Activity-Based Costing (ABC) 6. Jose Company specializes in the production of two types of products, the A-1 and the B-3. The A-1 has been a bread-and-butter product for a number of years, while the B-3 is relatively new and struggling to gain public acceptance. Data on the two products follow: 291 Product A-1 Product B-3 Material cost Labor hours P20 P45 Expected volume for coming year 10 hours 20 hours 10,000 500 Labor cost is P20 per hour and overhead costs are budgeted at P660,000 for the coming year. For purposes of using the ABC system, the controller develops the following information: Product A-1 Product B-3 100 250 Number of machine setups, annually Testing time, annually 2,000 hours 2,750 hours Thus, the company performs one setup for every 10 units of A-1 (100/ 10,000) and one setup for every two units of B-3 (250/500). Similarly, the company spends 0.20 hours (2,000/10,000) testing an A-1 and 5.5 hours (2,750/500) testing a B-3. The controller also determined that of the total overhead of P660,000. about P140,000 is related to setups and P190,000 to testing. The remaining P330,000 is related to labor.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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