Activity Rates and Activity-Based Product Costing
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.
Activity Rates and Activity-Based Product Costing
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant:
| Deluxe | Regular | |
| Quantity | 100,000 | 800,000 |
| Selling price | $900 | $750 |
| Unit prime cost | $529 | $483 |
In addition, the following information was provided so that overhead costs could be assigned to each product:
| Activity Name | Activity Driver | Deluxe | Regular | Activity Cost |
| Setups | Number of setups | 300 | 200 | $2,200,000 |
| Machining | Machine hours | 100,000 | 300,000 | 80,000,000 |
| Engineering | Engineering hours | 50,000 | 100,000 | 10,500,000 |
| Packing | Packing orders | 100,000 | 400,000 | 200,000 |
Required:
1. Calculate the overhead rates for each activity. If required, carry your answers out to the nearest cent.
| Setups | $fill in the blank 1 per setup |
| Machining | $fill in the blank 2 per machine hour |
| Engineering | $fill in the blank 3 per engineering hour |
| Packing | $fill in the blank 4 per packing order |
2. Calculate the per-unit product cost for each product. Round your answers to the nearest whole dollar.
| Deluxe | $fill in the blank 5per unit |
| Regular | $fill in the blank 6per unit |
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