Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from last year's operations. Month Labor-Hours Machine-Hours Overhead Costs 1 725 1,349 $ 102,630 2 720 1,404 103,742 3 685 1,517 109,818 4 750 1,459 108,368 5 770 1,589 116,290 6 745 1,583 114,521 7 735 1,396 107,079 8 720 1,307 102,082 9 715 1,463 106,471 10 790 1,538 113,065 11 675 1,298 103,776 12 720 1,608 116,796 Required: a. Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours. b. Managers expect the plant to operate at a monthly average of 1,400 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation
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.
Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and
| Month | Labor-Hours | Machine-Hours | Overhead Costs | ||||||
| 1 | 725 | 1,349 | $ | 102,630 | |||||
| 2 | 720 | 1,404 | 103,742 | ||||||
| 3 | 685 | 1,517 | 109,818 | ||||||
| 4 | 750 | 1,459 | 108,368 | ||||||
| 5 | 770 | 1,589 | 116,290 | ||||||
| 6 | 745 | 1,583 | 114,521 | ||||||
| 7 | 735 | 1,396 | 107,079 | ||||||
| 8 | 720 | 1,307 | 102,082 | ||||||
| 9 | 715 | 1,463 | 106,471 | ||||||
| 10 | 790 | 1,538 | 113,065 | ||||||
| 11 | 675 | 1,298 | 103,776 | ||||||
| 12 | 720 | 1,608 | 116,796 | ||||||
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Required:
a. Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours.
b. Managers expect the plant to operate at a monthly average of 1,400 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation?
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