After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey decides to analyze overhead cost at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of the company's overhead. Additional information about overhead follows. Activity Set up Inspection Utilities Total The following data pertain to Job 615. Direct materials Direct labor Overhead Setups Parts inspected Machine hours. Budgeted Cost $ 24,920 5,400 10,800 $ 41,120 $ 2,500 $ 3,300 $ Setup Inspection Utilities Budgeted Activity Usage 28 setups 5,400 parts inspected. 5,400 machine hours (MH) 5 setups 590 parts inspected 610 machine hours. Required: 1. Classify each of the three overhead activities as unit level, batch level, product level, or facility level. 2. Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,400 machine hours. Compute total product cost of Job 615. 3. Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost to Job 615. (c) Compute total product cost of Job 615. Required 1 Required 2 Required 3 Classify each of the three overhead activities as unit level, batch level, product level, or facility level. < Required 1 Required 2 >
After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey decides to analyze overhead cost at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of the company's overhead. Additional information about overhead follows. Activity Set up Inspection Utilities Total The following data pertain to Job 615. Direct materials Direct labor Overhead Setups Parts inspected Machine hours. Budgeted Cost $ 24,920 5,400 10,800 $ 41,120 $ 2,500 $ 3,300 $ Setup Inspection Utilities Budgeted Activity Usage 28 setups 5,400 parts inspected. 5,400 machine hours (MH) 5 setups 590 parts inspected 610 machine hours. Required: 1. Classify each of the three overhead activities as unit level, batch level, product level, or facility level. 2. Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,400 machine hours. Compute total product cost of Job 615. 3. Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost to Job 615. (c) Compute total product cost of Job 615. Required 1 Required 2 Required 3 Classify each of the three overhead activities as unit level, batch level, product level, or facility level. < Required 1 Required 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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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Transcribed Image Text:After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey decides to
analyze overhead cost at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and
utility costs made up most of the company's overhead. Additional information about overhead follows.
Activity
Set up
Inspection
Utilities
Total
Budgeted Cost
$ 24,920
The following data pertain to Job 615.
$ 2,500
$ 3,300
$
Direct materials.
Direct labor
Overhead
Setups
Parts inspected
Machine hours
5,400
10,800
$ 41,120
Setup
Inspection
Utilities
Budgeted Activity Usage
28 setups
5,400 parts inspected
5,400 machine hours (MH)
5 setups
590 parts inspected
610 machine hours.
Required:
1. Classify each of the three overhead activities as unit level, batch level, product level, or facility level.
2. Assume Business Solutions allocates overhead cost using a plantwide rate based on 5,400 machine hours. Compute
total product cost of Job 615.
3. Assume Business Solutions uses activity-based costing. (a) Compute overhead activity rates. (b) Allocate overhead cost
to Job 615. (c) Compute total product cost of Job 615.
Required 1 Required 2 Required 3
Classify each of the three overhead activities as unit level, batch level, product level, or facility level.
< Required 1
Required 2 >
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