Antuan Company set the following standard costs for one unit of its product. Direct materials (5.0 Ibs. @ $5.00 per Ib.) $ 25.00 Direct labor (1.9 hrs. @ $12.00 per hr.) 22.80 Overhead (1.9 hrs. @ $18.50 per hr.) 35.15 Total standard cost $ 82.95 The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level. Overhead Budget (75% Capacity) Variable overhead costs Indirect materials $ 15,000 Indirect labor 75,000 Power 15,000 Repairs and maintenance 45,000 Total variable overhead costs $ 150,000 Fixed overhead costs Depreciation—Building 24,000 Depreciation—Machinery 71,000 Taxes and insurance 17,000 Supervision 265,250 Total fixed overhead costs 377,250 Total overhead costs $ 527,250 The company incurred the following actual costs when it operated at 75% of capacity in October. Direct materials (75,500 Ibs. @ $5.10 per lb.) $ 385,050 Direct labor (19,000 hrs. @ $12.40 per hr.) 235,600 Overhead costs Indirect materials $ 41,000 Indirect labor 176,050 Power 17,250 Repairs and maintenance 51,750 Depreciation—Building 24,000 Depreciation—Machinery 95,850 Taxes and insurance 15,300 Supervision 265,250 686,450 Total costs $ 1,307,100 rev: 03_28_2018_QC_CS-122864 Required: 1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.
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.
Antuan Company set the following standard costs for one unit of its product.
| Direct materials (5.0 Ibs. @ $5.00 per Ib.) | $ | 25.00 |
| Direct labor (1.9 hrs. @ $12.00 per hr.) | 22.80 | |
| 35.15 | ||
| Total |
$ | 82.95 |
The predetermined overhead rate ($18.50 per direct labor hour) is based on an expected volume of 75% of the factory’s capacity of 20,000 units per month. Following are the company’s budgeted overhead costs per month at the 75% capacity level.
| Overhead Budget (75% Capacity) | |||||
| Variable overhead costs | |||||
| Indirect materials | $ | 15,000 | |||
| Indirect labor | 75,000 | ||||
| Power |
15,000 |
||||
| Repairs and maintenance | 45,000 | ||||
| Total variable overhead costs | $ | 150,000 | |||
| Fixed overhead costs | |||||
| 24,000 | |||||
| Depreciation—Machinery | 71,000 | ||||
| Taxes and insurance | 17,000 | ||||
| Supervision | 265,250 | ||||
| Total fixed overhead costs | 377,250 | ||||
| Total overhead costs | $ | 527,250 | |||
The company incurred the following actual costs when it operated at 75% of capacity in October.
| Direct materials (75,500 Ibs. @ $5.10 per lb.) | $ | 385,050 | |||
| Direct labor (19,000 hrs. @ $12.40 per hr.) | 235,600 | ||||
| Overhead costs | |||||
| Indirect materials | $ | 41,000 | |||
| Indirect labor | 176,050 | ||||
| Power | 17,250 | ||||
| Repairs and maintenance | 51,750 | ||||
| Depreciation—Building | 24,000 | ||||
| Depreciation—Machinery | 95,850 | ||||
| Taxes and insurance | 15,300 | ||||
| Supervision | 265,250 | 686,450 | |||
| Total costs | $ | 1,307,100 | |||
rev: 03_28_2018_QC_CS-122864
Required:
1&2. Prepare flexible overhead budgets for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels and classify all items listed in the fixed budget as variable or fixed.
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