Antz is a custom manufacturer of electronic circuit boards. Antz develops bids for jobs based on an estimate of the materials needed and a labor estimate. Overhead is applied based on direct labor hours. A 15 percent profit margin is then added to each job for the final bid. During 2004, Antz had the following costs: Materials............................................. $175,000 Labor (all direct) ................................ 25,000 Overhead ............................................ 250,000 After some consideration the manager of Antz decided that overhead was not caused totally by direct labor. Approximately one-half of the overhead represented the cost of purchasing, storing, and issuing materials to production. Thus, the manager has decided to develop a multiple overhead rate system. Required: 15. Compute the predetermined overhead rate if only direct labor hours are used. Assume a wage rate of $5 per hour. 16-17. Divide overhead in half and calculate two overhead rates—one based on direct labor hours and a second based on material dollars.
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.
Antz is a custom manufacturer of electronic circuit boards. Antz develops bids for jobs based on an estimate of the
materials needed and a labor estimate.
is then added to each job for the final bid. During 2004, Antz had the following costs:
Materials............................................. $175,000
Labor (all direct) ................................ 25,000
Overhead ............................................ 250,000
After some consideration the manager of Antz decided that overhead was not caused totally by direct labor.
Approximately one-half of the overhead represented the cost of purchasing, storing, and issuing materials to
production. Thus, the manager has decided to develop a multiple overhead rate system.
Required:
15. Compute the predetermined overhead rate if only direct labor hours are used. Assume a wage rate of $5 per
hour.
16-17. Divide overhead in half and calculate two overhead rates—one based on direct labor hours and a second
based on material dollars.
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