Approximately Relevant ABC Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Setting up equipment Ordering materials Machining Receiving Expected Cost Activity Driver $126,000 Number of setups 18,000 Number of orders 126,000 Machine hours 30,000 Receiving hours Units completed Number of setups Receiving hours Required: 1. Determine the total overhead assigned to each product using the four activity drivers. 2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. 3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable. Exercise 4-23 Equally Accurate Reduced ABC System Refer to Exercise 4-22. Required: 1. Calculate the global consumption ratios for the two products. 2. Using the activity consumption ratios for number of orders and number of setups, show that the same cost assignment can be achieved using these two drivers as that of the com-plete, four-driver ABC system. OBJECTIVE ◀ 4 Model Y 10,000 50 600 6,000 375 4,500 875 Activity Capacity 150 900 10,500 1,250 Silven produces two models of cell phones with the following expected activity demands: Model X 5,000 Number of orders Machine hours 100 300 OB
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.
Approximately Relevant ABC Silven Company has identified the following
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