as Activity-Based Costing Hakara Company has been using direct labor costs assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $10.80 per unit, while product B has been assigned $3.60 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Activity Costs Cost Drivers Activity Driver Consumption Machine setup Materials handling Electric power $360,000 100,000 40,000 Setup hours Pounds of materials 4,000 20,000 40,000 Kilowatt-hours The following cost information pertains to the production of A and B, just two of Hakara's many products: A B Number of units produced 4,000 $42,000 $24,000 20,000 $54,000 $40,000 Direct materials cost Direct labor cost Number of setup hours Pounds of materials used 400 200 1,000 2,000 3,000 4,000 Kilowatt-hours red e activity-based costing to determine a unit cost for each product. mment on management's belief that the ABC system will generate an over
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.
![3-28 Activity-Based Costing Hakara Company has been using direct labor costs as the basis for
assigning overhead to its many products. Under this allocation system, product A has been assigned
overhead of $10.80 per unit, while product B has been assigned $3.60 per unit. Management feels that
an ABC system will provide a more accurate allocation of the overhead costs and has collected the
following cost pool and cost driver information:
[LO 5-2, 5-3]
Cost Pools
Activity Costs
Cost Drivers
Activity Driver Consumption
4,000
20,000
40,000
Machine setup
Setup hours
Pounds of materials
$360,000
Materials handling
Electric power
100,000
40,000
Kilowatt-hours
The following cost information pertains to the production of A and B, just two of Hakara's many
products:
A
Number of units produced
4,000
$42,000
$24,000
20,000
$54,000
$40,000
Direct materials cost
Direct labor cost
Number of setup hours
400
200
Pounds of materials used
1,000
2,000
3,000
4,000
Kilowatt-hours
Required
1. Use activity-based costing to determine a unit cost for each product.
2. Comment on management's belief that the ABC system will generate an overhead allocation that is
more accurate than the volume-based system currently in use.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F95e100c9-a0e8-40c0-9f58-bccf16814f16%2Fecbbeeff-37d0-4216-9757-1b0872b29028%2F02e9avvl_processed.jpeg&w=3840&q=75)
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