Assume that Ellis Perry has identified three activity cost pools. Pool Cost Cost Driver Assembly $630,000 Direct labor hours Setup 30,000 Number of setups (1 per batch) Packaging 180,000 Weight (i) Given these activity pools and cost drivers, how much overhead should be allocated to each product? (Round per unit rates to 2 decimal places, e.g. 3.54 and final answers to 0 decimal places, e.g. 45,286.) AM-2 FM-9 Total allocated overhead $enter a dollar amount rounded to 0 decimal places $enter a dollar amount rounded to 0 decimal places (ii) What overhead cost per unit will be allocated to each product? (Round answers to 2 decimal places, e.g. 15.25.) AM-2 FM-9 Overhead cost per unit $enter a dollar amount rounded to 2 decimal places $enter a dollar amount rounded to 2 decimal places Ellis Perry is an electronics components manufacturer. Information about the company’s two products follows: AM-2 FM-9 Units produced 20,000 4,000 Direct labor hours required for production 10,000 15,000 Units per batch 4,000 400 Shipping weight per unit 0.50 lbs. 10 lbs. The company incurs $840,000 in overhead per year and has traditionally applied overhead on the basis of direct labor hours
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.
Assume that Ellis Perry has identified three activity cost pools.
|
Pool
|
Cost
|
Cost Driver
|
||
|---|---|---|---|---|
|
Assembly
|
$630,000 | Direct labor hours | ||
|
Setup
|
30,000 | Number of setups (1 per batch) | ||
|
Packaging
|
180,000 | Weight |
| (i) | Given these activity pools and cost drivers, how much |
|
|
AM-2
|
FM-9
|
||
|---|---|---|---|---|
|
Total allocated overhead
|
$enter a dollar amount rounded to 0 decimal places | $enter a dollar amount rounded to 0 decimal places |
| (ii) | What overhead cost per unit will be allocated to each product? (Round answers to 2 decimal places, e.g. 15.25.) |
|
|
AM-2
|
FM-9
|
||
|---|---|---|---|---|
|
Overhead cost per unit
|
$enter a dollar amount rounded to 2 decimal places | $enter a dollar amount rounded to 2 decimal places |
|
AM-2
|
FM-9
|
||||
|---|---|---|---|---|---|
|
Units produced
|
20,000 | 4,000 | |||
|
Direct labor hours required for production
|
10,000 | 15,000 | |||
|
Units per batch
|
4,000 | 400 | |||
|
Shipping weight per unit
|
0.50 | lbs. | 10 | lbs. |
The company incurs $840,000 in overhead per year and has traditionally applied overhead on the basis of direct labor hours.
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