Assuming that the company used the direct method, how much overhead cost would be allocated to each operating department? using the step method, allocate the service department costs to the operating departments.\
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.
Guna publishing company has three service departments & two operating departments. Selected data from a recent period on the five departments follow.
|
|
Service Departments |
Operating Departments |
Total |
|||
|
|
A |
B |
C |
1 |
2 |
|
|
|
140,000 |
105,000 |
48,000 |
275,000 |
430,000 |
998,000 |
|
Number of employees |
60 |
35 |
140 |
315 |
210 |
760 |
|
Space occupied |
15,000 |
10,000 |
20,000 |
40,000 |
100,000 |
185,000 |
|
Hours of press time |
- |
- |
- |
30,000 |
60,000 |
90,000 |
The company allocated service department costs by the step method in the following order. A(number of employees). (B/space occupied), & C( hours of press time ) . The company makes no distinction between variable & fixed service department costs.
Required
- Assuming that the company used the direct method, how much overhead cost would be allocated to each operating department?
- using the step method, allocate the service department costs to the operating departments.\
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