Atkinson Construction assembles residential houses. It uses a job-costing system with two direct-cost categories (direct materials and direct labor) and one i ndirect-cost pool (assembly support). Direct labor-hours is the allocation base for assembly support costs. In December 2016, Atkinson budgets 2017 assembly-support costs to be $8,800,000 and 2017 direct laborhours to be 220,000. At the end of 2017, Atkinson is comparing the costs of several jobs that were started and completed in 2017. Laguna Model Mission Model Construction period Feb–June 2017 May–Oct 2017 Direct material costs $106,550 $127,450 Direct labor costs $ 36,250 $ 41,130 Direct labor-hours 970 1,000 Direct materials and direct labor are paid for on a contract basis. The costs of each are known when direct materials are used or when direct labor-hours are worked. The 2017 actual assembly-support costs were $8,400,000, and the actual direct labor-hours were 200,000. Q. Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ?
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.
Atkinson Construction assembles residential houses. It uses a
At the end of 2017, Atkinson is comparing the costs of several jobs that were started and completed in 2017.
Laguna Model Mission Model Construction period Feb–June 2017 May–Oct 2017 Direct material costs $106,550 $127,450 Direct labor costs $ 36,250 $ 41,130 Direct labor-hours 970 1,000 Direct materials and direct labor are paid for on a contract basis. The costs of each are known when direct materials are used or when direct labor-hours are worked. The 2017 actual assembly-support costs were $8,400,000, and the actual direct labor-hours were 200,000.
Q. Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ?
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