Bridgestone Tires manufactures two types of tires that it sells as wholesale products to various specialty retail auto supply stores. Each tire requires a three-step process. The first step is mixing. The mixing department combines some of the necessary direct materials to create the material mix that will become part of the tire. The second step includes the forming of each tire where the materials are layered to form the tire. This is an entirely automated process. The final step is finishing, which is an entirely manual process. The finishing department includes curing and quality control. Required: Costs involved in the process are listed next. For each cost, indicate whether it is a direct variable, direct fixed, indirect variable, or indirect fixed cost, assuming “units of production of each kind of tire” is the cost object. Costs: Rubber Mixing department manager Reinforcement cables Material handlers in each department Other direct materials Custodian in factory Depreciation on formers Night guard in factory Depreciation on mixing machines Machinist (running the mixing machine) Rent on factory building Machine maintenance personnel in each department Fire insurance on factory building Maintenance supplies for factory Factory utilities Cleaning supplies for factory Finishing department hourly laborers
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.
Question #1
Bridgestone Tires manufactures two types of tires that it sells as wholesale products to various specialty retail auto supply stores. Each tire requires a three-step process. The first step is mixing. The mixing department combines some of the necessary direct materials to create the material mix that will become part of the tire. The second step includes the forming of each tire where the materials are layered to form the tire. This is an entirely automated process. The final step is finishing, which is an entirely manual process. The finishing department includes curing and quality control.
Required:
- Costs involved in the process are listed next. For each cost, indicate whether it is a direct variable, direct fixed, indirect variable, or indirect fixed cost, assuming “units of production of each kind of tire” is the cost object.
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Costs: |
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Rubber |
Mixing department manager |
|
Reinforcement cables |
Material handlers in each department |
|
Other direct materials |
Custodian in factory |
|
|
Night guard in factory |
|
Depreciation on mixing machines |
Machinist (running the mixing machine) |
|
Rent on factory building |
Machine maintenance personnel in each department |
|
Fire insurance on factory building |
Maintenance supplies for factory |
|
Factory utilities |
Cleaning supplies for factory |
|
Finishing department hourly laborers |
Machinist (running the forming machines) |
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