Calculate a job cost using ABC (Learning Objective 2) Oliver Industries, a small, family-run manufacturer, has adopted an ABC system . The fol- lowing manufacturing activities, indirect manufacturing costs, and usage of cost drivers have been estimated for the year : 54-7 Direct materials ................................................................................ ? Direct labor ...................................................................................... ? Manufacturing overhead ...... .......... .......... ............. ................. .......... ? Total job cost .................................................................................... $? Classifying costs within the cost hierarchy (Learning Objective 2) Classify each of the following costs as either unit-level, batch-level, product-level, or facility-level. a. Engineering costs for new product b. Order processing c. Depreciation on factory d. Direct labor e. Shipment of an order to a customer f. Product line manager salary g. Machine setup costs that are incurred whenever a new production order is started h. Patent for new product i. Factory utilities j. Direct materials k. Cost to inspect each product as it is finished I. CEO salary Activity Machine setup ............................................ Machining ............ ........................... .......... .. Quality control .... ....... .......... .......... ............ Estimated Total Manufacturing Overhead Costs $ 161,650 $1,100,000 $360,000 Estimated Total Usage of Cost Driver 3,050 setups 5,000 machine hours 4,500 tests During May, Jeff and Arabella Oliver machined and assembled Job 557 . Jeff worked a to- tal of 10 hours on the job, while Arabella worked 4 hours on the job . Jeff is paid a $25 per hour wage rate, while Arabella is paid $28 per hour because of her additional experience level. Direct materials requisitioned for Job 557 totaled $1,250 . The following additional information was collected on Job 557 : the job required 2 machine setups, 6 machine hours, and 3 quality control tests . 1. Compute the activity cost allocation rates for the year. 2. Complete the following job cost record for Job 557 :
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.
Calculate a
Oliver Industries, a small, family-run manufacturer, has adopted an ABC system . The fol- lowing manufacturing activities, indirect
54-7
Direct materials ................................................................................ ? Direct labor ...................................................................................... ? Manufacturing overhead ...... .......... .......... ............. ................. .......... ? Total job cost .................................................................................... $?
Classifying costs within the cost hierarchy (Learning Objective 2) Classify each of the following costs as either unit-level, batch-level, product-level, or
facility-level.
a. Engineering costs for new product
b. Order processing
c.
d. Direct labor
e. Shipment of an order to a customer
f. Product line manager salary
g. Machine setup costs that are incurred whenever a new production order is started
h. Patent for new product
i. Factory utilities
j. Direct materials
k. Cost to inspect each product as it is finished
I. CEO salary
Activity
Machine setup ............................................ Machining ............ ........................... .......... .. Quality control .... ....... .......... .......... ............
Estimated Total Manufacturing Overhead Costs
$ 161,650 $1,100,000 $360,000
Estimated Total Usage of Cost Driver
3,050 setups
5,000 machine hours 4,500 tests
During May, Jeff and Arabella Oliver machined and assembled Job 557 . Jeff worked a to- tal of 10 hours on the job, while Arabella worked 4 hours on the job . Jeff is paid a $25 per hour wage rate, while Arabella is paid $28 per hour because of her additional experience level. Direct materials requisitioned for Job 557 totaled $1,250 . The following additional information was collected on Job 557 : the job required 2 machine setups, 6 machine hours, and 3 quality control tests .
1. Compute the activity cost allocation rates for the year. 2. Complete the following job cost record for Job 557 :
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
