1. Company A produces two products H and L. Both are produced on the same equipmentand use similar processes. The products differ by volume. Product H is a high volumeproduct while L is a low volume product. Details of product inputs, output and the cost ofactivities are as follows:Product MachineHour perunitDirectAnnualTotalTotalNo ofNoLaborOutput(Units)MachineDirectPurchaseofHourHoursLaborOrdersSetHoursUpsperunitL41000200040008040H2410000200004000016060110002200044000240100The cost centers cots (Overheads) are RO 440000 but have been further analyzed asfollows:Volume relatedRO 110000Purchasing relatedRO 120000Set up relatedRO 210000Calculate overhead cost under:a. Traditional volume based costing systemb. ABC system

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Description: 1. Company A produces two products H and L. Both are produced on the same equipmentand use similar processes. The products differ by volume. Product H is a high volumeproduct while L is a low volume product. Details of product inputs, output and the

Answered: Calculate overhead cost under: a.…

Business

Accounting

Calculate overhead cost under: a. Traditional volume based costing system b. ABC system

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 17MC: Under absorption costing, a unit of product includes which costs? A. direct material, direct labor,...

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Concept explainers

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.

Topic Video

Question

1. Company A produces two products H and L. Both are produced on the same equipment
and use similar processes. The products differ by volume. Product H is a high volume
product while L is a low volume product. Details of product inputs, output and the cost of
activities are as follows:
Product Machine
Hour per
unit
Direct
Annual
Total
Total
No of
No
Labor
Output
(Units)
Machine
Direct
Purchase
of
Hour
Hours
Labor
Orders
Set
Hours
Ups
per
unit
L
4
1000
2000
4000
80
40
H
2
4
10000
20000
40000
160
60
11000
22000
44000
240
100
The cost centers cots (Overheads) are RO 440000 but have been further analyzed as
follows:
Volume related
RO 110000
Purchasing related
RO 120000
Set up related
RO 210000
Calculate overhead cost under:
a. Traditional volume based costing system
b. ABC system

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