Carter Company manufactures two products, Deluxe and Regular, and uses a traditional two-stage cost allocation system. The first stage assigns all factory overhead costs to two production departments, A and B, based on machine hours. The second stage uses direct labor hours to allocate overhead to individual products. For the current year, the firm budgeted $1,650,000 total factory overhead cost. The $1,650,000 was for the planned levels of machine and direct labor hours shown in the following table. Production Department A Production Department B Machine hours 6,600 26,400 Direct labor hours 33,000 16,500 The following information relates to the firm’s operations for the month of January: Deluxe Regular Units produced and sold 330 1,320 Unit cost of direct materials $ 165 $ 82.50 Hourly direct labor wage rate $ 25 $ 33 Direct labor hours in Department A per unit 2 2 Direct labor hours in Department B per unit 1 1 Carter Company is considering implementing an activity-based costing system. Its management accountant has collected the following information for activity cost analysis for the current year: Activity Budgeted Overhead Cost Driver Budgeted Quantity Driver Consumption Deluxe Regular Material movement $ 11,550 Number of production runs 403 25 33 Machine setups 660,000 Number of setups 825 41 83 Inspections 970,200 Number of units 32,340 330 1,320 Shipment 8,250 Number of shipments 413 83 165 $ 1,650,000 Required: 1. Calculate the unit cost for each of the two products under the existing volume-based costing system. (Round "Regular unit cost" to 2 decimal places.) 2. Calculate the overhead per unit of the cost driver under the proposed ABC system. (Round your answers to 2 decimal places.) 3. Calculate the unit cost for each of the two products if the proposed ABC system is adopted. (Round your intermediate calculations to 1 decimal place and final answers to 2 decimal places.) 1.Deluxe Unit Cost _____ Regular Unit Cost _____ 2.Deluxe Unit Overhead _____ Regular Unit Overhead _____ 3.Deluxe Unit Cost _____ Regular Unit Cost _____
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.
Carter Company manufactures two products, Deluxe and Regular, and uses a traditional two-stage cost allocation system. The first stage assigns all
For the current year, the firm budgeted $1,650,000 total factory overhead cost. The $1,650,000 was for the planned levels of machine and direct labor hours shown in the following table.
| Production Department A | Production Department B | |
|---|---|---|
| Machine hours | 6,600 | 26,400 |
| Direct labor hours | 33,000 | 16,500 |
The following information relates to the firm’s operations for the month of January:
| Deluxe | Regular | |
|---|---|---|
| Units produced and sold | 330 | 1,320 |
| Unit cost of direct materials | $ 165 | $ 82.50 |
| Hourly direct labor wage rate | $ 25 | $ 33 |
| Direct labor hours in Department A per unit | 2 | 2 |
| Direct labor hours in Department B per unit | 1 | 1 |
Carter Company is considering implementing an activity-based costing system. Its
| Activity | Budgeted Overhead | Cost Driver | Budgeted Quantity | Driver Consumption | |
|---|---|---|---|---|---|
| Deluxe | Regular | ||||
| Material movement | $ 11,550 | Number of production runs | 403 | 25 | 33 |
| Machine setups | 660,000 | Number of setups | 825 | 41 | 83 |
| Inspections | 970,200 | Number of units | 32,340 | 330 | 1,320 |
| Shipment | 8,250 | Number of shipments | 413 | 83 | 165 |
| $ 1,650,000 |
Required:
1. Calculate the unit cost for each of the two products under the existing volume-based costing system. (Round "Regular unit cost" to 2 decimal places.)
2. Calculate the overhead per unit of the cost driver under the proposed ABC system. (Round your answers to 2 decimal places.)
3. Calculate the unit cost for each of the two products if the proposed ABC system is adopted. (Round your intermediate calculations to 1 decimal place and final answers to 2 decimal places.)
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