Category Lower Upper Direct labor $700,000 $1,000,000 Category Lower Upper Direct material $2,000,000 $1,500,000 Direct labor hours 28,000 25,000 Quantity produced 20,000 10,000 Total overhead $2,500,000 ABC Activity Driver Cost Lower Upper Rework Hours $1,800,000 4,000 hours 42,500 hours Material handling Moves $700,000 40,000 moves 20,000 moves
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.
Skrunchy Company produces two products, Lower and Upper. The following two tables give pertinent information about these two products. Solve, a. What is the cost per unit of Lower if Skrunchy uses traditional
allocation based on direct labor hours? b. What is the cost per unit of Lower if Skrunchy uses activity-based costing to allocate overhead?
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