Chipman Inc. produces water pumps. Overhead costs have been identified as follows: Activity Pool Cost Material handling $ 78,210.00 Machine maintenance $ 110,400.00 Setups $ 81,642.00 Activity Driver Activity Number of moves 495 Number of machine hours 36,800 Number of production runs 66 Chipman makes 3 models of pumps with the following details: Economy Standard Premium Units produced 10,130 20,500 3,520 Number of moves 203 127 165 Machine hours 9,850 21,000 5,950 Production runs 24 10 32 Required: a. Calculate the activity rate for each activity. (Round your answers to 2 decimal places.) b. Determine the amount of indirect costs assigned to each of the products. (Do not round your intermediate calculations. Round your answers to 2 decimal places.)
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.
Chipman Inc. produces water pumps.
| Activity Pool | Cost | |
| Material handling | $ | 78,210.00 |
| Machine maintenance | $ | 110,400.00 |
| Setups | $ | 81,642.00 |
| Activity Driver | Activity |
| Number of moves | 495 |
| Number of machine hours | 36,800 |
| Number of production runs | 66 |
Chipman makes 3 models of pumps with the following details:
| Economy | Standard | Premium | |
| Units produced | 10,130 | 20,500 | 3,520 |
| Number of moves | 203 | 127 | 165 |
| Machine hours | 9,850 | 21,000 | 5,950 |
| Production runs | 24 | 10 | 32 |
Required:
a. Calculate the activity rate for each activity. (Round your answers to 2 decimal places.)
b. Determine the amount of indirect costs assigned to each of the products. (Do not round your intermediate calculations. Round your answers to 2 decimal places.)
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