Citra Bhd manufactures two types of components, C-1 and C-2 and absorbs overheads on the basis of direct labour hours. Anticipated overheads for the upcoming accounting period is RM972,500. Information about the company's products is as follows: C-1 C-2 Expected production volume (units) 3,000 12,000 Direct materials cost RM32 per unit RM40 per unit Direct labour/unit (RM15/hour) RM30 RM60 The overheads of Citra Bhd of RM972,500 can be identified with three main activities as follows: Order processing RM 180,000 Machine processing RM 650, 000 Product inspection RM 142,500 These activities are driven by number of orders processed, machine hours worked and inspection hours respectively. Data relevant to these activities are as follows: C-1 C-2 Order processed 380 220 Machine hours worked 22,000 28,000 Inspection hours 3,000 12,000 Required: a. Assuming the use of direct labour hours to apply overheads to production, compute the unit manufacturing costs of products C-1 and C-2 if the expected manufacturing volume is attained. b. Compute the absorption rates that would be used for order processing, machine processing and product inspection.
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.
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