Cogswell Cogs, Inc. estimates its overhead for the upcoming year to be $1,693,500 and will use machine hours as its base to apply overhead and estimates total machine usage will be 112,000 hours and estimates direct labor hours will be 43,500 hours. Cogswell makes three different models of its product – Basic, Premium and Deluxe. The company anticipates making 10,000 units of Basic, 5,000 units of Premium and 1,000 units of Deluxe. The following information relates to Direct Material and Direct Labor for each unit for each model – Deluxe 10 pounds @ $440/pd 3.5 hours @ $18/hour Basic Premium 5 pounds @ $4/pound 2.5 hours @ $16/hour 8 pounds @ $4.20/pound 3 hours @ $16/hour 8 machine hours Direct Material Direct Labor Overhead 6 machine hours 12 machine hours Mr. Cogswell, the President and CEO of Cogswell Cogs, Inc. has been reading about Activity-based Costing (ABC) and thinks that perhaps the company should adopt it. He asked you to gather up information regarding the cost drivers in the factory and here is what you found - Costs Cost Driver Basic Premium Deluxe $36,000 $66,000 Production runs Deliveries Material handling Setup costs Supervisors' salaries $550,000 50 deliveries 25 deliveries 15 deliveries 24 runs 16 runs 10 runs 55,000 hours 54,000 hours 2000 hours 40,000 hours 48,000 hours 1000 hours 30,000 hours 18,000 hours 600 hours DL hours $660,000 Machine hours $72,000 $220,000 Floor space $134,000 Utilities Inspection costs Inspection hours 4,000 feet 2,000 hours 9,000 feet 5,000 hours Rent 7,000 feet Engineering Engineering hours 3,000 hours Using ABC costing, calculate total overhead dollars to be charged to each product, then at bottom calculate the total cost per unit, circle your final answer. Cost Pools Basic Premium Deluxe Material handling Setup costs Supervisors' salaries Utilities Inspection costs Rent Engineering Total Overhead in $ Total Overhead per unit What is TOTAL COST per unit for each model using ABC? Basic - Premium - Deluxe -
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.
![Cogswell Cogs, Inc. estimates its overhead for the upcoming year to be $1,693,500 and will use machine hours as
its base to apply overhead and estimates total machine usage will be 112,000 hours and estimates direct labor
hours will be 43,500 hours. Cogswell makes three different models of its product – Basic, Premium and Deluxe. The
company anticipates making 10,000 units of Basic, 5,000 units of Premium and 1,000 units of Deluxe. The following
information relates to Direct Material and Direct Labor for each unit for each model –
Basic
Direct Material
Direct Labor
5 pounds @ $4/pound
2.5 hours @ $16/hour
Premium
8 pounds @ $4.20/pound
3 hours @ $16/hour
Deluxe
10 pounds @ $440/pd
3.5 hours @ $18/hour
Overhead
6 machine hours
8 machine hours
12 machine hours
Mr. Cogswell, the President and CEO of Cogswell Cogs, Inc. has been reading about Activity-based Costing (ABC)
and thinks that perhaps the company should adopt it. He asked you to gather up information regarding the cost
drivers in the factory and here is what you found -
Premium
Deluxe
15 deliveries
Costs
Cost Driver
Basic
Material handling
$36,000
$66,000 Production runs
Deliveries
50 deliveries
25 deliveries
Setup costs
24 runs
16 runs
10 runs
Supervisors' salaries $550,000
55,000 hours
54,000 hours
2000 hours
40,000 hours
48,000 hours
DL hours
30,000 hours
$660,000 Machine hours
$72,000
$220,000 Floor space
Utilities
18,000 hours
Inspection costs
Inspection hours
1000 hours
600 hours
Rent
4,000 feet
7,000 feet
9,000 feet
Engineering
$134,000
Engineering hours
2,000 hours
3,000 hours
5,000 hours
Using ABC costing, calculate total overhead dollars to be charged to each product, then at bottom calculate the
total cost per unit, circle your final answer.
Cost Pools
Basic
Premium
Deluxe
Material handling
Setup costs
Supervisors' salaries
Utilities
Inspection costs
Rent
Engineering
Total Overhead in $
Total Overhead per unit
What is TOTAL COST per unit for each model using ABC?
Basic -
Premium –
Deluxe -](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa5735d5d-389e-4d25-ac0c-dbe56f702c32%2F910e057e-0b19-465e-8a10-b3e9827f3807%2F7871h1n_processed.png&w=3840&q=75)
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ABC (Activity Based Costing) :
This is a method of allocating Overheads to the product based on the No. of Cost Drivers used in that particular product. So, for finding the Total cost of unit first we will have to find Total No. of Cost Drivers and Cost per driver. The Calculation are as follows :
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