Consider the following data for two products of Vigano Manufacturing. Activity Budgeted Cost Activity Driver Machine setup $ 16,000 (20 machine setups) Parts handling 12,800 (16,000 parts) Quality inspections 19,200 (100 inspections) Total budgeted overhead $ 48,000 Unit Information Product A Product B Units produced 1,600 units 320 units Direct materials cost $ 26 per unit $ 36 per unit Direct labor cost $ 46 per unit $ 56 per unit Direct labor hours 2 per unit 2.50 per unit 1. Using a plantwide overhead rate based on 4,000 direct labor hours, compute the total product cost per unit for each product. 2. Consider the following additional information about these two products. If activity-based costing is used to allocate overhead cost, (a) compute overhead activity rates, (b) allocate overhead cost to Product A and Product B and compute overhead cost per unit for each, and (c) compute product cost per unit for each. Actual Activity Usage Product A Product B Setups 8 setups 12 setups Parts 10,000 parts 6,000 parts Inspections 40 inspections 60 inspections
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.
Consider the following data for two products of Vigano Manufacturing.
| Activity | Budgeted Cost | Activity Driver |
|---|---|---|
| Machine setup | $ 16,000 | (20 machine setups) |
| Parts handling | 12,800 | (16,000 parts) |
| Quality inspections | 19,200 | (100 inspections) |
| Total budgeted |
$ 48,000 |
| Unit Information | Product A | Product B | ||
|---|---|---|---|---|
| Units produced | 1,600 | units | 320 | units |
| Direct materials cost | $ 26 | per unit | $ 36 | per unit |
| Direct labor cost | $ 46 | per unit | $ 56 | per unit |
| Direct labor hours | 2 | per unit | 2.50 | per unit |
1. Using a plantwide overhead rate based on 4,000 direct labor hours, compute the total product cost per unit for each product.
2. Consider the following additional information about these two products. If activity-based costing is used to allocate overhead cost, (a) compute overhead activity rates, (b) allocate overhead cost to Product A and Product B and compute overhead cost per unit for each, and (c) compute product cost per unit for each.
| Actual Activity Usage | Product A | Product B | ||
|---|---|---|---|---|
| Setups | 8 | setups | 12 | setups |
| Parts | 10,000 | parts | 6,000 | parts |
| Inspections | 40 | inspections | 60 | inspections |
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