Crystal Fabrication allocates manufacturing overhead using a single predetermined rate based on a planned use of 10,000 direct labour hours per year. Company leadership recently learned that its costing system may be too simple for its operations, and that job costs may be fairly inaccurate. A consultant was hired to study overhead costs, and the following information reflects the cost pools and activity rates that were determined: Cost Pool Total Cost Purchasing $96,000 Setups $50,000 Assembly $150,000 Inspections $80,000 Total $376,000 Activity Rate $48/purchase order $80/production run $15/direct labour a. $2,000; $5,000 O b. $3,000; $2,760 O c. $150,000; $376,000 d. $7,520; $5,760 hour $20/inspection Job #650 required 20 purchase orders, 200 direct labour hours, 15 production runs, and 30 inspections. The allocated overhead using a traditional job-costing system is and __ using an activity-based costing system.
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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