Davis Company produces two hair dryers: regular and deluxe. The company has four activities: machining, engineering, receiving, and inspection. Information on the activities and their drivers is given below. Units produced Prime costs Machine hours Engineering hours Receiving orders Inspection hours Overhead costs: Machining Engineering Receiving Inspecting products Regular 90,000 $8,100,000 90,000 500 500 1,000 $4,060,000 2,350,000 600,000 330,000 Deluxe 270,000 $28,000,000 450,000 4,500 1,500 2,000 Total $36,100,000 540,000 5,000 2,000 3,000
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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![Activity-Based Product Costing
Davis Company produces two hair dryers: regular and deluxe. The company has four activities: machining, engineering, receiving, and inspection. Information on these
activities and their drivers is given below.
Units produced
Prime costs
Machine hours
Engineering hours
Receiving orders
Inspection hours
Overhead costs:
Machining
Engineering
Receiving
Inspecting products
Required:
Regular
90,000
$8,100,000
90,000
500
500
1,000
$4,860,000
2,350,000
600,000
330,000
Deluxe
270,000
$28,080,000
450,000
4,500
1,500
2,000
Total
$36,180,000
540,000
5,000
2,000
3,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe9f99bc1-b177-45e1-a6f4-6be690697c34%2F6521b7dd-b104-4c2c-9f4b-3e756836f9b9%2Fa95wjen_processed.jpeg&w=3840&q=75)
![1. Calculate the four activity rates.
Machining rate
Engineering rate
Receiving rate
Inspecting rate
2. Calculate the unit costs using activity rates. Round your answers to the nearest cent.
Unit cost
Regular
Deluxe
per machine hour
per hour
per order
per hour
Regular
Deluxe
Calculate the overhead cost per unit. Round your answers to the nearest cent.
Overhead Cost
per unit
per unit
Regular
Deluxe
per unit
per unit
3. If consumption ratios instead of activity rates were used to assign costs instead of activity rates, show the cost assignment for the inspection activity.
Cost assignment](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe9f99bc1-b177-45e1-a6f4-6be690697c34%2F6521b7dd-b104-4c2c-9f4b-3e756836f9b9%2Foxl96bu_processed.jpeg&w=3840&q=75)
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