Department Hours Space Occupied Employees Hours Hours Personnel 17,000 12,600 30 Custodial Services 8,300 3,400 41 Maintenance 14,400 11,000 64 Printing 30,500 40,500 110 163,000 19,000 Binding 105,000 20,500 303 49,000 70,000 175,200 88,000 548 212,000 89,000 Budgeted overhead costs in each department for the current year are shown below: Personnel Custodial Services Maintenance Printing Binding Total budgeted cost $330,000 65,100 93,900 417,000 167,000 $ 1,073,000 Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating Bepartments. Required: Using the step-down method, allocate the service department costs to the consuming departments. Then compute predetermined overhead rates in the two operating departments. Use machine-hours as the allocation base in the Printing Department and direct labor-hours as the allocation base in the Binding Department. Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in the Printing and Binding departments. 3. Assume during the current year the company bids on a job requiring machine and labor time as follows: Printing Department Binding Department Machine-Hours 2,200 500 Direct Labor- Hours 1,300 13,600
Department Hours Space Occupied Employees Hours Hours Personnel 17,000 12,600 30 Custodial Services 8,300 3,400 41 Maintenance 14,400 11,000 64 Printing 30,500 40,500 110 163,000 19,000 Binding 105,000 20,500 303 49,000 70,000 175,200 88,000 548 212,000 89,000 Budgeted overhead costs in each department for the current year are shown below: Personnel Custodial Services Maintenance Printing Binding Total budgeted cost $330,000 65,100 93,900 417,000 167,000 $ 1,073,000 Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating Bepartments. Required: Using the step-down method, allocate the service department costs to the consuming departments. Then compute predetermined overhead rates in the two operating departments. Use machine-hours as the allocation base in the Printing Department and direct labor-hours as the allocation base in the Binding Department. Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in the Printing and Binding departments. 3. Assume during the current year the company bids on a job requiring machine and labor time as follows: Printing Department Binding Department Machine-Hours 2,200 500 Direct Labor- Hours 1,300 13,600
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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Transcribed Image Text:Total Labor- Square Feet of
Department
Hours
Space Occupied
Number of
Employees
Machine-
Direct Labor-
Hours
Hours
Personnel
17,000
12,600
30
Custodial Services
8,300
3,400
41
Maintenance
14,400
11,000
64
Printing
30,500
40,500
110
163,000
19,000
Binding
105,000
20,500
303
49,000
70,000
175,200
88,000
548
212,000
89,000
Budgeted overhead costs in each department for the current year are shown below:
Personnel
Custodial Services
Maintenance
Printing
Binding
$ 330,000
65,100
93,900
417,000
167,000
Total budgeted cost
$ 1,073,000
Because of its simplicity, the company has always used the direct method to allocate service department costs to the two operating
departments.
Required:
1. Using the step-down method, allocate the service department costs to the consuming departments. Then compute predetermined
overhead rates in the two operating departments. Use machine-hours as the allocation base in the Printing Department and direct
labor-hours as the allocation base in the Binding Department.
2. Repeat (1) above, this time using the direct method. Again compute predetermined overhead rates in the Printing and Binding
departments.
3. Assume during the current year the company bids on a job requiring machine and labor time as follows:
Direct Labor-
Printing Department
Binding Department
Total hours
Machine-Hours
2,200
500
2,700
Hours
1,300
13,600
14,900
a. Calculate the overhead cost assigned to the job if the company used the overhead rates developed in (1) above. Then calculate
the overhead cost assigned to the iob if the company used the overhead rates developed in (2) above.
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