Donovan & Parents produces soccer shorts and jerseys for youth leagues. Most of the production is done by machine. Data on operations and costs for March follow. Jerseys Shorts Total Units produced 10,100 4,600 14,700 Machine-hours used 1,030 810 1,840 Direct labor-hours 200 100 300 Direct materials costs $ 12,100 $ 7,400 $ 19,500 Direct labor costs $ 4,000 $ 2,000 $ 6,000 Manufacturing overhead costs $ 21,891 Management asks the firm’s cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine-hours. The analysis of overhead accounts by the cost accountant follows. Account Amount Related to: Utilities $ 3,940 Machine-hours Supplies 2,820 Materials Machine depreciation and maintenance 8,116 Machine-hours Purchasing and storing materials 3,615 Materials Miscellaneous 3,400 Machine-hours Required: a. Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs. b. Compute the total costs of production and the cost per unit for each of the two products for March.
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.
Donovan & Parents produces soccer shorts and jerseys for youth leagues. Most of the production is done by machine. Data on operations and costs for March follow.
| Jerseys | Shorts | Total | |||||||
| Units produced | 10,100 | 4,600 | 14,700 | ||||||
| Machine-hours used | 1,030 | 810 | 1,840 | ||||||
| Direct labor-hours | 200 | 100 | 300 | ||||||
| Direct materials costs | $ | 12,100 | $ | 7,400 | $ | 19,500 | |||
| Direct labor costs | $ | 4,000 | $ | 2,000 | $ | 6,000 | |||
| $ | 21,891 | ||||||||
Management asks the firm’s cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine-hours. The analysis of overhead accounts by the cost accountant follows.
| Account | Amount | Related to: | ||
| Utilities | $ | 3,940 | Machine-hours | |
| Supplies | 2,820 | Materials | ||
| Machine |
8,116 | Machine-hours | ||
| Purchasing and storing materials | 3,615 | Materials | ||
| Miscellaneous | 3,400 | Machine-hours | ||
Required:
a. Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs.
b. Compute the total costs of production and the cost per unit for each of the two products for March.
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