Exercise 17-14 (Algo) Allocating overhead cost to jobs using activity-based costing LO P3 Pro-Craft Company computed the following activity rates to allocate overhead cost for the year. Activity Activity Rate Materials handling $ 54 per materials requisition Quality inspection $ 44 per inspection Utilities $ 5 per machine hour During January, the company produced the following two jobs. Allocate overhead cost to each job using the activity rates. Activity Cost Driver Activity Usage Job A Job B Materials requisitions 5 3 Inspections 8 4 Machine hours 320 220
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.
Exercise 17-14 (Algo) Allocating overhead cost to jobs using activity-based costing LO P3
Pro-Craft Company computed the following activity rates to allocate overhead cost for the year.
| Activity | Activity Rate | |
|---|---|---|
| Materials handling | $ 54 | per materials requisition |
| Quality inspection | $ 44 | per inspection |
| Utilities | $ 5 | per machine hour |
During January, the company produced the following two jobs. Allocate overhead cost to each job using the activity rates.
| Activity Cost Driver | Activity Usage | |
|---|---|---|
| Job A | Job B | |
| Materials requisitions | 5 | 3 |
| Inspections | 8 | 4 |
| Machine hours | 320 | 220 |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
