Exotic Engine Shop uses a job order cost system to determine the cost ofperforming engine repair work. Estimated costs and expenses for thecoming period are as follows: Engine partsShop direct laborShop and repair equipment depreciationShop supervisor salariesShop property taxesShop suppliesAdvertising expenseAdministrative office salariesAdministrative office depreciation expenseTotal costs and expenses $ 380,0001,872,00062,500240,00036,94010,00028,000150,0008,000$2,787,440 The average shop direct labor rate is $37.50 per hour.Determine the predetermined shop overhead rate per direct labor hour.
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.
Exotic Engine Shop uses a
performing engine repair work. Estimated costs and expenses for the
coming period are as follows:
| Engine parts Shop direct labor Shop and repair equipment Shop supervisor salaries Shop property taxes Shop supplies Advertising expense Administrative office salaries Administrative office depreciation expense Total costs and expenses |
$ 380,000 1,872,000 62,500 240,000 36,940 10,000 28,000 150,000 8,000 $2,787,440 |
The average shop direct labor rate is $37.50 per hour.
Determine the predetermined shop
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