Fran Ferry company had the following activities, pooled costs, and physical flow of driver units. The company uses activity-based costing. Activities Pooled Cost Physical flow of Driver Units Account Inquiry (hours) $200,000 5000 (hours) Account billing (Lines) $140,000 2,000,000 lines Account Verification (accounts) $5,000 20,000 accounts Correspondence (letters) $25,000 2,000 letters The above activities are used by departments A and B as follows: Department A Department B Account Inquiry (hours) 1,000 2,000 Account Billing (Lines) 200,000 100,000 Account Verification (accounts) 5,000 4,000 Correspondence (letters) 500 800 Required: 1. 1. How much of the Account Inquiry cost, Account Billing Cost, Account Verification Cost and Correspondence Cost will be assignmed to Department A & Department B ?
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.
Fran Ferry company had the following activities, pooled costs, and physical flow of driver units. The company uses activity-based costing.
Activities Pooled Cost Physical flow of Driver Units
Account Inquiry (hours) $200,000 5000 (hours)
Account billing (Lines) $140,000 2,000,000 lines
Account Verification (accounts) $5,000 20,000 accounts
Correspondence (letters) $25,000 2,000 letters
The above activities are used by departments A and B as follows:
Department A Department B
Account Inquiry (hours) 1,000 2,000
Account Billing (Lines) 200,000 100,000
Account Verification (accounts) 5,000 4,000
Correspondence (letters) 500 800
Required:
1.
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1. How much of the Account Inquiry cost, Account Billing Cost, Account Verification Cost and Correspondence Cost will be assignmed to Department A & Department B ? 2. What is over costing and under-costing? 3. What is the difference between managerial and financial accounting?
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