Franklin Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows. Expected Costs Direct labor Direct materials Fringe Benefits: Home 1 2 3 Total Indirect Materials: Home 1 Assume Franklin needs to allocate two major overhead costs ($67,200 of employee fringe benefits and $18,080 of Indirect materials costs) among the three jobs. Required Choose an appropriate cost driver for each of the overhead costs and determine the total cost of each house. Note: Round "Allocation rate" to 2 decimal places. 2 3 Total Expected Costs Direct labor Direct materials Fringe benefits Indirect materials Total cost Home 1 $ 61,000 107,000 Allocation Rate x Weight of Base X X Allocation Ratex Weight of Base $ The cost components to determine the total cost of each house: Home 1 Home 2 Home 2 $ 101,000 148,000 X 0 X X $ 0 11 = S 11 Home 3 $ 174,000 197,000 11 Allocated Cost 0 0 0 11 $ 12 = S Allocated Cost 0 0 0 S S Home 3 S 0 $ Total 0 0 0 0 0
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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