Garza Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Casting Customizing Machine-hours 20,000 13,000 Direct labor-hours 1,000 7,000 Total fixed manufacturing overhead cost $ 152,000 $ 68,600 Variable manufacturing overhead per machine-hour $ 2.10 Variable manufacturing overhead per direct labor-hour $ 4.30The predetermined overhead rate for the Casting Department is closest to: $9.70 per machine-hour $7.60 per machine-hour $27.71 per machine-hour $2.10 per machine-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.
| Casting | Customizing | |||
| Machine-hours | 20,000 | 13,000 | ||
| Direct labor-hours | 1,000 | 7,000 | ||
| Total fixed |
$ | 152,000 | $ | 68,600 |
| Variable manufacturing overhead per machine-hour | $ | 2.10 | ||
| Variable manufacturing overhead per direct labor-hour | $ | 4.30 |
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$9.70 per machine-hour
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$7.60 per machine-hour
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$27.71 per machine-hour
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$2.10 per machine-hour
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