High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company provided the following estimates:
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.
High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a
| Department | ||||||
| Molding | Painting | |||||
| Direct labor-hours | 12,000 | 60,000 | ||||
| Machine-hours | 70,000 | 8,000 | ||||
| Fixed manufacturing overhead cost | $ | 497,000 | $ | 615,000 | ||
| Variable manufacturing overhead per machine-hour | $ | 1.50 | - | |||
| Variable manufacturing overhead per direct labor-hour | - | $ | 2.00 | |||
Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:
| Department | ||||||
| Molding | Painting | |||||
| Direct labor-hours | 30 | 84 | ||||
| Machine-hours | 110 | 20 | ||||
| Direct materials | $ | 770 | $ | 1,332 | ||
| Direct labor cost | $ | 525 | $ | 1,470 | ||
Required:
1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.
2. Compute the total overhead cost applied to Job 205.
3-a. What would be the total
3-b. If the job contained 50 units, what would be the unit product cost?
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