Home Insert Page Layout Formulas Data Review View Usage of Cost Drivers by Customer Contract Jupiter Auto Southern Caesar Manufacturing Overhead in 2017 Department 3 Design 4 Production 5 Engineering Cost Driver Motors Motors CAD-design-hours Engineering-hours Machine-hours $ 35,000 150 250 100 25,000 220,000 130 100 270 300 3,700 1,000 6 Total $280,000 Required 1. Compute the manufacturing overhead allocated to each customer in 2017 using the simple costing system that uses machine-hours as the allocation base. 2. Compute the manufacturing overhead allocated to each customer in 2017 using department-based manufacturing overhead rates. 3. Comment on your answers in requirements 1 and 2. Which customer do you think was complaining about being overcharged in the simple system? If the new department-based rates are used to price contracts, which customer(s) will be unhappy? How would you respond to these concerns? 4. How else might RC use the information available from its department-by-department analysis of manu- facturing overhead costs? 5. RC's managers are wondering if they should further refine the department-by-department costing sys- tem into an ABC system by identifying different activities within each department. Under what condi- tions would it not be worthwhile to further refine the department costing system into an ABC system?
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.
Plant-wide, department, and ABC indirect cost rates. Roadster Company (RC) designs and produces automotive parts. In 2017, actual variable manufacturing
has regularly complained of being charged noncompetitive prices, so RC’s controller Matthew Draper realizes that it is time to examine the consumption of overhead resources more closely. He knows that there are three main departments that consume overhead resources: design, production, and engineering. Interviews with the department personnel and examination of time records yield the following detailed information:
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