Hosmer Industries provides the following information about resources and usage: Unused Resources Capacity Cost Driver Volume Resources used Materials $ 4,800 6,400 pounds Power 3,744 272 hours Setups 1,800 62 setups Purchasing 4,320 64 purchase orders Client assistance 18,240 40 inquiries Supervision 8,160 256 labor-hours Facility cost 6,720 3,360 square meters Resources supplied Materials $ 235,200 Power 42,912 Setups 57,600 Purchasing 50,400 Client assistance 37,440 Supervision 69,600 Facility cost 67,200 Sales revenue for Hosmer Industries is $720,000. Required: Prepare a traditional income statement. Prepare an activity-based income statement.
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.
Hosmer Industries provides the following information about resources and usage:
| Unused Resources Capacity | Cost Driver Volume | ||
|---|---|---|---|
| Resources used | |||
| Materials | $ 4,800 | 6,400 | pounds |
| Power | 3,744 | 272 | hours |
| Setups | 1,800 | 62 | setups |
| Purchasing | 4,320 | 64 | purchase orders |
| Client assistance | 18,240 | 40 | inquiries |
| Supervision | 8,160 | 256 | labor-hours |
| Facility cost | 6,720 | 3,360 | square meters |
| Resources supplied | |||
| Materials | $ 235,200 | ||
| Power | 42,912 | ||
| Setups | 57,600 | ||
| Purchasing | 50,400 | ||
| Client assistance | 37,440 | ||
| Supervision | 69,600 | ||
| Facility cost | 67,200 |
Sales revenue for Hosmer Industries is $720,000.
Required:
- Prepare a traditional income statement.
- Prepare an activity-based income statement.
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