It has been suggested to the president to consider the use of an ABC costing system to allocate manufacturing overhead. Engineering studies have revealed the following information about estimated manufacturing activities for the coming year. Activity Cost Pool Estimated Overhead Cost Expected Activity Level Setups $530,000 200 setups Scrap $425,000 400 units Testing $325,000 10,000 tests Machine Related $1,370,000 60,000 machine hours Total $2,650,000 Calculate the separate predetermined overhead rates for each of the activities listed above.
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.
- It has been suggested to the president to consider the use of an ABC costing system to allocate manufacturing
overhead . Engineering studies have revealed the following information about estimated manufacturing activities for the coming year.
Activity Cost Pool Estimated Overhead Cost Expected Activity Level Setups $530,000 200 setups Scrap $425,000 400 units Testing $325,000 10,000 tests Machine Related $1,370,000 60,000 machine hours Total $2,650,000
Calculate the separate predetermined overhead rates for each of the activities listed above.
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