Machine hours and electricity costs for Wells Industries for 2011 were as follows: Machine Electricity Month Hours Costs January 2,000 $ 9,200 February 2,320 10,500 March 1,520 6,750 April 2,480 11,500 May 3,040 14,125 June 2,640 11,000 July 3,280 12,375 August 2,800 11,375 September 1,600 7,750 October 2,960 13,000 November 3,760 15,500 December 3,360 13,875 Required: A. Using the high-low method, develop an estimate of variable electricity costs per machine hour. ______________________________ B. Using the high-low method, develop an estimate of fixed electricity costs per month. ______________________________ C. Using the high-low method, develop a cost function (linear cost equation) for use in estimating monthly electricity costs. ______________________________ D. Using the cost equation you developed in “C” above, estimate the total electricity costs for a month in which 3,000 machine hours are worked.
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.
Machine hours and electricity costs for Wells Industries for 2011 were as follows:
|
|
Machine |
Electricity |
|
Month |
Hours |
Costs |
|
January |
2,000 |
$ 9,200 |
|
February |
2,320 |
10,500 |
|
March |
1,520 |
6,750 |
|
April |
2,480 |
11,500 |
|
May |
3,040 |
14,125 |
|
June |
2,640 |
11,000 |
|
July |
3,280 |
12,375 |
|
August |
2,800 |
11,375 |
|
September |
1,600 |
7,750 |
|
October |
2,960 |
13,000 |
|
November |
3,760 |
15,500 |
|
December |
3,360 |
13,875 |
Required:
|
A. |
Using the high-low method, develop an estimate of variable electricity costs per machine hour.
______________________________ |
|
B. |
Using the high-low method, develop an estimate of fixed electricity costs per month.
______________________________ |
|
C. |
Using the high-low method, develop a cost function (linear cost equation) for use in estimating monthly electricity costs.
______________________________ |
|
D. |
Using the cost equation you developed in “C” above, estimate the total electricity costs for a month in which 3,000 machine hours are worked.
______________________________ |
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