Madani Sdn Bhd produces variety of furniture products that is sell to retailer such as Home Depot. The company use a job order costing system in which predetermined overheads rates are used to apply manufacturing overheads cost to jobs. The predetermined overhead rate in the Spraying Department based on machined hours, and the rate in the Assembly Department is based on direct labour hours. At the beginning of the year, the company’s management made the following estimate: Department Spraying Assembly Direct labour hours 12,000 60,000 Machine hours 70,000 8,000 Direct material cost RM510,000 RM650,000 Direct labour cost RM130,000 RM420,000 Fixed manufacturing overhead cost RM497,000 RM615,000 Variable manufacturing overhead per machine hour RM1.50 - Variable manufacturing overhead per direct labour hour - RM2.00
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.
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Madani Sdn Bhd produces variety of furniture products that is sell to retailer such as Home Depot. The company use a
Department |
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|
|
Spraying Assembly |
|
|
Direct labour hours |
12,000 |
60,000 |
|
Machine hours |
70,000 |
8,000 |
|
Direct material cost |
RM510,000 |
RM650,000 |
|
Direct labour cost |
RM130,000 |
RM420,000 |
|
Fixed |
RM497,000 |
RM615,000 |
|
Variable manufacturing overhead per machine hour |
RM1.50 |
- |
|
Variable manufacturing overhead per direct labour hour |
- |
RM2.00 |
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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 |
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|
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Spraying Assembly |
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Direct labour hours |
30 |
84 |
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|
|
Machine hours |
110 |
20 |
|
|
|
Materials placed into production |
RM470 |
RM332 |
|
|
|
Direct labour cost |
RM325 |
RM588 |
|
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Required:
- Computed the predetermined overhead are used during the year in the Spraying Department and Assembly Department.
- Calculate the total overhead cost applied to Job 205.
- Calculate the total cost recorded for Job 205. If the job contained 50 units, compute the unit product cost.
- At the end of the year, the records of Madani Sdn Bhd revealed the following actual cost and operating data for all jobs worked on during the year.
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Spraying |
Department Assembly |
|
|
Direct labour hours |
10,000 |
62,000 |
|
Machine hours |
65,000 |
9,000 |
|
Direct material cost |
RM430,000 |
RM680,000 |
|
Direct labour cost |
RM108,000 |
RM436,000 |
|
Manufacturing overhead cost |
RM570,000 |
RM750,000 |
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