Management Accounting) Stanley Company has identified the following activities related to indirect production costs: Activity Activity Costs Cost Drivers Machine Setup $180,000 1,500 setup hours Materials Handling $50,000 12,500 pounds of materials Electric Power $20,000 20,000 kilowatt hours Stanley Company has obtained the following data concerning two products: Product 1 Product 2 Number of units produced 4,000 20,000 Direct materials cost $20,000 $25,000 Direct labor cost $12,000 $20,000 Number of setup hours 100 120 Pounds of materials used 500 1,500 Kilowatt-hours 1,000 2,000 Using an activity-based costing system, what amount of materials handling cost is assigned to Products 1 and 2? Product 1 Product 2 A) $2,000 $6,000 B) $8,333 $41,667 C) $12,500 $37,500 D) $20,000 $30,000
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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Stanley Company has identified the following activities related to indirect production costs:
Activity Activity Costs Cost Drivers
Machine Setup $180,000 1,500 setup hours
Materials Handling $50,000 12,500 pounds of materials
Electric Power $20,000 20,000 kilowatt hours
Stanley Company has obtained the following data concerning two products:
Product 1 Product 2
Number of units produced 4,000 20,000
Direct materials cost $20,000 $25,000
Direct labor cost $12,000 $20,000
Number of setup hours 100 120
Pounds of materials used 500 1,500
Kilowatt-hours 1,000 2,000
Using an activity-based costing system, what amount of materials handling cost is assigned to Products 1 and 2?
Product 1 Product 2
- A) $2,000 $6,000
- B) $8,333 $41,667
- C) $12,500 $37,500
- D) $20,000 $30,000
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