Maurice Corporation has established the following cost pools for 2023. COMMITTED COST POOLS COSTS COST DRIVERS LEVEL Maintenance $ 40,000 Machine hours 10,000 Materials handling 50,000 Number of moves 250 Machine setup 60,000 Setup hours 1,000 Inspection 50,000 Number of inspections 500 Total $200,000 The following information pertains to two representative jobs completed during January 2023 ITEM J101 J102 Direct materials cost $ 20,000 $ 12,000 Direct labor cost $ 10,000 $ 8,000 Number of units 4,000 3,000 Direct labor hours 700 600 Machine hours 800 600 Number of material-moves 50 20 Number of setup hours 100 50 Number of inspections 40 20 Required: Determine the unit cost of each job using machine hours to allocate all support costs. Determine the unit cost of each job using activity-based costing. Which of the two methods produces more accurate estimates of job costs and profits?
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.
Maurice Corporation has established the following cost pools for 2023.
COMMITTED
COST POOLS COSTS COST DRIVERS LEVEL
Maintenance $ 40,000 Machine hours 10,000
Materials handling 50,000 Number of moves 250
Machine setup 60,000 Setup hours 1,000
Inspection 50,000 Number of inspections 500
Total $200,000
The following information pertains to two representative jobs completed during January 2023
ITEM J101 J102
Direct materials cost $ 20,000 $ 12,000
Direct labor cost $ 10,000 $ 8,000
Number of units 4,000 3,000
Direct labor hours 700 600
Machine hours 800 600
Number of material-moves 50 20
Number of setup hours 100 50
Number of inspections 40 20
Required:
- Determine the unit cost of each job using machine hours to allocate all support costs.
- Determine the unit cost of each job using activity-based costing.
- Which of the two methods produces more accurate estimates of
job costs and profits?
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
