Miljohn freelancing provides different services to its clients. The company uses an activity based costing system for its overhead costs. The company has provided the following data from its activity based costing system. Activity Cost Pool Total Cost Total Activity Consulting 368,364 36, 250 hours Bookkeeping 142,500 8,100 jobs Client support 37,620 680 clients Other 220,000 Not applicable The “other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Adams corporation, requested 31 jobs during the year that required a total of 24 hours of service. For this service the client as charged 1,750. Required: Compute the increase/decrease in margin assuming Miljohn Freelancing decides to use traditional costing system in which all cost are allocated to customer on the basis of number of jobs.
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.
Miljohn freelancing provides different services to its clients. The company uses an activity based costing system for its
|
Activity Cost Pool |
Total Cost |
Total Activity |
|
Consulting |
368,364 |
36, 250 hours |
|
Bookkeeping |
142,500 |
8,100 jobs |
|
Client support |
37,620 |
680 clients |
|
Other |
220,000 |
Not applicable |
The “other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Adams corporation, requested 31 jobs during the year that required a total of 24 hours of service. For this service the client as charged 1,750.
Required:
Compute the increase/decrease in margin assuming Miljohn Freelancing decides to use traditional costing system in which all cost are allocated to customer on the basis of number of jobs.
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