Musich Corporation has an activity-based costing system with three activity cost pools--Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, have been allocated to the cost pools already and are provided in the table below. Activity Cost Pools Total Machining Setting Up Other Equipment depreciation $ 10,200 $ 50,700 $ 24,600 $ 85,500 Indirect labor 5,700 3,300 4,500 13,500 Total $ 15,900 $ 54,000 $ 29,100 $ 99,000 Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company's costs appear below: MHs Batches Product Z3 6,400 950 Product T1 6,600 1,550 Total 13,000 2,500 Product Z3 Product T1 Sales (total) $ 238,800 $ 259,500 Direct materials (total) $ 86,000 $ 98,400 Direct labor (total) $ 110,800 $ 107,200 Required: a. Calculate activity rates for each activity cost pool using activity-based costing. b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing. c. Determine the product margins for each product using activity-based costing.
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.
Musich Corporation has an activity-based costing system with three activity cost pools--Machining, Setting Up, and Other. The company's
| Activity Cost Pools | Total | |||
|---|---|---|---|---|
| Machining | Setting Up | Other | ||
| Equipment depreciation | $ 10,200 | $ 50,700 | $ 24,600 | $ 85,500 |
| Indirect labor | 5,700 | 3,300 | 4,500 | 13,500 |
| Total | $ 15,900 | $ 54,000 | $ 29,100 | $ 99,000 |
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company's costs appear below:
| MHs | Batches | |
|---|---|---|
| Product Z3 | 6,400 | 950 |
| Product T1 | 6,600 | 1,550 |
| Total | 13,000 | 2,500 |
| Product Z3 | Product T1 | |
|---|---|---|
| Sales (total) | $ 238,800 | $ 259,500 |
| Direct materials (total) | $ 86,000 | $ 98,400 |
| Direct labor (total) | $ 110,800 | $ 107,200 |
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
c. Determine the product margins for each product using activity-based costing.
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