North-South Pole Company produces two products, a jacket suitable for adventure-seeking people (Spirit) and a jacket for less-adventurous people (Companion). Production and Sales per year 20,000 units (Spirit) & 5,000 units (Companion) Direct labour 3.5 hours per unit (both) Direct labour cost $32.00 per hour Estimated annual manufacturing overhead $285,000 Direct materials $180 per unit (both) Breakdown of overhead rates Activity Cost Pools Estimated Overhead Expected Use of Cost Drivers per Activity Activity Based Overhead Rates Machine set-up overhead $ 40,000 ,per activity200 . what is overhead rate$? per set-up Sewing overhead $135,000 and per activity37,500 machine hours per activity (MH)and per setup and what is overhead rates $? per MH Inspection overhead $ 25,000 and per activity1000 therefore,what is the overhead rates $? per inspection The breakdown between the two products for assigning overheads are as follows: Product No. of Set-ups Sewing Inspections Spirit 105 23,500 500 Companion 95 14,000 500 Required: From the following information, calculate the unit costs for “Spirit” and “Companion” using both the traditional method of costing (i.e. manufacturing overhead rate is based on units produced), and 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.
North-South Pole Company produces two products, a jacket suitable for adventure-seeking people
(Spirit) and a jacket for less-adventurous people (Companion).
Production and Sales per year 20,000 units (Spirit) & 5,000 units (Companion)
Direct labour 3.5 hours per unit (both)
Direct labour cost $32.00 per hour
Estimated annual manufacturing overhead $285,000
Direct materials $180 per unit (both)
Breakdown of overhead rates
Activity Cost Pools Estimated
Overhead
Expected Use of Cost Drivers
per Activity
Activity Based
Overhead Rates
Machine set-up overhead $ 40,000 ,per activity200 . what is overhead rate$? per set-up
Sewing overhead $135,000 and per activity37,500 machine hours per activity (MH)and per setup and what is overhead rates $? per MH
Inspection overhead $ 25,000 and per activity1000 therefore,what is the overhead rates $? per inspection
The breakdown between the two products for assigning
Product No. of Set-ups Sewing Inspections
Spirit 105 23,500 500
Companion 95 14,000 500
Required:
From the following information, calculate the unit costs for “Spirit” and “Companion” using both the
traditional method of costing (i.e. manufacturing overhead rate is based on units produced), and Activity Based Costing.
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