Northwest Company produces two types of glass shelving: rounded edge and squared edge. The company reports the following cost data. Rounded Edge $ 34,800 11,600 Squared Edge $ 46,800 $ 81,600 31,200 Total Direct materials Direct labor Overhead (using plantwide rate) 42,800 41,400 79,400 120,800 $ 87,800 $ 245,200 Total product cost 157,400 11,600 $ 7.57 15,600 $ 10.09 Units produced Product cost per unit Northwest's controller wants to apply activity-based costing to allocate the $120,800 of overhead cost to the two products to see whether product cost per unit would change markedly from that above. The company's budgeted activity usage equals its actual activity usage for the period. The following additional information is collected. Activity Cost Driver Purchase orders Rounded Edge 149 orders Activity Usage Squared Edge 471 orders Budgeted Cost Activity Purchasing Depreciation of machinery Setup Total 620 orders $ 6,200 63,000 Machine hours 500 hours 1,500 hours 2,000 hours 51,600 Setups 40 setups 210 setups 250 setups 2$ 120,800 Total Required: 1. Compute the activity rate for each activity using activity-based costing. 2. Compute overhead cost per unit for each of the two products using activity-based costing. 3. Determine product cost per unit for each of the two products 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.
Activity based costing is one of the costing system under which all indirect costs and overhead costs will be allocated to the products on the basis of activities and their related cost drivers.
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