Ogwood Company’s Johnstown Division is a small manufacturer of wooden household items. Al Rivkin, division controller, plans to implement a standard-costing system. Rivkin has collected informa-tion from several co-workers that will assist him in developing standards. One of the Johnstown Divi-sion’s products is a wooden cutting board. Each cutting board requires 1.25 board feet of lumber and 12 minutes of direct-labor time to prepare and cut the lumber. The cutting boards are inspected after they are cut. Because the cutting boards are made of a natural material that has imperfections, one board is normally rejected for each five that are accepted. Four rubber foot pads are attached to each good cutting board. A total of 15 minutes of direct-labor time is
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.
Ogwood Company’s Johnstown Division is a small manufacturer of wooden household items. Al Rivkin, division controller, plans to implement a standard-costing system. Rivkin has collected informa-tion from several co-workers that will assist him in developing standards. One of the Johnstown Divi-sion’s products is a wooden cutting board. Each cutting board requires 1.25 board feet of lumber and 12 minutes of direct-labor time to prepare and cut the lumber. The cutting boards are inspected after they are cut. Because the cutting boards are made of a natural material that has imperfections, one board is normally rejected for each five that are accepted. Four rubber foot pads are attached to each good cutting board. A total of 15 minutes of direct-labor time is required to attach all four foot pads and finish each cutting board. The lumber for the cutting boards cost $3.00 per board foot, and each foot pad costs $.05. Direct labor is paid at the rate of $8.00 per hour.Required: 1. Develop the standard cost for direct material and direct labor of a cutting board. 2. Explain the role of each of the following people in developing standards. a. Purchasing manager. b. Industrial engineer. c.
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