Orpheus Ltd has a Human Resource Department, an Administration Department and three Sales Departments. The Human Resource Department cost is allocated based on the number of employees and the Administration Department cost is allocated based on direct labour hours. The support departments both serve each other and the three Sales Departments. The following information is available: HR Admin Sales #1 Sales #2 Sales #3 Budgeted cost 30,000 45,000 Number of employees 10 5 15 45 30 Direct labour hours 1,000 4,000 20,000 30,000 50,000 Use the step-down method to calculate the amount of Administration Department cost allocated to Sales #1.
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.
Orpheus Ltd has a Human Resource Department, an Administration Department and three Sales Departments. The Human Resource Department cost is allocated based on the number of employees and the Administration Department cost is allocated based on direct labour hours. The support departments both serve each other and the three Sales Departments. The following information is available:
| HR | Admin | Sales #1 | Sales #2 | Sales #3 | |
| Budgeted cost | 30,000 | 45,000 | |||
| Number of employees | 10 | 5 | 15 | 45 | 30 |
| Direct labour hours | 1,000 | 4,000 | 20,000 | 30,000 | 50,000 |
Use the step-down method to calculate the amount of Administration Department cost allocated to Sales #1.
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