Part 2: Job Order Costing Mr. Suncat is trying to determine if he should use a job order costing system or an activity-based costing system to better determine the cost of each of his products. He has provided you with the following information and has requested that you help him by answering these questions/calculating these amounts. Basic Multi-Layer Custom Direct Material Costs per wedding cake type $20 $35 $50 Direct Labor Hours per wedding cake type 3 hours 5 hours 7 hours Number of cakes expected to be produced by wedding cake type 1500 1700 1000 Direct Labor Costs per hour per wedding cake type $50/hour $50/hour $50/hour Total estimated manufacturing overhead cost is $150,000. Using the information given above, compute the predetermined manufacturing overhead rate based on total direct labor hours for Suncat Cake Shop. Show all calculations and clearly label your answer.
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.
Part 2:
Mr. Suncat is trying to determine if he should use a job order costing system or an activity-based costing system to better determine the cost of each of his products. He has provided you with the following information and has requested that you help him by answering these questions/calculating these amounts.
|
|
Basic |
Multi-Layer |
Custom |
|
Direct Material Costs per wedding cake type |
$20 |
$35 |
$50 |
|
Direct Labor Hours per wedding cake type |
3 hours |
5 hours |
7 hours |
|
Number of cakes expected to be produced by wedding cake type |
1500 |
1700 |
1000 |
|
Direct Labor Costs per hour per wedding cake type |
$50/hour |
$50/hour |
$50/hour |
Total estimated
- Using the information given above, compute the predetermined manufacturing overhead rate based on total direct labor hours for Suncat Cake Shop. Show all calculations and clearly label your answer.
Job order costing: It is defined as a method of recording the costs of a manufacturing job, rather than process. With job costing systems, a project manager or accountant can keep track of the cost of each job, maintaining data that is often more relevant to the operations of the business. The job order costing system is used only when the products manufactured are sufficiently different from each other.
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