Patricio Corp. uses ABC to compute the product cost for external reports. The company has three activity pools and applies manufacturing overhead costs using predetermined overhead rates for each activity cost pool. Estimated costs and activities for the current year are presented below for the three activity cost pools: Estimated OH Cost Expected Activity Activity 1 $180,144 14,400 Activity 2 $175,968 7,200 Acitivity 3 $390,702 13,200 The actual cost and activities for the current year are presented below: Actual OH Cost Actual Activity Activity 1 $179,394 14,490 Activity 2 $175,428 7,110 Acitivity 3 $390,702 13,350 a. What is the activity rate under the ABC system for activity 3 would be? b. What would be the total overhead applied to Work in Process account during the year? c. What would be the total overhead debited to the manufacturing account during the year?
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.
Patricio Corp. uses ABC to compute the product cost for external reports. The company has three activity pools and applies
| Estimated OH Cost | Expected Activity | |
| Activity 1 | $180,144 | 14,400 |
| Activity 2 | $175,968 | 7,200 |
| Acitivity 3 | $390,702 | 13,200 |
The actual cost and activities for the current year are presented below:
| Actual OH Cost | Actual Activity | |
| Activity 1 | $179,394 | 14,490 |
| Activity 2 | $175,428 | 7,110 |
| Acitivity 3 | $390,702 | 13,350 |
a. What is the activity rate under the ABC system for activity 3 would be?
b. What would be the total overhead applied to Work in Process account during the year?
c. What would be the total overhead debited to the manufacturing account during the year?
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