phinx Company projected the following overhead costs and cost drivers: Overhead Item Expected Costs Cost Driver Expected Quantity Setup costs $121,500 Number of setups 50 Ordering costs 40,500 Number of orders 30 Maintenance 174,000 Machine-hours 600 Power 27,000 Kilowatt-hours 600 Total overhead cost 363,000 Direct Labor Hours 500 Sphinx contracted for 2 jobs, both of which were completed during the year. Production managers reported the following data in relation to these jobs: Job 1 Job 2 Direct materials $170,000 $120,000 Direct labor $14,000 $11,000 Direct labor-hours 300 220 Number of setups 25 23 Number of orders 20 13 Machine-hours 410 200 Kilowatt-hours 380 240
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.
Sphinx Company projected the following
|
Overhead Item |
Expected Costs |
Cost Driver |
Expected Quantity |
|
Setup costs |
$121,500 |
Number of setups |
50 |
|
Ordering costs |
40,500 |
Number of orders |
30 |
|
Maintenance |
174,000 |
Machine-hours |
600 |
|
Power |
27,000 |
Kilowatt-hours |
600 |
|
Total overhead cost |
363,000 |
Direct Labor Hours |
500 |
Sphinx contracted for 2 jobs, both of which were completed during the year. Production managers reported the following data in relation to these jobs:
|
|
Job 1 |
Job 2 |
|
Direct materials |
$170,000 |
$120,000 |
|
Direct labor |
$14,000 |
$11,000 |
|
Direct labor-hours |
300 |
220 |
|
Number of setups |
25 |
23 |
|
Number of orders |
20 |
13 |
|
Machine-hours |
410 |
200 |
|
Kilowatt-hours |
380 |
240 |
If Sphinx uses activity based costing method to determine the overhead cost. How much overhead costs should be assigned to Job 1. Show the calculation steps and clearly indicate the answers for each question. Round decimals to the nearest tenth.
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