Platinum Co. is an English manufacturing company whose total factory overhead costs fluctuate somewhat from month to month according to the number of machine-hours worked in its production facility. These costs (in English pounds) for the three months in summer are given below. Unfortunately, the costs are incomplete. Level of Activity June July August Machine-hours 46,500 62,000 51,150 Total factory overhead costs £214,700 £236,400 The factory overhead costs above consist of indirect materials, rent, and maintenance. The company has analyzed these costs at the 46,500 machine-hours level of activity as follows: Indirect materials (variable) £51,150 Rent (fixed) 123,000 Maintenance (mixed) 40,550 Total factory overhead costs £214,700 Platinum Co. (above) is considering using a predetermined overhead rate based on capacity. Capacity of the factory 64,000 Machine hours Manufacturing OH cost at the capacity £256,000 If Platinum used the capacity based predetermined rate to apply manufacturing overhead cost, calculate the over or under-applied overhead cost for the month of July : A. Underapplied by £11,600 B. Overapplied by £11,600 C. Underapplied by £8,000 D. Overapplied by £8,000 E. None of the above
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.
Platinum Co. is an English manufacturing company whose total
Platinum Co. (above) is considering using a predetermined overhead rate based on capacity. Capacity of the factory 64,000 Machine hours Manufacturing OH cost at the capacity £256,000 If Platinum used the capacity based predetermined rate to apply manufacturing overhead cost, calculate the over or under-applied overhead cost for the month of July
: A. Underapplied by £11,600
B. Overapplied by £11,600
C. Underapplied by £8,000
D. Overapplied by £8,000
E. None of the above
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