Pristine Painting Services uses a job order cost system to collect the costs of its home painting business. Each customer’s house is treated as a separate job. Overhead is applied to each job based on the number of painting hours required for each house. Listed below are the data for the current year: Estimated overhead $780,000 Actual overhead $772,450 Estimated painting hours 39,000 Actual painting hours 38,750 The company uses Operating Overhead in place of Manufacturing Overhead. Instructions (a) Compute the predetermined overhead rate. (b) Prepare the entry to apply the overhead for the year. (c) Determine whether the overhead was under- or overapplied and by how much. (d) If estimated overhead increases to $799,500, discuss how this would impact (1) applied overhead and (2) actual overhead. Support your discussion with calculations. Determine whether overhead would be under- or overapplied and by how much.
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.
- Pristine Painting Services uses a
job order cost system to collect the costs of its home painting business. Each customer’s house is treated as a separate job.Overhead is applied to each job based on the number of painting hours required for each house. Listed below are the data for the current year:
Estimated overhead $780,000
Actual overhead $772,450
Estimated painting hours 39,000
Actual painting hours 38,750
The company uses Operating Overhead in place of Manufacturing Overhead.
Instructions
(a) Compute the predetermined overhead rate.
(b) Prepare the entry to apply the overhead for the year.
(c) Determine whether the overhead was under- or overapplied and by how much.
(d) If estimated overhead increases to $799,500, discuss how this would impact (1) applied overhead and (2) actual overhead. Support your discussion with calculations. Determine whether overhead would be under- or overapplied and by how much.
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