Product Data Model A Model B Units produced per year 10,000 100,000 Prime costs $153,000 $1,530,000 Direct labor hours 143,000 310,000 Machine hours 21,000 196,000 Production runs 40 60 Inspection hours 900 1,300 Maintenance hours 8,000 92,000 Overhead costs: Setup costs $300,000 Inspection costs 209,000 Machining 318,200 Maintenance 260,000 Total $1,087,200 2. Compute the overhead cost per unit for each product by using ABC. (Round rates and unit overhead costs to two decimal places.) Model A: overhead cost per unit Model B: overhead cost per unit Note: Be sure to complete both tables below. Activity Driver Activity Rate Setups Production runs per run Inspections Inspection hours per hour Machining Machine hours per hour Maintenance Maintenance hours per hour Overhead assignment Model A Model B Setups Inspections Machining Maintenance Total overhead ÷ Units produced Overhead per unit
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.
| Product Data | ||
| Model A | Model B | |
| Units produced per year | 10,000 | 100,000 |
| Prime costs | $153,000 | $1,530,000 |
| Direct labor hours | 143,000 | 310,000 |
| Machine hours | 21,000 | 196,000 |
| Production runs | 40 | 60 |
| Inspection hours | 900 | 1,300 |
| Maintenance hours | 8,000 | 92,000 |
| Setup costs | $300,000 | |
| Inspection costs | 209,000 | |
| Machining | 318,200 | |
| Maintenance | 260,000 | |
| Total | $1,087,200 |
| Model A:
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| Model B:
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| Activity | Driver | Activity Rate |
| Setups | Production runs |
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| Inspections | Inspection hours |
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| Machining | Machine hours |
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| Maintenance | Maintenance hours |
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| Overhead assignment | ||
| Model A | Model B | |
| Setups |
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| Inspections |
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| Machining |
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| Maintenance |
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| Total overhead |
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| ÷ Units produced |
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| Overhead per unit |
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