Question 1 Fair Manufacturing Company is a factory in Hong Kong. It has two support departments- Maintenance and Accounting and two operating departments – Production 1 and Production 2 Departments. You are given the following information related to the overhead costs of the four departments: Maintenance Accounting Production 1 Production 2 Budgeted overhead costs before any interdepartment cost allocations Support work furnished: For Maintenance department $300,000 $120,000| $300,000 $500,000 Machine hours 50 5,750 500 For Accounting department Number of employees 20 10 Support costs in Maintenance department are allocated based on the machine hours used and that for the Accounting department are allocated by number of employees. Required What are the total costs for each of the operating departments (Production 1 and Production 2) after the support department costs of Maintenance and Accounting have been allocated using a. the direct method, b. the step-down method (allocate Maintenance costs first), c. the step-down method (allocate Accounting costs first), d. the reciprocal method? (Round your answers to the nearest dollar.)
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.
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