QUESTION 2 Seroja Sdn. Bhd. manufactures customized equipment for local market. The budgeted data for the month of February 2019 were as follows: Machining Department Finishing Department Manufacturing overhead RM40,000 RM65,000 Direct labour hours 2,000 hours 10,000 hours Machine hours 4,000 hours 5,700 hours During the month, an order was received from Mr. Eric to manufacture an equipment for his personnel use. The job is known as Job E and the data pertaining to the job were as follows: Machining Department Finishing Department Direct material RM2,800 RM1,200 Direct labour hours 500 hours 50 hours Machine hours 300 hours 200 hours Wage rate per hour RM2.50 RM3.20 Additional information about Job E: Manufacturing overhead is absorbed based on machine hour for Machining department and direct labour hour for Finishing department. Administrative expenses incurred for Job E was 15% of prime cost The company set the profit margin of 25% on total cost for Job E. At the end of the month the actual data were obtained as follows: Machining Department Finishing Department Manufacturing overhead RM35,000 RM72,000 Direct labour hours 1,650 hours 9,800 hours Machine hours 3,700 hours 6,200 hours a. ii) Departmental rate Machining Dept Finishing Dept Budgeted Manufacturing Overhead RM 40,000 RM 65,000 Budgted Direct Labour Hours - 10,000 hours Budgeted Machine Hours 4,000 hours - Departmental Rate RM 10 per Machine hour ( 40,000/4,000) RM 6.5 per labour hour (65,000/10,000) d. Based on your answer in a. ii) above, calculate over or under absorption of overhead for each department.
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.
QUESTION 2
Seroja Sdn. Bhd. manufactures customized equipment for local market. The budgeted data for the month of February 2019 were as follows:
|
|
Machining Department |
Finishing Department |
|
Manufacturing |
RM40,000 |
RM65,000 |
|
Direct labour hours |
2,000 hours |
10,000 hours |
|
Machine hours |
4,000 hours |
5,700 hours |
During the month, an order was received from Mr. Eric to manufacture an equipment for his personnel use. The job is known as Job E and the data pertaining to the job were as follows:
|
|
Machining Department |
Finishing Department |
|
Direct material |
RM2,800 |
RM1,200 |
|
Direct labour hours |
500 hours |
50 hours |
|
Machine hours |
300 hours |
200 hours |
|
Wage rate per hour |
RM2.50 |
RM3.20 |
Additional information about Job E:
- Manufacturing overhead is absorbed based on machine hour for Machining department and direct labour hour for Finishing department.
- Administrative expenses incurred for Job E was 15% of prime cost
- The company set the profit margin of 25% on total cost for Job E.
At the end of the month the actual data were obtained as follows:
|
|
Machining Department |
Finishing Department |
|
Manufacturing overhead |
RM35,000 |
RM72,000 |
|
Direct labour hours |
1,650 hours |
9,800 hours |
|
Machine hours |
3,700 hours |
6,200 hours |
a. ii) Departmental rate
|
|
Machining Dept |
Finishing Dept |
|
Budgeted Manufacturing Overhead |
RM 40,000 |
RM 65,000 |
|
Budgted Direct Labour Hours |
- |
10,000 hours |
|
Budgeted Machine Hours |
4,000 hours |
- |
|
Departmental Rate |
RM 10 per Machine hour ( 40,000/4,000) |
RM 6.5 per labour hour (65,000/10,000) |
d. Based on your answer in a. ii) above, calculate over or under absorption of overhead for each department.
Step by step
Solved in 2 steps with 2 images
