Required: 1. Calculate the predetermined overhead rate. 2. Calculate the amount of applied manufacturing overhead. 3. Calculate actual manufacturing overhead costs. 4. Compute over- or underapplied overhead.
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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Predetermined overhead rate:
Manufacturing overhead is the cost that is incurred directly for the production process. The manufacturing overhead is allocated to the products based on a rate known as the predetermined overhead rate.
The predetermined overhead rate is calculated by dividing the estimated total manufacturing overhead costs by the estimated total amount of cost driver or activity base.
Applied manufacturing overhead:
Applied manufacturing overhead is calculated by multiplying the predetermined overhead rate by the actual activity base or cost driver.
Actual manufacturing overhead:
It is the actual overhead incurred during the period. It can be more or less than the applied manufacturing overhead. Over-applied manufacturing overhead means the applied manufacturing overhead is more than the actual overhead and vice versa.
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