Required: 1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent. Department Production Department Rate Cutting Department $ fill in the blank.... per direct labor hour Finishing Department $ fill in the blank.... per direct labor hour 2. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Round per unit amounts to the nearest whole cent
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.
Activity-Based And Department Rate Product Costing and Product Cost Distortions
Black and Blue Sports Inc. manufactures two products: snowboards and skis. The factory
| Indirect labor | $507,000 |
| Cutting Department | 156,000 |
| Finishing Department | 192,000 |
| Total | $855,000 |
The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows:
| Activity | Budgeted Activity Cost | Activity Base | ||||
| Production control | $237,000 | Number of production runs | ||||
| Materials handling | 270,000 | Number of moves | ||||
| Total | $507,000 |
The activity-base usage quantities and units produced for the two products follow:
| Number of Production Runs | Number of Moves | Direct Labor Hours-Cutting | Direct Labor Hours-Finishing | Units Produced | ||||||||||||||||
| Snowboards | 430 | 5,000 | 4,000 | 2,000 | 6,000 | |||||||||||||||
| Skis | 70 | 2,500 | 2,000 | 4,000 | 6,000 | |||||||||||||||
| Total | 500 | 7,500 | 6,000 | 6,000 | 12,000 |
Required:
1. Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is $315,000 and $540,000 for the Cutting and Finishing departments, respectively. Round per unit amounts to the nearest whole cent.
| Department | Production Department Rate |
| Cutting Department | $ fill in the blank.... per direct labor hour |
| Finishing Department | $ fill in the blank.... per direct labor hour |
2. Determine the total and per-unit
| Product | Total Factory Overhead | Factory Overhead Per Unit |
| Snowboards | $ fill in the blank 3 | $ fill in the blank 4 |
| Skis | $ fill in the blank 5 | $ fill in the blank 6 |
3. Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Round per unit amounts to the nearest whole cent.
| Activity | Activity Rate |
| Production Control | $ fill in the blank....per prod. run |
| Materials Handling | $ fill in the blank.....per move |
| Cutting Department | $ fill in the blank.....per dlh |
| Finishing Department | $ fill in the blank......per dlh |
4. Determine the total and per-unit cost assigned to each product under activity-based costing. Round the per unit amounts to the nearest whole cent.
| Product | Total Activity Cost | Activity Cost Per Unit |
| Snowboards | $ fill in the blank | $ fill in the blank |
| Skis | $ fill in the blank | $ fill in the blank |
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