Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below: Cost Pool Total Costs Cost Driver Annual Activity Packaging and shipping $168,100 Number of boxes shipped 20,600 boxes Final inspection $197,500 Number of individual items shipped 97,500 items General operations and supervision $81,900 Number of orders 8,500 orders During the period, the Far East sales office generated 675 orders for a total of 6,190 items. These orders were shipped in 1,326 boxes. What amount of shipping department costs should be allocated to these sales?
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.
Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:
| Cost Pool | Total Costs | Cost Driver | Annual Activity |
| Packaging and shipping | $168,100 | Number of boxes shipped | 20,600 boxes |
| Final inspection | $197,500 | Number of individual items shipped | 97,500 items |
| General operations and supervision | $81,900 | Number of orders | 8,500 orders |
During the period, the Far East sales office generated 675 orders for a total of 6,190 items. These orders were shipped in 1,326 boxes. What amount of shipping department costs should be allocated to these sales?
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