Roger Parker, the production manager of Products Company, entered the office of controller Harris Johnson and asked, “Harris, what gives here? I was charged for 330 direct labor hours on Job AD22, and my records show that we spent only 290 hours on that job. That 40-hour difference caused the total cost of direct labor and overhead for the job to increase by over $5,500. Are my records wrong, or was there an error in the direct labor assigned to the job?” Harris replied, “Don’t worry about it, Roger. This job won’t be used in your quarterly performance evaluation. Job AD22 was a federal government job, a cost plus contract, so the more costs we assign to it, the more profit we make. We decided to add a few hours to the job in case there is some follow-up work to do. You know how fussy the feds are.” a. What should Roger Parker do? b. Discuss Harris Johnson’s costing.
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.
Roger Parker, the production manager of Products Company, entered the office of controller Harris Johnson and asked, “Harris, what gives here? I was charged for 330 direct labor hours on Job AD22, and my records show that we spent only 290 hours on that job.
That 40-hour difference caused the total cost of direct labor and
Harris replied, “Don’t worry about it, Roger. This job won’t be used in your quarterly performance evaluation. Job AD22 was a federal government
a. What should Roger Parker do?
b. Discuss Harris Johnson’s costing.
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