Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations. Standard Custom Direct labor costs $43,000 $120,000 Machine hours 1,390 1,410 Setup hours 104 410 Total estimated overhead costs are $295,000. Overhead cost allocated to the machining activity cost pool is $199,000, and $96,000 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 12.25.) Predetermined overhead rate enter the predetermined overhead rate in percentages of direct labor cost rounded to 2 decimal places % of direct labor cost eTextbook and Media
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.
|
Standard
|
Custom
|
|||
|---|---|---|---|---|
| Direct labor costs | $43,000 | $120,000 | ||
| Machine hours | 1,390 | 1,410 | ||
| Setup hours | 104 | 410 |
Total estimated overhead costs are $295,000. Overhead cost allocated to the machining activity cost pool is $199,000, and $96,000 is allocated to the machine setup activity cost pool.
| Predetermined overhead rate |
enter the predetermined overhead rate in percentages of direct labor cost rounded to 2 decimal places
|
% of direct labor cost |
eTextbook and Media
| Machining |
$enter a dollar amount per machine hour rounded to 2 decimal places
|
per machine hour | |
|---|---|---|---|
| Machine setup |
$enter a dollar amount per setup hour rounded to 2 decimal places
|
per setup hour |
eTextbook and Media
| Traditional costing | ||
|---|---|---|
| Standard |
$enter a dollar amount rounded to 0 decimal places
|
|
| Custom |
$enter a dollar amount rounded to 0 decimal places
|
|
| Activity-based costing | ||
| Standard |
$enter a dollar amount rounded to 0 decimal places
|
|
| Custom |
$enter a dollar amount rounded to 0 decimal places
|
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