SANGWOO CO. manufactures variety of products. In the past, SANGWOO Co. has been using traditional costing system in which the predetermined overhead rate was 150% of direct labor. Selling prices had been set my multiplying total product cost by 200%. Sensing that this system was distorting costs and selling prices, SANGWOO CO. has decided to switch to an activity-based costing system for manufacturing overhead cost using three activity cost pools. Selling prices are still to be set at 200% of unit product cost under the new system. Information on these cost pools for the next year are as follows: Activity Cost Pool Machine Set-up Quality Control Other Overhead Estimated Activity 400 Number of setups 1,500 Number of inspections 30,000 Machine hours Estimated Overhead Cost P150,000 180,000 480,000 Information (on a per units' basis) related to three popular products at SANGWOO CO. are as follows: Product A Product B Product C Direct materials cost Direct labor cost Number of setups Number of inspections Number of machine hours 400 540 600 310 810 220 2 3 1 3 4 10 Compute for the difference of the selling price in using traditional system and activity-based costing of product A.
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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