Shadow Awnings makes custom awnings for homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity cost pools: Overhead Costs: Production Overhead $ 150,000 Office Expense $ 100,000 Total $ 250,000 Distribution of Resource Consumption: Activity Cost Pools Making Awnings Job Support Other Total Production Overhead 45% 40% 15% 100% Office Expense 8% 65% 27% 100% The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows: Activity Cost Pool Annual Activity Making Drapes 5,000 metres Job Support 200 jobs Other N/A c) Set up an income report in good form of a job that involves making 80 metres of awnings and has direct materils and direct labour costs of $3,000. The sales revenue from this job is $4,000. Sales $ 4,000 Cost of Goods Sold: Direct Materials & Direct Labour $ 3,000 Manufacturing Overhead $ 1,380 $ 4,380 Gross Margin $ (380) Selling and Administrative Expenses: Office Expense $ 326.60 $ 326.60 Operating Income $ (706.60)
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.
Shadow Awnings makes custom awnings for homes and businesses. The company uses an activity-based costing system for its
Overhead Costs:
Production Overhead $ 150,000
Office Expense $ 100,000
Total $ 250,000
Distribution of Resource Consumption:
Activity Cost Pools Making Awnings Job Support Other Total
Production Overhead 45% 40% 15% 100%
Office Expense 8% 65% 27% 100%
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Making Drapes 5,000 metres
Job Support 200 jobs
Other N/A
c) Set up an income report in good form of a job that involves making 80 metres of awnings and has direct materils and direct labour costs of $3,000. The sales revenue from this job is $4,000.
Sales $ 4,000
Cost of Goods Sold:
Direct Materials & Direct Labour $ 3,000
Manufacturing Overhead $ 1,380 $ 4,380
Gross Margin $ (380)
Selling and Administrative Expenses:
Office Expense $ 326.60 $ 326.60
Operating Income $ (706.60)
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