Street Runner Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:Engine parts $ 740,000Shop direct labor 500,000Shop and repair equipment depreciation 40,000Shop supervisor salaries 133,000Shop property taxes 22,000Shop supplies 10,000Advertising expense 20,000Administrative office salaries 71,400Administrative office depreciation expense 6,000Total costs and expenses $1,542,400The average shop direct labor rate is $20 per hour.Determine the predetermined shop overhead rate per direct labor hour.
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.
Street Runner Engine Shop uses a
Engine parts $ 740,000
Shop direct labor 500,000
Shop and repair equipment
Shop supervisor salaries 133,000
Shop property taxes 22,000
Shop supplies 10,000
Advertising expense 20,000
Administrative office salaries 71,400
Administrative office depreciation expense 6,000
Total costs and expenses $1,542,400
The average shop direct labor rate is $20 per hour.
Determine the predetermined shop overhead rate per direct labor hour.
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