Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 148,000 29,600 DLHs Purchase orders Number of orders $ 15,180 253 orders Parts management Number of part types $ 85,680 102 part types Board etching Number of boards $ 99,550 1,810 boards General factory Machine-hours $ 162,400 20,300 MHs Required: 1. Compute the activity rate for each of the activity cost pools. 2. The expected activity for the year was distributed among the company’s four products as follows: Expected Activity Activity Cost Pool Product A Product B Product C Product D Labor-related (DLHs) 7,900 12,800 3,900 5,000 Purchase orders (orders) 75 39 45 94 Parts management (part types) 30 13 41 18 Board etching (boards) 420 780 610 0 General factory (MHs) 3,200 8,200 3,600 5,300 Using the ABC data, determine the total amount of overhead cost assigned to each product. ompute the activity rate for each of the activity cost pools. Activity Cost Pool Activity Rate Labor-related per DLH Purchase orders per order Parts management per part type Board etching per board General factory per MH Using the ABC data, determine the total amount of overhead cost assigned to each product. Overhead Cost Assigned Activity Cost Pool Product A Product B Product C Product D Labor-related (DLHs) Purchase orders (orders) Parts management (part types) Board etching (boards) General factory (MHs) Total
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.
Sultan Company uses an activity-based costing system.
At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:
| Activity Cost Pool | Activity Measure | Expected |
Expected Activity | ||||
| Labor-related | Direct labor-hours | $ | 148,000 | 29,600 | DLHs | ||
| Purchase orders | Number of orders | $ | 15,180 | 253 | orders | ||
| Parts management | Number of part types | $ | 85,680 | 102 | part types | ||
| Board etching | Number of boards | $ | 99,550 | 1,810 | boards | ||
| General factory | Machine-hours | $ | 162,400 | 20,300 | MHs | ||
Required:
1. Compute the activity rate for each of the activity cost pools.
2. The expected activity for the year was distributed among the company’s four products as follows:
| Expected Activity | ||||||||||||
| Activity Cost Pool | Product A | Product B | Product C | Product D | ||||||||
| Labor-related (DLHs) | 7,900 | 12,800 | 3,900 | 5,000 | ||||||||
| Purchase orders (orders) | 75 | 39 | 45 | 94 | ||||||||
| Parts management (part types) | 30 | 13 | 41 | 18 | ||||||||
| Board etching (boards) | 420 | 780 | 610 | 0 | ||||||||
| General factory (MHs) | 3,200 | 8,200 | 3,600 | 5,300 | ||||||||
Using the ABC data, determine the total amount of overhead cost assigned to each product.
ompute the activity rate for each of the activity cost pools.
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Using the ABC data, determine the total amount of overhead cost assigned to each product.
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