Sunland Toys & Games, Inc. manufactures specialty toys. Sunland uses a traditional product costing system to assign overhead costs uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Sunland assigns its quality-control overhead costs to all products at a rate of 21% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $325,000. In response to repeated requests from its financial vice president, Sunland's management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows: Activity Cost Pools Materials Inspection Assembly Line Inspection National Toy Association Certification (a) Traditional costing Activity-based costing Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Cost Drivers Number of pounds Number of finished toys Retail orders Quality-Control Overhead Cost $ $ Overhead Rate $0.70 per pound $0.14 per toy $2.00 per order Number of Cost Drivers Used per Activity 60,000 pounds 167,000 toys 900 orders
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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See image below. Need to computer the overhear cost assigned to the toddler topy line for the month of August using activity-based costing under the new propoal. Also need confirm if Sunland Toys should accept the Nation Toy Association's offer?
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