Support Departments Operating Departments Pathology Delivery Accounting $240,000 Laboratory Overhead costs $270,000 $345,000 $456,000 Number of samples Transactions processed 70,200 46,800 2,000 24,700 13,300
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.
MedServices Inc. is divided into two operating departments: Laboratory and Tissue Pathology.
The company allocates delivery and accounting costs to each operating department. Delivery
costs include the costs of a fleet of vans and drivers that drive throughout the state each day to
clinics and doctors’ offices to pick up samples and deliver them to the centrally located laboratory and tissue pathology offices. Delivery costs are allocated on the basis of number of samples. Accounting costs are allocated on the basis of the number of transactions processed. No
effort is made to separate fixed and variable costs; however, only budgeted costs are allocated.
Allocations for the coming year are based on the following data:
Required:
1. Assign the support department costs by using the direct method. (Note: Round allocation
ratios to four decimal places.)
2. Assign the support department costs by using the sequential method, allocating
accounting costs first. (Note: Round allocation ratios to four decimal places.)
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