Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production . . . . 165,000Fixed manufacturing overhead cost . . . . . . . . . . . . . . . . . . . . . . . . $1,980,000Variable manufacturing overhead cost per machine-hour . . . . . $2.00 Required:1. Compute the plantwide predetermined overhead rate.2. During the year, Job P90 was started, completed, and sold to the customer for $2,500. The following information was available with respect to this job: Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,150Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $830Machine-hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Compute the total manufacturing cost assigned to Job P90.3. Upon comparing Job P90’s sales revenue to its total manufacturing cost, the company’s chief financial officer said “If this exact same opportunity walked through our front door tomorrow, I’d turn it down rather than making it and selling it for $2,500.”a. Construct an argument (supported by numerical analysis) that refutes the chief financial officer’s assertion.b. Construct an argument (accompanied by numerical analysis) that supports the chief financial officer’s assertion.
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.
Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a
Machine-hours required to support estimated production . . . . 165,000
Fixed manufacturing overhead cost . . . . . . . . . . . . . . . . . . . . . . . . $1,980,000
Variable manufacturing overhead cost per machine-hour . . . . . $2.00
Required:
1. Compute the plantwide predetermined overhead rate.
2. During the year, Job P90 was started, completed, and sold to the customer for $2,500. The following information was available with respect to this job:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,150
Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $830
Machine-hours used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Compute the total
3. Upon comparing Job P90’s sales revenue to its total manufacturing cost, the company’s chief financial officer said “If this exact same opportunity walked through our front door tomorrow, I’d turn it down rather than making it and selling it for $2,500.”
a. Construct an argument (supported by numerical analysis) that refutes the chief financial officer’s assertion.
b. Construct an argument (accompanied by numerical analysis) that supports the chief financial officer’s assertion.
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