Teach Gear Inc. produces 3 types of office equipment; Bronze, silver and Gold and uses an activity-based product costing system. They have identified 5 activities. Each activity, it costs and related activity driver is summarized below: Activity Material handling Material insertion Activity Units to be produced Cost Automated Machinery finishing Packaging The following data are provided for each product line: Orders to be shipped Number of parts per unit Machine hours per unit Labor hours per unit Activity driver Number of parts P120,000 240,000 Number of parts 350,000 Machine hours 150,000 Labor hours 90,000 Orders shipped Bronze 6,000 1,200 4. 1 2 Silver 4,000 800 5 2 3 Gold 2,000 400 8 3 3 Tasks: Make a narrative recommend the unit cost per unit of Bronze, Silver and Gold using the ABC system. In support of your recommendation show your solution presenting: 1. The computation of the activity cost rates 2. the computation of the estimated volume (TOTAL PARTS, TOTAL MACHINE HOURS, TOTAL LABOR HOURS AND ORDERS TO BE SHIPPED) 3. the computation of the cost per unit of the 3 products using ABC.
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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