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 Cost Activity driver Material handling P120,000 Number of parts Material insertion 240,000 Number of parts Automated 350,000 Machine hours Machinery finishing 150,000 Labor hours Packaging 90,000 Orders shipped The following data are provided for each product line: Activity Bronze Silver Gold Units to be produced 6,000 4,000 2,000 Orders to be shipped 1,200 800 400 Number of parts per unit 4. 5 8 Machine hours per unit 1 2 3 Labor hours per unit 2 3 3 a. The computation of the activity cost rates
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.
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 |
Cost |
Activity driver |
|
Material handling |
P120,000 |
Number of parts |
|
Material insertion |
240,000 |
Number of parts |
|
Automated |
350,000 |
Machine hours |
|
Machinery finishing |
150,000 |
Labor hours |
|
Packaging |
90,000 |
Orders shipped |
The following data are provided for each product line:
|
Activity |
Bronze |
Silver |
Gold |
|
Units to be produced |
6,000 |
4,000 |
2,000 |
|
Orders to be shipped |
1,200 |
800 |
400 |
|
Number of parts per unit |
4. |
5 |
8 |
|
Machine hours per unit |
1 |
2 |
3 |
|
Labor hours per unit |
2 |
3 |
3 |
a. The computation of the activity cost rates
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