Teledex Company manufactures products to customers' specifications and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year: Department Fabricating Machining $ 385,000 $ 440,000 $ 220,000 $ 110,000 Assembly 99,000 $ 330,000 $ Total Plant Manufacturing overhead Direct labor 924,000 660,000 Jobs require varying amounts of work in the three departments. The Koopers job, for example, would have required manufacturing costs in the three departments as follows: Fabricating $ 5,000 $ 6,800 Department Machining $ 300 $ 600 Assembly $ 3,400 $ 8, 200 Total Plant $ 8,700 $15,600 Direct materials Direct labor Manufacturing overhead Required: 1. Using the company's plantwide approach: a. Compute the plantwide predetermined rate for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
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.
How can I Compute the plantwide predetermined rate for the current year with only direct labor dollar cost (not the number of hours) and total
For example - the manufacturing overhead costs are $924,000 and the direct labor costs are $660,000. I would assume that means the predetermined OH rate is 1.4% but that's not the right answer (per my online book assignment).
I'm attaching the practice problem from the book. Thanks for your help!
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