The company manufactures two products, Big and Small. The company has identified the following activities, overhead cost and cost drivers for two different products. Activity Center Activity Driver Costs Machine setup Number of setups $100,000 Special design Design hours $364,000 Production Direct labor hours $900,000 Machining Machine hours $300,000 BIG SMALL Number of Units produced 10,000. 35,000 Direct materials cost per unit $75. $40 Direct labor cost per unit $19.50. $13 Number of setups. 100 100 Design hours 900 100 Direct labor hours 15,000. 35,000 Machine hours 9,000 . 1,000 A. Calculate the overhead rate using traditional. The allocation base is Direct labor hours B. Determine the cost per unit using Traditional. C. Calculate the overhead rates using ABC D. Determine the cost per unit using ABC E. Which costing method is more accurate?
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.
The company manufactures two products, Big and Small. The company has identified the following
activities, overhead cost and cost drivers for two different products.
Activity Center Activity Driver Costs
Machine setup Number of setups $100,000
Special design Design hours $364,000
Production Direct labor hours $900,000
Machining Machine hours $300,000
BIG SMALL
Number of Units produced 10,000. 35,000
Direct materials cost per unit $75. $40
Direct labor cost per unit $19.50. $13
Number of setups. 100 100
Design hours 900 100
Direct labor hours 15,000. 35,000
Machine hours 9,000 . 1,000
A. Calculate the overhead rate using traditional. The allocation base is Direct labor hours
B. Determine the cost per unit using Traditional.
C. Calculate the overhead rates using ABC
D. Determine the cost per unit using ABC
E. Which costing method is more accurate?
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