The following cost information is available for David, Ltd.: Activity Allocation Base Volume of Activity Overhead Cost Purchasing Purchase orders 25,000 $150,000 Receiving Shipments received 17,000 68,000 Machine setups Setups 3,000 190,000 Quality control Inspections 20,000 100,000 Direct materials are $15 per unit for luxury handbags and $10 per unit for deluxe handbags. There were 12,000 direct labor hours. Each of which was charged to inventory at $18 per hour. Required: Calculate the overhead rate using activity-based costing for the Receiving Activity. $4 per shipment $5 per shipment $6 per shipment $7 per shipment
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.
QUESTION 34
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The following cost information is available for David, Ltd.:
Activity
Allocation Base
Volume of Activity
Overhead CostPurchasing
Purchase orders
25,000
$150,000
Receiving
Shipments received
17,000
68,000
Machine setups
Setups
3,000
190,000
Quality control
Inspections
20,000
100,000
Direct materials are $15 per unit for luxury handbags and $10 per unit for deluxe handbags. There were 12,000 direct labor hours. Each of which was charged to inventory at $18 per hour.
Required: Calculate the overhead rate using activity-based costing for the Receiving Activity.
$4 per shipment
$5 per shipment
$6 per shipment
$7 per shipment
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