The Homer Corporation produces two products, and reports the following production and cost information for the most recent accounting period. Product A Product B Number of units produced 20,000 units 4,000 units Direct labor @ $20 per direct labor hour (DLH) 0.50 DLH per unit 2.00 DLH per unit Direct materials cost $ 4 per unit $ 35 per unit Overhead costs: Total Cost Activity Driver Product A Product B Machine setup $ 2,000.00 setups 6 setups 14 setups Quality inspections 31,000.00 inspections 80 inspections 120 inspections Total $ 33,000.00 Using activity-based costing to assign overhead costs, the activity rate for machine setups is:
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 Homer Corporation produces two products, and reports the following production and cost information for the most recent accounting period.
| Product A | Product B | ||||||
| Number of units produced | 20,000 | units | 4,000 | units | |||
| Direct labor @ $20 per direct labor hour (DLH) | 0.50 | DLH per unit | 2.00 | DLH per unit | |||
| Direct materials cost | $ | 4 | per unit | $ | 35 | per unit | |
| Total Cost | Activity Driver |
Product A | Product B | ||||||
| Machine setup | $ | 2,000.00 | setups | 6 | setups | 14 | setups | ||
| Quality inspections | 31,000.00 | inspections | 80 | inspections | 120 | inspections | |||
| Total | $ | 33,000.00 | |||||||
Using activity-based costing to assign overhead costs, the activity rate for machine setups is:
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