The managers of Cheyenne Manufacturing are discussing ways to allocate the cost of service departments, such as quality control and maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information: Quality Control Maintenance Machining Assembly Total Budgeted overhead $374,000 $200,000 $392,000 $272,000 $1,238,000 costs before Allocation Budgeted machine – – 45,000 – 45,000 Hours Budgeted direct – – – 23,000 23,000 labour hours Budgeted hours – 5,000 15,000 5,000 25,000 of service: Quality Control Maintenance 8,000 – 14,400 9,600 32,000
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 managers of Cheyenne Manufacturing are discussing ways to allocate the cost of service departments, such as quality control and maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information:
| Quality Control | Maintenance | Machining | Assembly | Total | ||||||
| Budgeted overhead | $374,000 | $200,000 | $392,000 | $272,000 | $1,238,000 | |||||
| costs before | ||||||||||
| Allocation | ||||||||||
| Budgeted machine | – | – | 45,000 | – | 45,000 | |||||
| Hours | ||||||||||
| Budgeted direct | – | – | – | 23,000 | 23,000 | |||||
| labour hours | ||||||||||
| Budgeted hours | – | 5,000 | 15,000 | 5,000 | 25,000 | |||||
| of service: Quality | ||||||||||
| Control | ||||||||||
| Maintenance | 8,000 | – | 14,400 | 9,600 | 32,000 |
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