Tower Mfg. allocates overhead based on machine hours. Tower estimates it will incur $200,000 of total overhead costs and use 10,000 machine hours in the coming year. During February, the Assembly department of Tower Mfg. used 375 machine hours. In addition, Tower incurred actual overhead costs as follows during February: indirect materials, $1,800; indirect labor, $5,700; depreciation on factory equipment, $8,000; and factory utilities, $500. 1. Compute the company’s predetermined overhead rate for the year. 2. Prepare journal entries to record (a) overhead applied for the Assembly department for February and (b) actual overhead costs used during February.
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.
Tower Mfg. allocates
overhead costs and use 10,000 machine hours in the coming year. During February, the Assembly department
of Tower Mfg. used 375 machine hours. In addition, Tower incurred actual overhead costs as follows
during February: indirect materials, $1,800; indirect labor, $5,700; depreciation on factory equipment,
$8,000; and factory utilities, $500.
1. Compute the company’s predetermined overhead rate for the year.
2. Prepare
(b) actual overhead costs used during February.
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