Traditional Product Costing Versus Activity-Based Costing High Country Outfitters, Inc., makes backpacks for large sporting goods chains that are sold under the customers' s brand names. The accounting department has identified the following overhead costs and cost drivers for next yea Overhead Item Expected Costs Cost Driver Setup costs Ordering costs Maintenance Power Number of setups Number of orders $1,216,800 312,000 1,200,000 Number of machine hours 120,000 Number of kilowatt hours Maximum Quantity 7,200 60,000 80,000 600,000 Total predicted direct labor hours for next year is 60,000. The following data are for two recently completed jobs: Job 201 Job 202 $15,000 $16,500 Cost of direct materials Cost of direct labor $20,625 $72,750 Number of units completed 1,125 915 Number of direct labor hours 270 330 Number of setups 18 22 Number of orders 24 45 Number of machine hours 540 450 Number of kilowatt hours 270 360 a. Determine the unit cost for each job using a traditional company-wide overhead rate based on direct labor hours Round rate to two decimal places. Overhead rate per direct labor hour $0
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.
Can you please answer A and fill in the table; please show me how you got those numbers and any formulas or rules used. I want to be able to understand.
note: use ABC method
- Traditional Method of Overhead allocation allocates the overheads based on either Direct Material, Direct Labor Hours or Machine Hours etc.
- But under Activity Based Costing (ABC), overheads are allocated to the jobs based on activities consumed by such jobs.
- ABC helps in better and fair allocation of overheads to the jobs and this will result in fair calculation of unit cost and its price.
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