Urban Africa cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 14% of direct-labor cost. Monthly direct-labor cost for Nile Blush makeup is 27,500. In an attempt to more equitably distribute quality-control costs, management is considering activity-based costing. The monthly data shown in the following chart have been gathered for Nile Blush makeup. Activity Cost Pool Incoming material inspection In-process inspection Product certification Required: Calculate the monthly quality-control cost to be assigned to the Nile Blush product line under each of the following product- costing system. a. Traditional system which assigns overhead on the basis of direct-labor costs b. ABC Does the traditional product-costing system overcost or undercost the Nile Blush product line with respect to quality-control costs? By what amount? Cost Driver Type of material Number of units Per order Pool Rates 11.5 per type .14 per unit 77 per order Quantity of Driver for Nile Blush 10 types 18,000 units 20 orders
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.
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