Use ABC to compute overhead cost assigned to an order. KCC Production Corporation uses an activity-based costing system and provided the following budget data: The distribution of resource consumption across activities is as follows: During the year, KCC completed one order from a new customer for 1,000 units, and the related data are as follows: direct labor hours= 0.5 /unit direct materials= $2.00/unit direct labor= $5.00/hour machine hour =1 machine hour per unit Requirements 1. Compute the activity rates for each of the activity cost pools. 2. Compute the overhead
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.
⦁ Use ABC to compute overhead cost assigned to an order.
KCC Production Corporation uses an activity-based costing system and provided the following budget data:
The distribution of resource consumption across activities is as follows:
During the year, KCC completed one order from a new customer for 1,000 units, and the related data are as follows:
direct labor hours= 0.5 /unit
direct materials= $2.00/unit
direct labor= $5.00/hour
machine hour =1 machine hour per unit
Requirements
1. Compute the activity rates for each of the activity cost pools.
2. Compute the overhead cost assigned to the order from the new customer.
Step by step
Solved in 3 steps
