Use the following information for the Exercises below. Textra produces parts for a machine manufacturer. Parts go through two departments, Molding and Trimming. The company budgets overhead cost of $243,750 in the Molding department and $203,750 in the Trimming department. The company budgets 16,000 machine hours (MH) in Molding and 25,000 direct labor hours (DLH) in Trimming. Actual production information follows . Molding Department Trimming Department Number of Units Hours per Unit Total Hours Hours per Unit Total Hours Part Z 3,000 2.0 MH per unit 6,000 MH 3 DLH per unit 9,000 DLH Part X 4,000 2.5 MH per unit 10,000 MH 4 DLH per unit 16,000 DLH Totals 16,000 MH 25,000 DLH Required: 1. Compute a departmental overhead rate for the Molding department based on machine hours and a departmental overhead rate for the Trimming department based on direct labor hours. 2. Determine the overhead cost per unit for each part using the departmental rates.
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 the following information for the Exercises below.
Textra produces parts for a machine manufacturer. Parts go through two departments, Molding and Trimming. The company budgets
.
| Molding Department | Trimming Department | ||||
| Number of Units | Hours per Unit | Total Hours | Hours per Unit | Total Hours | |
| Part Z | 3,000 | 2.0 MH per unit | 6,000 MH | 3 DLH per unit | 9,000 DLH |
| Part X | 4,000 | 2.5 MH per unit | 10,000 MH | 4 DLH per unit | 16,000 DLH |
| Totals | 16,000 MH | 25,000 DLH |
Required:
1. Compute a departmental overhead rate for the Molding department based on machine hours and a departmental overhead rate for the Trimming department based on direct labor hours.
2. Determine the overhead cost per unit for each part using the departmental rates.
The overhead rate is calculated as estimated overhead cost divided by estimated base activity.
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