Valdez Motors Co. makes motorcycles. Management wants to estimate overhead costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine hours. To check this, they collected the following data for the past 12 months. Month no. Machine Hours 175 170 Overhead Costs P 4,500 4,225 4,321 5,250 4,800 5,100 4,450 4,200 5,475 4,760 4,325 3,975 3 160 4 190 175 200 160 8 150 210 10 180 11 12 170 145 Chapter 2 Cost - Concepts and Classification 45 Requirements for Problem 12: 1. Use the high-low method to estimate the fixed and variable portion of overhead costs based on machine hours.
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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