Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs: Setting up equipment $810,000 Other overheard $2,088,000 Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows: Fudge Cookies Units produced 8,000 445,000 Setup hours 12,000 3,000 Oven hours 1,800 12,600 Required: Round your answers to the nearest whole dollar, unless otherwise directed. 1. Calculate the activity rate for (a) setting up equipment and (b) other overhead. a. Setting up equipment $fill in the blank 1 per setup hour b. Other overhead $fill in the blank 2 per oven hour 2. How much total overhead is assigned to Fudge using ABC? $fill in the blank 3 3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent. $fill in the blank 4per unit
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.
Comparing ABC and Plantwide
Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs:
| Setting up equipment | $810,000 |
| Other overheard | $2,088,000 |
Setting up equipment is based on setup hours, and other overhead is based on oven hours.
Wellington produces two products, Fudge and Cookies. Information on each product is as follows:
| Fudge | Cookies | ||||
| Units produced | 8,000 | 445,000 | |||
| Setup hours | 12,000 | 3,000 | |||
| Oven hours | 1,800 | 12,600 |
Required:
Round your answers to the nearest whole dollar, unless otherwise directed.
1. Calculate the activity rate for (a) setting up equipment and (b) other overhead.
| a. Setting up equipment | $fill in the blank 1 per setup hour |
| b. Other overhead | $fill in the blank 2 per oven hour |
2. How much total overhead is assigned to Fudge using ABC?
$fill in the blank 3
3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent.
$fill in the blank 4per unit
4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent.
$fill in the blank 5 per oven hour
5. How much total overhead is assigned to Fudge using the plantwide overhead rate?
$fill in the blank 6
6a. The difference in the total overhead assigned to Fudge is different under the ABC system and non–ABC system because .
6b. What is the difference in total overhead assigned to fudge under the two methods?
$fill in the blank 8
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