Wixis Cabinets makes custom wooden cabinets for high-end stereo systems from specialty woods. The company uses a job-order costing system. The capacity of the plant is determined by the capacity of its constraint, which is time on the automated bandsaw that makes finely beveled cuts in wood according to the preprogrammed specifications of each cabinet. The bandsaw can operate up to 184 hours per month. The estimated total manufacturing overhead cost at capacity is $15,088 per month. The company bases its predetermined overhead rate on capacity, so its predetermined overhead rate is $82 per hour of bandsaw use.The results of a recent month’s operations appear below:Sales $ 43,710Beginning inventories $ 0Ending inventories $ 0Direct materials $ 5,380Direct labor $ 8,860Manufacturing overhead incurred $ 14,260Selling and administrative expense $ 8,180Actual hours of bandsaw use 154Required:1-a. Prepare an income statement that records the cost of unused capacity on the income statement as a period expense.1-b. How much of the cost of unused capacity can be shown on the income statement as a period expense
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.
Wixis Cabinets makes custom wooden cabinets for high-end stereo systems from specialty woods. The company uses a
The results of a recent month’s operations appear below:
Sales $ 43,710
Beginning inventories $ 0
Ending inventories $ 0
Direct materials $ 5,380
Direct labor $ 8,860
Manufacturing overhead incurred $ 14,260
Selling and administrative expense $ 8,180
Actual hours of bandsaw use 154
Required:
1-a. Prepare an income statement that records the cost of unused capacity on the income statement as a period expense.
1-b. How much of the cost of unused capacity can be shown on the income statement as a period expense
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