XYZ Ltd. is a manufacturing company that follows the cost allocation approach for overhead allocation. The company uses three cost pools for allocating overhead costs: Material Handling, Machine Maintenance, and Factory Utilities. Each cost pool has its own cost driver. For the current accounting period, the company incurred the following costs and activity levels: Material Handling Costs: $150,000 Cost Driver: Number of Material Orders - 2,500 orders Machine Maintenance Costs: $250,000 Cost Driver: Machine Hours - 10,000 hours Factory Utilities Costs: $200,000 Cost Driver: Direct Labor Hours - 5,000 hours Calculate the overhead allocation rate for each cost pool based on the given information. A) Material Handling: $60 per order, Machine Maintenance: $25 per hour, Factory Utilities: $40 per direct labor hour. B) Material Handling: $30 per order, Machine Maintenance: $25 per hour, Factory Utilities: $40 per direct labor hour. C) Material Handling: $60 per order, Machine Maintenance: $40 per hour, Factory Utilities: $25 per direct labor hour. D) Material Handling: $30 per order, Machine Maintenance: $40 per hour, Factory Utilities: $25 per direct labor hour.
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.
XYZ Ltd. is a manufacturing company that follows the cost allocation approach for
Material Handling Costs: $150,000
Cost Driver: Number of Material Orders - 2,500 orders
Machine Maintenance Costs: $250,000
Cost Driver: Machine Hours - 10,000 hours
Cost Driver: Direct Labor Hours - 5,000 hours
Calculate the overhead allocation rate for each cost pool based on the given information.
A) Material Handling: $60 per order, Machine Maintenance: $25 per hour, Factory Utilities: $40 per direct labor hour.
B) Material Handling: $30 per order, Machine Maintenance: $25 per hour, Factory Utilities: $40 per direct labor hour.
C) Material Handling: $60 per order, Machine Maintenance: $40 per hour, Factory Utilities: $25 per direct labor hour.
D) Material Handling: $30 per order, Machine Maintenance: $40 per hour, Factory Utilities: $25 per direct labor hour.
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