Ye Old Bump and Grind inc is an automobile body and fender repair shop. repair work is done by hand and with the use of small tools. Customers are billed based on time (direct labor hours) and materials used in each repair job. The shops overhead costs consist of primaily of indirect materials(welding materials, metal putty and sandpaper), rent, indirect labor and utilities. Rent is equal to a percentage of the shops gross revenue for each month. The indirect labor relates primarily to ordering parts and processing insurance claims. The amount of indirect labor, therefore, tends to vary with the size of each job. Harvy Lee,manager of the business, is considering using either direct labor hours or number of repair jobs as the basis for allocating overhead costs. He has estimated the following amounts for the coming year: Estimated total overhead $123,000 Estimated direct labor hours 10,000 Estimated number of repair jobs 300 a. (1) - Compute the overhead application rate based on the direct labor hours a(2) - Compute the overhead application rate based on number of repair jobs B. The following is information for 2 repair jobs: Job 1 - Repair a dented fender. Direct material used $25; direct labour hours .5; direct labor cost $75 Job 2 - Repair an automobile involved in a serious collision. Direct materials used $3,800; direct labor hours 200; direct labor cost $3,000 a- Determine the total cost of each repair job assuming that overhead costs are applied to each job based on direct labor hours b - determine the cost of each repair job, assuming that overhead costs are applied to each job based on the number of repair jobs
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.
Ye Old Bump and Grind inc is an automobile body and fender repair shop. repair work is done by hand and with the use of small tools. Customers are billed based on time (direct labor hours) and materials used in each repair job.
The shops
Harvy Lee,manager of the business, is considering using either direct labor hours or number of repair jobs as the basis for allocating overhead costs. He has estimated the following amounts for the coming year:
| Estimated total overhead | $123,000 |
| Estimated direct labor hours | 10,000 |
| Estimated number of repair jobs | 300 |
a. (1) - Compute the overhead application rate based on the direct labor hours
a(2) - Compute the overhead application rate based on number of repair jobs
B. The following is information for 2 repair jobs:
Job 1 - Repair a dented fender. Direct material used $25; direct labour hours .5; direct labor cost $75
Job 2 - Repair an automobile involved in a serious collision. Direct materials used $3,800; direct labor hours 200; direct labor cost $3,000
a- Determine the total cost of each repair job assuming that overhead costs are applied to each job based on direct labor hours
b - determine the cost of each repair job, assuming that overhead costs are applied to each job based on the number of repair jobs
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