Product-Related Data Scientific Business Units produced per year 75,000 $250,000 100,000 50,000 750,000 $2,500,000 1,000,000 500,000 150 Prime costs Direct labor hours Machine hours Production runs 100 Inspection hours Maintenance hours 3,000 9,000 2,000 2,250 Department Data Department 1 Department 2 Direct labor hours: Scientific calculator Business calculator 75,000 112,500 187,500 25,000 887,500 912,500 Total Machine hours: Scientific calculator 25,000 100,000 125,000 25,000 Business calculator 400,000 425,000 Total Overhead costs: Setup costs Inspection costs Power $225,000 175,000 250,000 200,000 $850,000 $225,000 175,000 150,000 250,000 $800,000 Maintenance Total
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.
Escuha Company produces two type of calculators : scientific and business. Both products pass through two producing departments. The business calculator is by far the most popular. The following data have been gathered for these two products :
Required:
1. Compute the
2. Compute the overhead cost per unit for each product using departmental rates.In calculating departmental rates, use machine hours for departmental 1 and direct labor hours for Department 2 . Repeat using direct labor hours for Department 1 and machine hours of Department 2 .
3. Compute the overhead cost per unit for each product using activity -based costing.
4. Comment on the ability of departmental rates to improve the accuracy of product costing.
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