1.
Simple Costing System:
Simple costing system is one of method of costing to estimate the amount of allocating the
Cost driver:
Cost driver is a method of costing to assign the overhead cost of resources to the number of units produced. It is a reason that causes a change in the cost of an activity. It is factor that establishes the relationship between indirect cost, product and activities performed to manufacture that product.
Activity Based Costing:
Activity based costing is one of the methods of costing to identify the activities performed to manufacture a product and to allocate the overhead cost of resources or indirect cost to the related products.
Overhead rate:
Overhead rate is also known as the indirect cost rate which is used to allocate the indirect cost or overhead cost with the associate product or with the associate department.
To calculate: The overhead allocated to each project in 2014 using the simple costing system
Given information:
Total overhead cost is $4,011,780.
Total quantity of cost driver (number of jobs) is 3.
2.
To calculate: Overhead cost allocated to each project in 2014 using department overhead cost rates.
Given information:
Design department hours for product SA is 1,000 hours
Design department hours for product H is 5,000 hours
Design department hours for product ST is 4,000 hours
Total overhead cost of Design Department is $1,500,000.
Engineering hours for product SA is 2,000 hours.
Engineering hours for product H is 2,000 hours.
Engineering hours for product ST is 2,200 hours.
Total overhead cost of Engineering Department is $500,030.
Labor hours for product SA are 20,800 hours.
Labor hours for product H are 21,500 hours.
Labor hours for product ST are 19,600 hours.
Total overhead cost of construction department is $2,011,750.
3.
To explain: The reason for dissatisfaction customer S had with cost and price of its building and manner in which the allocation based department rates change costs of each project.
4.
To define: The benefit Company CKN gets by allocating overhead costs of each department based on activities done in a department.
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Chapter 5 Solutions
Cost Accounting: A Managerial Emphasis, 15th Edition
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