A. G Company manufactures two products: Product S and Product T. During January, 50 units of Product S and 300 units of Product T wee produced. And overhead costs of P81,000 were incurred. An analysis of overhead costs reveals the following activities: Activity Cost Driver Total cost 1. Material handling Number of requisitions P30.000 2. Machine setups Number of setups 27,000 3. Quality inspections Number of inspections 24,000 The cost drive volume for each product was as follows: Cost driver Product S Product T Number of requisitions 400 600 Number of setups 150 300 Number of inspections 200 400 Required: 1. Determine the overhead rate for each activity. 2. Allocate the manufacturing overhead costs to the two products using Activity Based Costing (ABC).
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.
Step by step
Solved in 2 steps