Addy Company has two products: A and B. The annual production and sales of Product A is 1,700 units and of Product B is 1,100 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labor-hours per unit and product B requires 0.6 direct labor-hours per unit. The total estimated overhead for next period is $98,785. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools- Activity 1, Activity 2, and General Factory- with estimated overhead costs and expected activity as follows: Activity Cost pool Estimated Overhead Costs Expected Product A Expected Product B Total Activity 1 $30,528 1,000 600 1,600 Activity 2 $17,385 1,700 200 1,900 General Factory $50,872 510 660 1,170 Total $98,785 Note: The general factory activity cost pool's cost s are allocated on the basis of direct labor-hours The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to: $9.15 $51.99 $86.93 $10.23 Please show your work
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.
Addy Company has two products: A and B. The annual production and sales of Product A is 1,700 units and of Product B is 1,100 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labor-hours per unit and product B requires 0.6 direct labor-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools- Activity 1, Activity 2, and General Factory- with estimated overhead costs and expected activity as follows:
| Activity Cost pool | Estimated Overhead Costs | Expected Product A | Expected Product B | Total |
| Activity 1 | $30,528 | 1,000 | 600 | 1,600 |
| Activity 2 | $17,385 | 1,700 | 200 | 1,900 |
| General Factory | $50,872 | 510 | 660 | 1,170 |
| Total | $98,785 |
Note: The general
The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to:
$9.15
$51.99
$86.93
$10.23
Please show your work
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