Bekimen Inc., has a job-order costing system. The company uses predetermined overhead rates in applying manufacturing overhead cost to individual jobs. The predetermined overhead rate in Preparation Department is based on direct labour-hours, and the rate in Finishing Department is based on direct materials cost. At the beginning of the most recent year, the company's management made the following estimates for the year: Preparation Department Finishing Department Machine-hours 140,000 38,000 Direct labour-hours 60,000 40,000 Direct materials cost $390,000 $700,000 Direct labour cost $520,000 $1,040,000 Manufacturing overhead cost $840,000 $1,400,000 Job 123 entered into production on April 1 and was completed on May 12. The company's cost records show the following information about the job: Preparation Department Finishing Department Machine-hours 500 120 Direct labour-hours 140 100 Direct materials cost $1,680 $2,200 Direct labour cost $1,220 $1,760 At the end of the year, the records of the company showed the following actual cost and operating data for all jobs worked on during the year: Preparation Department Finishing Department Machine-hours 122,000 40,000 Direct labour-hours 56,000 92,000 Direct materials cost $312,000 $648,000 Manufacturing overhead cost $770,000 $1,320,000 Required: a. Compute the predetermined overhead rates for Preparation Department and Finishing Department. b. Compute the total overhead cost applied to Job 123. c. Compute the amount of underapplied or overapplied overhead in each department at the end of the current year
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.
- Bekimen Inc., has a
job-order costing system. The company uses predetermined overhead rates in applyingmanufacturing overhead cost to individual jobs. The predetermined overhead rate in Preparation Department is based on direct labour-hours, and the rate in Finishing Department is based on direct materials cost. At the beginning of the most recent year, the company's management made the following estimates for the year:
|
|
Preparation Department |
Finishing Department |
|
Machine-hours |
140,000 |
38,000 |
|
Direct labour-hours |
60,000 |
40,000 |
|
Direct materials cost |
$390,000 |
$700,000 |
|
Direct labour cost |
$520,000 |
$1,040,000 |
|
Manufacturing overhead cost |
$840,000 |
$1,400,000 |
Job 123 entered into production on April 1 and was completed on May 12. The company's cost records show the following information about the job:
|
|
Preparation Department |
Finishing Department |
|
Machine-hours |
500 |
120 |
|
Direct labour-hours |
140 |
100 |
|
Direct materials cost |
$1,680 |
$2,200 |
|
Direct labour cost |
$1,220 |
$1,760 |
At the end of the year, the records of the company showed the following actual cost and operating data for all jobs worked on during the year:
|
|
Preparation Department |
Finishing Department |
|
Machine-hours |
122,000 |
40,000 |
|
Direct labour-hours |
56,000 |
92,000 |
|
Direct materials cost |
$312,000 |
$648,000 |
|
Manufacturing overhead cost |
$770,000 |
$1,320,000 |
Required:
a. Compute the predetermined overhead rates for Preparation Department and Finishing Department.
b. Compute the total overhead cost applied to Job 123.
c. Compute the amount of underapplied or overapplied overhead in each department at the end of the current year.
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