Believing that its traditional cost system may be providing misleading information, an organization is considering an activity-based costing (ABC) approach. It now employs a full cost system and has been applying its manufacturing overhead on the basis of machine hours. The organization plans on using 50,000 direct labor hours and 30,000 machine hours in the coming year. The following data show the manufacturing overhead that is budgeted. Activity Cost Driver Budgeted Costs Material Handling Setup Costs P 1,440,000 Budgeted Activity 6,000,000 720 No. of parts handled No. of setups 630,000 1,080,000 Machine costs Machine hours 30,000 500 Quality control No. of Batches 450,000 Cost, sales, and production data for one of the organization's products for the coming year are: Direct materials cost per unit, P8.80; Direct labor cost per unit (.05 DLH @ P30/DLH) P1.50; Expected sales, 20,000 Units; Batch size, 5,000 units; Setups, 2 per batch; Total parts per finished unit, 5 parts; Machine hours required, 80 MH per batch.
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.
Assume that the organization uses the traditional full cost system, the cost per unit for the product for the coming year will be? (two decimal places, if any)
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