Craftmore Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company’s records. Production Activity Indirect Labor Indirect Materials Other Overhead Grinding $320,000 Polishing $135,000 Product modification 600,000 Providing power System Calibration 500,000
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.
Craftmore Machining produces machine tools for the construction industry. The following details about
|
Production Activity |
Indirect Labor |
Indirect Materials |
Other Overhead |
|
Grinding |
$320,000 |
|
|
|
Polishing |
|
$135,000 |
|
|
Product modification |
600,000 |
|
|
|
Providing power System Calibration |
500,000 |
|
$255,000 |
Additional information on the drivers for its production activities follows.
|
Grinding |
13,000 machine hours |
|
Polishing |
13,000 machine hours |
|
Product modification |
1,500 engineering hours |
|
Providing power |
17,000 direct labor hours |
|
System calibration |
400 batches |
Required
.
|
|
Job 3175 |
Job 4286 |
|
Number of units |
200 units |
2,500 units |
|
Machine hours |
550 MH |
5,500 MH |
|
Engineering hours |
26 eng. hours |
32 eng. hours |
|
Batches |
30 batches |
90 batches |
|
Direct Labor hours |
500 DLH |
4,375 DLH |
-
If the company used a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286?
-
Compute the overhead cost per unit computed in requirement 4 and 5 for each job. Which method more accurately assigns overhead costs?
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