Digger Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year. Overhead cost Machine hours Direct labor hours Budgeted $975,000 50,000 100,000 Actual $950,000 45,000 92,000 Overhead is applied on the basis of direct labor hours. (a) Compute the predetermined overhead rate. (b) Determine the amount of overhead applied for the 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.
Digger Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year.
Budgeted
$975,000 50,000 100,000
Actual
$950,000 45,000 92,000
Overhead is applied on the basis of direct labor hours. (a) Compute the predetermined overhead rate. (b) Determine the amount of overhead applied for the year.
Overheads are considered as fixed and common expenses that should be allocated to the products on the basis of different methods. Activity level allocation is one of the best methods for allocation.
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