Dr. Young, of Young and Associates, LLP, is examining how overhead costs behave as a function of monthly physician contact hours billed to patients. The historical data are as follows: Total Overhead Costs Physician Contact Hours Billed to Patients $ 90,000 105,000 150 200 111,000 125,000 137,000 150,000 250 300 350 400
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.
Compute the linear cost function, relating total overhead costs to physician contact hours, using the representative observations of 200 and 300 hours. Plot the linear cost function. Does the constant component of the cost function represent the fixed overhead costs of Young and Associates? Why?
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