Eagle Co. manufactures bentwood chairs and tables. Wood for both products is steam-bent in the same process, but different types of wood are used for each product. Thus, materials cost is identified separately to each product. One production cycle uses 20 board feet. Labor cost is identified to the process as a whole, as is overhead cost. Data for the month of July follow: Chairs Tables Direct material cost per board foot $3.60 $4.20 Number of parts formed per production cycle (20 board feet) 10 8 Actual operating hours in July 120 380 Parts produced during July 4,000 9,000 Budgeted annual conversion cost: Labor $150,000 Utilities 125,000 Depreciation 65,000 Other overhead 50,000 Total $390,000 Budgeted annual operating hours for steam-bending 5,200 In your computations, round cost per unit amounts to two decimal places. If required, round final answers to the nearest dollar. a. Compute July's predetermined rate for the steam-bending process.
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.
Eagle Co. manufactures bentwood chairs and tables. Wood for both products is steam-bent in the same process, but different types of wood are used for each product. Thus, materials cost is identified separately to each product. One production cycle uses 20 board feet. Labor cost is identified to the process as a whole, as is
| Chairs | Tables | |
| Direct material cost per board foot | $3.60 | $4.20 |
| Number of parts formed per production cycle (20 board feet) | 10 | 8 |
| Actual operating hours in July | 120 | 380 |
| Parts produced during July | 4,000 | 9,000 |
| Budgeted annual conversion cost: | ||
| Labor | $150,000 | |
| Utilities | 125,000 | |
| 65,000 | ||
| Other overhead | 50,000 | |
| Total | $390,000 | |
| Budgeted annual operating hours for steam-bending | 5,200 |
In your computations, round cost per unit amounts to two decimal places. If required, round final answers to the nearest dollar.
a. Compute July's predetermined rate for the steam-bending process.
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