Green Company manufactures several products. Product 1 production manager reports that each product requires 2 pounds of A-material, 3 pounds of B-materials, and 2 hours of labor. The cost of A-material and B-material are $2 and $2.5 per pound, respectively. The labor cost is $15 per hour. He also reports that most of the fixed overhead costs are allocated from Green Company, except supervision and inspection costs that are directly incurred and responsible by Product 1 production department. The following data were used in developing the master manufacturing overhead budget for the production department for the year 2020, which was prepared on the expectation that 40,000 units will be produced during the year. Annual variable overhead costs: indirect labor $120,000, indirect materials $80,000, factory utilities $32,000 and factory repairs $40,000. Annual fixed overhead costs: supervision $75,000, Product 1 production manager salary $24,000, inspection $21,000, depreciation $102,000, insurance $24,000, rent $54,000 and property taxes $9,000. In August, 4,500 units were actually produced with the following costs. Direct materials: A-materials $16,800, B-materials $34,000. Direct labor: $137,000 Variable overhead costs: indirect labor $12,000, indirect materials $8,000, factory utilities $3,100 and factory repairs $4,000. Fixed overhead costs: supervision $7,000, Product 1 production manager salary $2,000, inspection $3,500, depreciation 8,500, insurance $2,000, rent $5,000 and property taxes $500. a. Prepare a monthly manufacturing overhead flexible budget for the year 2020, assuming production levels range from 4,000 to 7,000 units, using increments of 1,000 units. b. Prepare a responsibility report for Production Department in August.
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.
Green Company manufactures several products. Product 1 production manager reports that each product requires 2 pounds of A-material, 3 pounds of B-materials, and 2 hours of labor. The cost of A-material and B-material are $2 and $2.5 per pound, respectively. The labor cost is $15 per hour. He also reports that most of the fixed overhead costs are allocated from Green Company, except supervision and inspection costs that are directly incurred and responsible by Product 1 production department.
The following data were used in developing the master manufacturing overhead budget for the production department for the year 2020, which was prepared on the expectation that 40,000 units will be produced during the year.
Annual variable overhead costs: indirect labor $120,000, indirect materials $80,000, factory utilities $32,000 and factory repairs $40,000.
Annual fixed overhead costs: supervision $75,000, Product 1 production manager salary $24,000, inspection $21,000,
In August, 4,500 units were actually produced with the following costs.
Direct materials: A-materials $16,800, B-materials $34,000.
Direct labor: $137,000
Variable overhead costs: indirect labor $12,000, indirect materials $8,000, factory utilities $3,100 and factory repairs $4,000.
Fixed overhead costs: supervision $7,000, Product 1 production manager salary $2,000, inspection $3,500, depreciation 8,500, insurance $2,000, rent $5,000 and property taxes $500.
a. Prepare a monthly manufacturing overhead flexible budget for the year 2020, assuming production levels range from 4,000 to 7,000 units, using increments of 1,000 units.
b. Prepare a responsibility report for Production Department in August.
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