K-Tyres Corp. produces two types of tires, regular and snow tires. The company uses activity-based costing and has identified two activities and their budgeted costs: Molding RM 75,000 Assembly RM 260,000 Molding is based on mixing hours and assembly is based on machine hours. Information regarding each product is as follows: Regular tire Snow tire Units produced 5,000 2,000 Mixing hours 525 275 Machine hours 1,000 460 Required: A. Assume the company does not use ABC costing. Calculate the plantwide overhead rate, based on machine hours. Round your answer to two decimal places. B. Calculate the total overhead assigned to each type of tire using the plantwide overhead rate.
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.
K-Tyres Corp. produces two types of tires, regular and snow tires. The
company uses activity-based costing and has identified two activities and their
budgeted costs:
Molding RM 75,000
Assembly RM 260,000
Molding is based on mixing hours and assembly is based on machine hours.
Information regarding each product is as follows:
|
Regular tire |
Snow tire |
|
|
Units produced |
5,000 |
2,000 |
|
Mixing hours |
525 |
275 |
|
Machine hours |
1,000 |
460 |
Required:
A. Assume the company does not use ABC costing. Calculate the plantwide
places.
B. Calculate the total overhead assigned to each type of tire using the plantwide
overhead rate.
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