Last Year This Year Estimated professional staff hours to be charged to clients' accounts Estimated overhead cost Professional staff hours available 4,500 4,600 $310,500 $310,500 6,000 6,000 .....
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.
Security Pension Services helps clients to set up and administer pension plans that are in compliance with tax laws and regulatory requirements. The firm uses a
“Professional staff hours available” is a measure of the capacity of the firm. Any hours available that are not charged to clients’ accounts represent unused capacity. All of the firm’s overhead is fixed.
Required:
1. Marta Brinksi is an established client whose pension plan was set up many years ago. In both this year and last year, only 2.5 hours of professional staff time were charged to Ms. Brinksi’s account. If the company bases its predetermined overhead rate on the estimated overhead cost and the estimated professional staff hours to be charged to clients, how much overhead cost would have been applied to Ms. Brinksi’s account last year? This year?
2. Suppose that the company bases its predetermined overhead rate on the estimated overhead cost and the estimated professional staff hours to be charged to clients as in (1) above. Also suppose that the actual professional staff hours charged to clients’ accounts and the actual overhead costs turn out to be exactly as estimated in both years. How much unused capacity cost would the company report last year? How about for this year?
3. Refer back to the data concerning Ms. Brinksi in (1) above. If the company bases its predetermined overhead rate on the professional staff hours available, how much overhead cost would have been applied to Ms. Brinksi’s account last year? This year?
4. Suppose that the company bases its predetermined overhead rate on the professional staff hours available as in (3) above. Also suppose that the actual professional staff hours charged to clients’ accounts and the actual overhead costs turn out to be exactly as estimated in both years. How much unused capacity cost would the company report last year? How about for this year?
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