Manufacturing Overhead Allocation Base and Calculating the Cost of Jobs. Pyramid Company expects to incur $3,000,000 in manufacturing overhead costs this year. During the year, it expects to use 40,000 direct labor hours at a cost of $600,000 and 80,000 machine hours. Required: a. Prepare a predetermined overhead rate based on direct labor hours, direct labor cost, and machine hours. b. Why might Pyramid Company prefer to use machine hours to allocate manufacturing overhead? c. Using each of the predetermined overhead rates calculated in part a and the data that follows for job 128, determine the cost of job 128. Direct materials $6,000 Direct labor $4,000 (200 hours at $15 per hour) + (100 hours at $10 per hour) Machine time 700 hours
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.
Review Question 1
Manufacturing
Pyramid Company expects to incur $3,000,000 in
year, it expects to use 40,000 direct labor hours at a cost of $600,000 and 80,000 machine hours.
Required:
a. Prepare a predetermined overhead rate based on direct labor hours, direct labor cost, and
machine hours.
b. Why might Pyramid Company prefer to use machine hours to allocate manufacturing overhead?
c. Using each of the predetermined overhead rates calculated in part a and the data that follows for
job 128, determine the cost of job
128.
Direct materials $6,000
Direct labor $4,000 (200 hours at $15 per hour) + (100 hours at $10 per hour)
Machine time 700 hours
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