Metal Company budgeted $556,000 manufacturing direct wages, 2,500 direct labor hours, and had the following manufacturing overhead: Overhead Cost Pool Budgeted Overhead Cost Budgeted Level for Cost Driver Overhead Cost Driver Materials handling $ 198,000 3,300 pounds Weight of materials Machine setup 14,000 400 setups Number of setups Machine repair 1,800 30,000 machine hours Machine hours Inspections 10,200 170
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.
Metal Company budgeted $556,000 manufacturing direct wages, 2,500 direct labor hours, and had the following manufacturing overhead:
| Overhead Cost Pool | Budgeted Overhead Cost | Budgeted Level for Cost Driver | Overhead Cost Driver | |
|---|---|---|---|---|
| Materials handling | $ 198,000 | 3,300 | pounds | Weight of materials |
| Machine setup | 14,000 | 400 | setups | Number of setups |
| Machine repair | 1,800 | 30,000 | machine hours | Machine hours |
| Inspections | 10,200 | 170 | inspections | Number of inspections |
Requirements for Job #971 which manufactured 4 units of product:
| Direct labor | 25 | hours |
|---|---|---|
| Direct materials | 140 | pounds |
| Machine setup | 40 | setups |
| Machine hours | 15,100 | machine hours |
| Inspections | 20 | inspections |
Using Activity-Based Costing, overhead cost assigned to Job #971 for machine setup is:
-
$2,910.
-
$1,200.
-
$8,400.
-
$906.
-
$1,400.
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