Olive Company makes dessert pies for national convenient food chains. Olive Company is considering using ABC costing and has the following activity cost pools and information available: Activities Estimated Overhead Costs Estimated Activity Material handling measured by batches $251,000 2,000 batches Mixing measured by batches $110,000 3,520 batches Packaging measured by units $84,000 2,100,000 units Maintenance measured by # of setups $15,000 260 setups Olive Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours. Based on their estimates for ABC costing, compute the allocated cost for all overhead costs for Job 607 using the following information about the job. # of units in the job = 4,900 # of units in each batch = 980 # of setups required to complete the job = 1 # of machine hours = 220
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.
Olive Company makes dessert pies for national convenient food chains. Olive Company is considering using ABC costing and has the following activity cost pools and information available:
|
Activities |
Estimated |
Estimated Activity |
|
Material handling measured by batches |
$251,000 |
2,000 batches |
|
Mixing measured by batches |
$110,000 |
3,520 batches |
|
Packaging measured by units |
$84,000 |
2,100,000 units |
|
Maintenance measured by # of setups |
$15,000 |
260 setups |
Olive Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours.
Based on their estimates for ABC costing, compute the allocated cost for all overhead costs for Job 607 using the following information about the job.
# of units in the job = 4,900
# of units in each batch = 980
# of setups required to complete the job = 1
# of machine hours = 220
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