Orear Corporation manufactures two products: Product Z34D and Product J25M. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Z34D and J25M. Activity Cost Pool Activity Measure Total Cost Total Activity Machining Machine-hours $ 120,000 6,000 Machine-hours Machine setups Number of setups $ 90,000 150 setups Product design Number of products $ 84,000 2 products Order size Direct labor-hours $ 300,000 10,000 Direct labor-hours Activity Measure Product Z34D Product J25M Machine-hours 4,000 2,000 Number of setups 90 60 Number of products 1 1 Direct labor-hours 7,000 3,000 Using the plantwide overhead rate, the percentage of the total overhead cost that is allocated to Product J25M is closest to: Group of answer choices 50.00% 30.00% 15.15% 19.87%
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.
Orear Corporation manufactures two products: Product Z34D and Product J25M. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Z34D and J25M.
|
Activity Cost Pool |
Activity Measure |
Total Cost |
Total Activity |
|
Machining |
Machine-hours |
$ 120,000 |
6,000 Machine-hours |
|
Machine setups |
Number of setups |
$ 90,000 |
150 setups |
|
Product design |
Number of products |
$ 84,000 |
2 products |
|
Order size |
Direct labor-hours |
$ 300,000 |
10,000 Direct labor-hours |
|
Activity Measure |
Product Z34D |
Product J25M |
|
|
Machine-hours |
4,000 |
2,000 |
|
|
Number of setups |
90 |
60 |
|
|
Number of products |
1 |
1 |
|
|
Direct labor-hours |
7,000 |
3,000 |
|
Using the plantwide overhead rate, the percentage of the total overhead cost that is allocated to Product J25M is closest to:
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