Plant & Equipment Depreciation Workers' Temp Agency Раyments Warehouse Salaries Rental Electricity $ 7,200 7,200 S 275 $ 150 $ 2,200 2,200 January February March Аpril Мay 540 350 385 1,100 1,350 1,750 7,200 325 655 2,200 7,200 7,200 2,200 2,200 340 695 725 335 June 7,200 1,500 200 675 2,200 Total $43,200 $6,240 $1,700 $3,410 $13,200 Information on number of machine hours, orders, and parts for the six-month period follows: Machine Hours Number of Orders Number of Parts January February March 2,000 10 200 3,100 5,800 40 600 350 550 Аpril May 6,200 6,500 400 580 510 570 June 6,000 410 300 Total 29,600 1,720 2,800 (сontinued) Gonyrinht 2018 Cengane All Rinhts Reserved conied scanned whole or in part wcN 02-200-202
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.
Darnell Poston, owner of Poston Manufacturing, Inc., wants to determine the cost behavior of
labor and overhead. Darnell pays his workers a salary; during busy times, everyone works to get
the orders out. Temps (temporary workers hired through an agency) may be hired to pack and
prepare completed orders for shipment. During slower times, Darnell catches up on bookkeep-
ing and administrative tasks while the salaried workers do preventive maintenance, clean the
lines and building, etc. Temps are not hired during slow times. Darnell found that workers’ sal-
aries, temp agency payments, rentals, utilities, and plant and equipment
largest dollar accounts. He believes that workers’ salaries and plant and equipment depreciation
are fixed, temp agency payments are associated with the number of orders (since temp workers are used to pack and prepare completed orders for shipment), and electricity is associated with the number of machine hours. When the number of different parts stored by Poston exceeds the space in the materials storeroom, Darnell rents nearby warehouse space. He can rent as much or as little space as he wants on a month-to-month basis. Therefore, he believes warehouse rental payments are variable with the number of parts purchased and stored. The account balances for
the past six months as well as the six-month total are as follows:
Required:
1. Calculate the monthly average account balance for each account. Calculate the average
monthly amount for each of the three drivers.
2. Calculate fixed monthly cost and the variable rates for temp agency payments, warehouse
rent, and electricity. Express the results in the form of an equation for total cost.
3. In July, Darnell predicts there will be 420 orders, 250 parts, and 5,900 machine hours. What
is the total labor and overhead cost for July?
4. What if Darnell buys a new machine in July for $24,000? The machine is expected to last 10
years and will have no salvage value at the end of that time. What part of the cost equation
will be affected? How? What is the new expected cost in July?
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