Product costing—various issues Clay Co. produces ceramic coffee mugsand pencil holders. Manufacturing overhead is assigned to production using an application rate based on direct labor hours.Required:a. For 2013, the company’s cost accountant estimated that total overhead costs incurred would be $420,000 and that a total of 50,000 direct labor hours would be worked. Calculate the amount of overhead to be applied for each direct labor hour worked on a production run.b. A production run of 400 coffee mugs used raw materials that cost $432 and used 40 direct labor hours at a cost of $10 per hour. Calculate the cost of each coffee mug produced.c. At the end of October 2013, 280 coffee mugs made in the production run in part b had been sold and the rest were in ending inventory. Calculate (1) the cost of the coffee mugs sold that would have been reported in the income statement and (2) the cost included in the October 31, 2013, finished goods inventory.
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.
Product costing—various issues Clay Co. produces ceramic coffee mugs
and pencil holders. Manufacturing overhead is assigned to production using an application rate based on direct labor hours.
Required:
a. For 2013, the company’s cost accountant estimated that total overhead costs incurred would be $420,000 and that a total of 50,000 direct labor hours would be worked. Calculate the amount of overhead to be applied for each direct labor hour worked on a production run.
b. A production run of 400 coffee mugs used raw materials that cost $432 and used 40 direct labor hours at a cost of $10 per hour. Calculate the cost of each coffee mug produced.
c. At the end of October 2013, 280 coffee mugs made in the production run in part b had been sold and the rest were in ending inventory. Calculate (1) the cost of the coffee mugs sold that would have been reported in the income statement and (2) the cost included in the October 31, 2013, finished goods inventory.
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