Product-Related Data Scientific Business Units produced per year 75,000 750,000 Prime costs S250,000 100,000 $2,500,000 1,000,000 Direct labor hours Machine hours 50,000 500,000 Production runs 100 150 Inspection hours Maintenance hours 2,000 3,000 2,250 9,000 Department Data Department 1 Department 2 Direct labor hours: Scientific calculator 75,000 112,500 25,000 887,500 Business calculator Total 187,500 912,500 Machine hours: Scientific calculator 25,000 25,000 Business calculator 400,000 100,000 Total 425,000 125,000 Overhead costs: Setup costs Inspection costs $225,000 175,000 S225,000 175,000 Power 250,000 200,000 150,000 250,000 Maintenance Total $850,000 S800,000
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 Accuracy, Plantwide and Departmental Rates, ABC
Escuha Company produces two type of calculators: scientific and business. Both products pass through two producing departments. The business calculator is by far the most popular. The fol-
lowing data have been gathered for these two products:
Required:
1. Compute the overhead cost per unit for each product using a plantwide, unit-based rate
using direct labor hours.
2. Compute the overhead cost per unit for each product using departmental rates. In calculating
departmental rates, use machine hours for Department 1 and direct labor hours for Department
2. Repeat using direct labor hours for Department 1 and machine hours for Department 2.
3. Compute the overhead cost per unit for each product using activity-based costing.
4. Comment on the ability of departmental rates to improve the accuracy of product costing.
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