Ramsey SARL uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs - Security expense and Building depreciation - are allocated to three activity cost pools - Shipping, Carving, and Other - based on resource consumption. Data to perform these allocations appear below: Overhead Costs: Security expense: $105,000 Building depreciation: $70,000 Distribution of Resource Consumption across Activity Cost Pools: Overhead Cost Activity Cost Pools Shipping Carving Other Security expense 0.30 0.42 0.28 Building depreciation 0.34 0.32 0.34 The second stage of allocation is done by assigning the Shipping costs to products on the basis of orders shipped while products are assigned Carving costs based on machine hours. Costs assigned to the Other activity pool are not further assigned to products. Activity information for Ramsey's only two products is below: orders shipped machine hours Product BA-15: 6,300 1,500 Product VM-031: 2,900 4,500 Total: 9,200 6,000 PART A: How much overhead cost is assigned to the Shipping activity cost pool under activity based costing in the first stage of allocation? ( 55300, 22400, 66500, 67900, OR 21,000?) PART B: The activity rate for the Shipping activity cost pool under activity based costing is closest to: (6.01, 3.42, 9.68, 5.93, OR 3.73.) PART C: What is the overhead cost assigned to Product VM-031 under activity based costing? (67,307, 34,057, 69,825, 58,100, OR 22,400)
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.
Ramsey SARL uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs - Security expense and Building
Overhead Costs:
- Security expense: $105,000
- Building depreciation: $70,000
Distribution of Resource Consumption across Activity Cost Pools:
| Overhead Cost | Activity Cost Pools | ||
| Shipping | Carving | Other | |
| Security expense | 0.30 | 0.42 | 0.28 |
| Building depreciation | 0.34 | 0.32 | 0.34 |
The second stage of allocation is done by assigning the Shipping costs to products on the basis of orders shipped while products are assigned Carving costs based on machine hours. Costs assigned to the Other activity pool are not further assigned to products. Activity information for Ramsey's only two products is below:
| orders shipped | machine hours | |
| Product BA-15: | 6,300 | 1,500 |
| Product VM-031: | 2,900 | 4,500 |
| Total: | 9,200 | 6,000 |
PART A:
How much overhead cost is assigned to the Shipping activity cost pool under activity based costing in the first stage of allocation? ( 55300, 22400, 66500, 67900, OR 21,000?)
PART B:
The activity rate for the Shipping activity cost pool under activity based costing is closest to: (6.01, 3.42, 9.68, 5.93, OR 3.73.)
PART C:
What is the overhead cost assigned to Product VM-031 under activity based costing? (67,307, 34,057, 69,825, 58,100, OR 22,400)
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