Required: (a) What is the overhead application rate with respect to Department A and Department B? (b) What is the total cost of production of Job L10?
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.
Wonder Ltd. is company based in the industria area that manufactures fishing hooks and fishing nets. The company uses predetermined overhead rates in applying
Department A. Department B
Direct materials-1800,000 -400000
Direct labour-1200,000 - 250,000
Production overhead-960,000. -220000
Totals= 3960,000. 870,000
Machine hours 96000. - 22000
Direct labour hours-80,000. - 25000
During the year, Job L10 consumed the following inputs:
Department A department B
Direct materials-11,000. - 25000
Direct labour cost-9600. - 2000
Machine hours 768. - 176
Direct labour hours-640. 2000
Required:
(a) What is the overhead application rate with respect to Department A and Department B?
(b) What is the total cost of production of Job L10?
(c) At the end of the year 2000, the actual
Calculate the over applied or under overhead for each Department and for the entire factory.
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