Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools: Activity Cost Pool Estimated Overhead Cost Expected Activity Labor-related $ 17,200 4,000 direct labor-hours Machine-related $ 4,000 8,000 machine-hours Machine setups $ 18,000 500 setups Production orders $ 10,500 300 orders Product testing $ 27,600 1,200 tests Packaging $ 62,900 3,700 packages General factory $ 57,600 4,000 direct labor-hours Required: 1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) 2. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours.
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.
Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:
| Activity Cost Pool | Estimated |
Expected Activity | |
|---|---|---|---|
| Labor-related | $ 17,200 | 4,000 | direct labor-hours |
| Machine-related | $ 4,000 | 8,000 | machine-hours |
| Machine setups | $ 18,000 | 500 | setups |
| Production orders | $ 10,500 | 300 | orders |
| Product testing | $ 27,600 | 1,200 | tests |
| Packaging | $ 62,900 | 3,700 | packages |
| General factory | $ 57,600 | 4,000 | direct labor-hours |
Required:
1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
2. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.)
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