Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year follow: Direct materials $ 310 Direct labor ($23/hour) $ 575 Machine hours 20 This product requires 15 hours of direct labor in Department A and 10 hours in Department B. Also, it requires 5 machine hours in Department A and 15 machine hours in Department B. Using output as the activity, the factory overhead costs estimated in these two departments follow: A B Variable cost $ 315,000 $ 190,000 Fixed cost 105,000 174,000 Management expects the firm to produce 1,000 units during the year. Required: 1. Assume the total actual overhead base used was equal to the estimated base for the 1,000 units produced. Assume that factory overhead was applied on the basis of direct labor hours. Compute the predetermined plantwide factory overhead rate. 2. If factory overhead were applied on the basis of machine hours, what would be the plantwide overhead rate? 3. If the company produced 1,000 units during the year, what was the total amount of applied factory overhead in each department in requirements 1 and 2? 5. Compute the departmental overhead rate and amount of applied overhead for Department A using direct labor hours as the allocation base and for Department B using machine hours as the allocation base. What is the answer for question 5 ONLY /how do you get the answer?
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.
Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year follow:
| Direct materials | $ | 310 | |
| Direct labor ($23/hour) | $ | 575 | |
| Machine hours | 20 | ||
This product requires 15 hours of direct labor in Department A and 10 hours in Department B. Also, it requires 5 machine hours in Department A and 15 machine hours in Department B. Using output as the activity, the
| A | B | ||||||
| Variable cost | $ | 315,000 | $ | 190,000 | |||
| Fixed cost | 105,000 | 174,000 | |||||
Management expects the firm to produce 1,000 units during the year.
Required:
1. Assume the total actual overhead base used was equal to the estimated base for the 1,000 units produced. Assume that factory overhead was applied on the basis of direct labor hours. Compute the predetermined plantwide factory overhead rate.
2. If factory overhead were applied on the basis of machine hours, what would be the plantwide overhead rate?
3. If the company produced 1,000 units during the year, what was the total amount of applied factory overhead in each department in requirements 1 and 2?
5. Compute the departmental overhead rate and amount of applied overhead for Department A using direct labor hours as the allocation base and for Department B using machine hours as the allocation base.
What is the answer for question 5 ONLY /how do you get the answer?
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