Salvador Apparel Company in Barcelona, Spain, has three production departments and two service departments. The overhead-per-month analysis sheet provides the following totals of the overheads analyzed to production and service departments: Departments Overheads Men’s wear production department € 48,000 Women’s wear production department 42,000 Children’s wear production department 30,000 Marketing service department 14,040 Delivery service department 18,000 €152,040 The expenses of the service departments are apportioned as follows: Production departments Service departments Men’s Women’s Children’s Marketing Delivery Marketing 20% 40% 30% — 10% Delivery 40% 20% 20% 20% — Instruction Use following methods to allocate service departments’ costs: Direct allocation (20%) Step-down allocation (30%) Reciprocal allocation (50%)
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.
Salvador Apparel Company in Barcelona, Spain, has three production departments and two service departments. The overhead-per-month analysis sheet provides the following totals of the overheads analyzed to production and service departments:
Departments Overheads
Men’s wear production department € 48,000
Women’s wear production department 42,000
Children’s wear production department 30,000
Marketing service department 14,040
Delivery service department 18,000
€152,040
The expenses of the service departments are apportioned as follows:
Production departments Service departments
Men’s Women’s Children’s Marketing Delivery
Marketing 20% 40% 30% — 10%
Delivery 40% 20% 20% 20% —
Instruction
Use following methods to allocate service departments’ costs:
- Direct allocation (20%)
- Step-down allocation (30%)
- Reciprocal allocation (50%)
Step by step
Solved in 3 steps with 5 images
