Sara Company produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labour hours to assign its overhead costs. The company has the following estimated and actual data for the coming year: Estimated overhead $2,000,000 Expected activity (Direct Labour hours) 80,000 Actual activity (direct labour hours): Deluxe dryer 25,000 Regular dryer 40,000 Units produced: Deluxe dryer 20,000 Regular dryer 200,000 1. Calculate the predetermined plantwide overhead rate and the applied overhead for each product, using direct labour hours. 2. Calculate the overhead cost per unit for each product. Write formula wherever required. Provide all the working out, do not just write the final answers.
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.
Sara Company produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labour hours to assign its overhead costs. The company has the following estimated and actual data for the coming year:
|
Estimated overhead |
$2,000,000 |
|
Expected activity (Direct Labour hours) |
80,000 |
|
Actual activity (direct labour hours): |
|
|
Deluxe dryer |
25,000 |
|
Regular dryer |
40,000 |
|
Units produced: |
|
|
Deluxe dryer |
20,000 |
|
Regular dryer |
200,000 |
1. Calculate the predetermined plantwide overhead rate and the applied overhead for each product, using direct labour hours.
2. Calculate the overhead cost per unit for each product.
Write formula wherever required. Provide all the working out, do not just write the final answers.
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