Sterling Archer Spy Agency provides independent intelligence gathering services. The agency has the following data concerning its overhead costs and its activity-based costing system: Overhead costs: Wages and salaries $400,000 Administrative expenses 150,000 Total $550,000 Distribution of resource consumption: Activity Cost Pools Intelligence Report procurement Writeups Other Total Wages and salaries 70% 25% 5% 100% Administrative expenses 40% 35% 25% 100% Activity measure Intelligence gathering hours Reports Annual activity 5,000 200 The other activity cost pool should not be assigned to jobs. Compute the OH costs assigned to the intelligence cost pool. (1st stage). Compute the activity rate for the intelligence cost pool.
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.
- Sterling Archer Spy Agency provides independent intelligence gathering services. The agency has the following data concerning its overhead costs and its activity-based costing system:
Overhead costs:
Wages and salaries $400,000
Administrative expenses 150,000
Total $550,000
Distribution of resource consumption:
Activity Cost Pools
Intelligence Report procurement Writeups Other Total
Wages and salaries 70% 25% 5% 100%
Administrative expenses 40% 35% 25% 100%
Activity measure Intelligence gathering hours Reports
Annual activity 5,000 200
The other activity cost pool should not be assigned to jobs.
- Compute the OH costs assigned to the intelligence cost pool. (1st stage).
- Compute the activity rate for the intelligence cost pool.
Job X133C involved 27 intelligence-gathering hours and three reports. Compute the OH cost assigned to Job X133C for both hours and reports.
- Pam Poovey Farms has budgeted sales revenue for the fourth quarter of 2016:
October November December
Credit sales $45,000 $80,000 $57,000
Actual credit sales for September 2016 were $46,000. Actual credit sales for August 2016 were $43,000. Past experience indicates that 75% of credit sales will be collected in the month of sale, 23% of credit sales will be collected in the following month, and the remaining 2% of credit sales will be collected in the second month following the sale.
Purchases of inventory are all on credit and 60% of purchases are paid in the month of purchase and the remaining 40% is paid in the month following the purchase. Budgeted inventory purchases for the fourth quarter of 2016 are:
October $60,000
November 50,000
December 21,000
Actual purchases in August 2016 were $40,000 and $45,000 in September 2016.
- Prepare a Cash Receipts (Collection) Schedule which shows expected total cash receipts for the months of October, November, and December.
- What is the A/R balance at the end of December?
- Cyril Figgis Accounting uses client visits as its measure of activity. During May the firm budgeted for 700 client visits, but its actual level of activity was 692 client visits. The firm has provided the following data concerning the formulas used in its budgeting process and the actual results for May.
Data used in budgeting:
Revenue: $220.00 per visit
Fixed cost Variable cost
per month per client visit
Expenses:
Salaries and wages expense $40,000 $75.00
Office supplies 2,000 20.00
Occupancy expenses 8,000 10.00
Administrative expenses 6,000 2.50
Total expenses $56,000 $107.50
Actual results for March:
Revenue $138,000
Salaries and wages expense 91,500
Office supplies 18,500
Occupancy expenses 13,213
Administrative expenses 7,058
For the revenue, salary and wage expense, office supplies, occupancy expenses, and administrative expenses:
- Compute the amount in the planning budget.
- Compute the amount in the flexible budget.
- Compute the spending variance and indicate if the variance is favorable or unfavorable.
- Compute the activity variance and indicate if the variance is favorable or unfavorable.
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