Teledex Company manufactures products to customers’ specifications and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year: Fabricating Machining assembly Total plant Manufacturing overhead 350,000 400,000 90,000 840,000 Direct Labor 200,000 100,000 300,000 600,000 Jobs require varying amounts of work in the three departments. The Koopers job, for example, would have required manufacturing costs in the three departments as follows: Fabricating Machining assembly Total plant Direct materials 3,000 200 1400 4600 Direct labor 2800 500 6200 9500 Manufacturing overhead Using the company’s plantwide approach: Compute the plantwide predetermined rate for the current year. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions: Compute the predetermined overhead rate for each department for the current year. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job. Explain the difference between the manufacturing overhead that would have been applied to the Koopers job using the plantwide approach in question 1 (b) and using the departmental approach in question 2 (b). Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What was the company’s bid price on the Koopers job using a plantwide predetermined overhead rate? What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?
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.
Teledex Company manufactures products to customers’ specifications and uses a
|
|
Fabricating |
Machining |
assembly |
Total plant |
|
Manufacturing overhead |
350,000 |
400,000 |
90,000 |
840,000 |
|
Direct Labor |
200,000 |
100,000 |
300,000 |
600,000 |
Jobs require varying amounts of work in the three departments. The Koopers job, for example, would have required
|
|
Fabricating |
Machining |
assembly |
Total plant |
|
Direct materials |
3,000 |
200 |
1400 |
4600 |
|
Direct labor |
2800 |
500 |
6200 |
9500 |
|
Manufacturing overhead |
|
|
|
|
- Using the company’s plantwide approach:
- Compute the plantwide predetermined rate for the current year.
- Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
- Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions:
- Compute the predetermined overhead rate for each department for the current year.
- Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.
- Explain the difference between the manufacturing overhead that would have been applied to the Koopers job using the plantwide approach in question 1 (b) and using the departmental approach in question 2 (b).
- Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What was the company’s bid price on the Koopers job using a plantwide predetermined overhead rate? What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?
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