The following information is provided for FairDeal furniture ltd.The information will be used to determine the total cost incurred for Job-FD800 which entailed production of sofa sets.The company has one production department where all the furniture is produced. The following budget figures are provided for the production department for the year 2021. Budget Production overhead cost Shs 40,000,000 Budgeted Direct labour hours 2,500 hours Note: The company allocated Factory overheads to customer jobs using the Budgeted Direct labour hours as the absorption base. The cost details for Job-FD800 are as given below; 1.Cost of Materials used in the Job 250,000 2.Direct labour hours used to complete the job (400 Hrs). The company pays Shs 1,200 For every direct labour hour used in the job 400 Direct Labour hours 3.The company hired a special machine for stitching the material used in the sofa at a cost of: 35,000 4.The Direct Labour hours used to complete the job 400 Direct Labour hours 5.The company adds a profit margin of 25% to the total cost of the job to determine the Selling price of the job. Profit Margin (10%) Required: Calculate the overhead absorption rate per direct labour hour for the company using machine hours as the absorption base. Prepare the job cost sheet for Job-FD800 using the above information. The job cost sheet should provide the total cost for the job and the selling price.
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.
The following information is provided for FairDeal furniture ltd.The information will be used to determine the total cost incurred for Job-FD800 which entailed production of sofa sets.The company has one production department where all the furniture is produced.
The following budget figures are provided for the production department for the year 2021.
|
Budget Production overhead cost |
Shs 40,000,000 |
|
Budgeted Direct labour hours |
2,500 hours |
Note: The company allocated Factory
The cost details for Job-FD800 are as given below;
|
1.Cost of Materials used in the Job |
250,000 |
|
2.Direct labour hours used to complete the job (400 Hrs). The company pays Shs 1,200 For every direct labour hour used in the job |
400 Direct Labour hours |
|
3.The company hired a special machine for stitching the material used in the sofa at a cost of: |
35,000 |
|
4.The Direct Labour hours used to complete the job |
400 Direct Labour hours |
|
5.The company adds a profit margin of 25% to the total cost of the job to determine the Selling price of the job. |
Profit Margin (10%) |
Required:
- Calculate the overhead absorption rate per direct labour hour for the company using machine hours as the absorption base.
- Prepare the
job cost sheet for Job-FD800 using the above information. The job cost sheet should provide the total cost for the job and the selling price.
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