The Smart Company is located in Toronto, Ontario, Canada. The company has been in business for 10 years. The Smart Company considers machine hours to be the best activity base for its manufacturing overhead. The estimate of overhead costs for the year for all jobs was $320,000. For Job #20, the company used 500 hours of machine hour processing. The actual overhead costs for the year totalled $325,000. The budgeted machine hours for the year were estimated at 20,000. Provide your answer for the following (show all calculations): a) The amount of overhead that should be applied to Job# 20. b) If Job #20 had a Direct Material cost of $20,000, and Direct Labour included 10 factory workers that earned $20 per hour, working 8 hours per day, 5 days per week, for 2 weeks, calculate the total manufacturing cost for Job #20. c) Explain why it is important to know the cost of the jobs completed.
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 Smart Company is located in Toronto, Ontario, Canada. The company has been in business for 10 years. The Smart Company considers machine hours to be the best activity base for its manufacturing overhead. The estimate of overhead costs for the year for all jobs was $320,000. For Job #20, the company used 500 hours of machine hour processing. The actual overhead costs for the year totalled $325,000. The budgeted machine hours for the year were estimated at 20,000.
Provide your answer for the following (show all calculations):
a) The amount of overhead that should be applied to Job# 20.
b) If Job #20 had a Direct Material cost of $20,000, and Direct Labour included 10 factory workers that earned $20 per hour, working 8 hours per day, 5 days per week, for 2 weeks, calculate the total
c) Explain why it is important to know the cost of the jobs completed.
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