Top Vent Manufacturing Inc. consists of two production departments (Assembly and Machining) and two service departments (Maintenance and Store). The estimated overhead costs and other relevant information for the respective departments are as follows: Assembly Machining Maintainance Store Estimated overhead cost $95,000 $82,000 $46,000 $30,000 Direct labour hours 10,000 5,000 Machine hours 2,000 30,000 It has been estimated that each service department does work for other cost centres in the following pproportions: Total labour hours used by departments Assembly Machining Maintenance Store Maintenance to 50% 50% - - Store to 30% 60% 10% Required: (a) Calculate the department overhead rates for the Machining and Assembly departments using the appropriate bases. (b) With the overhead absorption rates calculated in (b), calculate the total costs for a job number #2042, assuming that it has incurred the following costs: • Direct materials $6,400 • Direct labour $5,500 and requires: Assembly Machining Direct labour hours 300 50 Machine hours 10 200 (c) Assume that at the end of the financial year, the total actual fixed overhead of the Machining department (inclusive of re-allocation from the Maintenance and Store) was $100,100 and that the actual machine hours were 30,200 and the actual labour hours were 5,100. Determine the under-applied or over-applied overhead for the year for the Machining Department. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold.
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.
Top Vent Manufacturing Inc. consists of two production departments (Assembly and
Machining) and two service departments (Maintenance and Store). The estimated
costs and other relevant information for the respective departments are as follows:
| Assembly | Machining | Maintainance | Store | |
| Estimated overhead cost | $95,000 | $82,000 | $46,000 | $30,000 |
| Direct labour hours | 10,000 | 5,000 | ||
| Machine hours | 2,000 | 30,000 |
It has been estimated that each service department does work for other cost centres in the following pproportions:
Total labour hours used by departments
Assembly Machining Maintenance Store
Maintenance to 50% 50% - -
Store to 30% 60% 10%
Required:
(a) Calculate the department overhead rates for the Machining and Assembly departments using the appropriate bases.
(b) With the overhead absorption rates calculated in (b), calculate the total costs for a job number #2042, assuming that it has incurred the following costs:
• Direct materials $6,400
• Direct labour $5,500
and requires:
Assembly Machining
Direct labour hours 300 50
Machine hours 10 200
(c) Assume that at the end of the financial year, the total actual fixed overhead of the Machining department (inclusive of re-allocation from the Maintenance and Store) was $100,100 and that the actual machine hours were 30,200 and the actual labour hours were 5,100. Determine the under-applied or over-applied overhead for the year for the Machining Department. Prepare a
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