Year 5 Year 4 Year 3 Year 2 Year 1 $ 790,000 $ 870,000 $ 935,000 $ 845,000 $ 760,000 Actual overhead Applied overhead (Over-) underapplied overhead 777,000 882,000 $ (12,000) 924,000 840,000 777,000 $ (17,000) $ 13,000 $ 11,000 5,000 Direct labor cost $4,410,000 $4,620,000 $4,200,000 $3,885,000 $3,885,000 Machine hours 104,000 111,000 93,000 100,400 91,600
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.
As an assistant cost accountant for Mississippi Industries, you have been assigned to review the activity base for the predetermined factory
An analysis of the company’s operations and use of the current overhead rate (direct labor cost) has narrowed the possible alternative overhead bases to direct labor cost and machine hours. For the past five years, the following data have been gathered:
Attachment
In teams:
1. Calculate a predetermined factory overhead rate for each alternative base, assuming that rates would have been determined by relating the total amount of factory overhead for the past five years to the base.
2. For each of the past five years, determine the over- or underapplied overhead based on the two predetermined overhead rates developed in part (1).
3. Which predetermined overhead rate would you recommend? Discuss the basis for your recommendation.
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