Ali Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department X and machine hours in Department Z. In establishing the predetermined overhead rates for 2020, the following estimates were made for the year. Department X Z Manufacturing overhead $78000 $75000 Direct labor costs $60000 $60000 Direct labor hours 5000 4000 Machine hours
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.
- Ali Company uses a job order cost system in each of its three manufacturing departments. Manufacturing
overhead is applied to jobs on the basis of direct labor cost in Department X and machine hours in Department Z.
In establishing the predetermined overhead rates for 2020, the following estimates were made for the year.
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Department |
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X |
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Z |
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Manufacturing overhead |
$78000 |
$75000 |
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Direct labor costs |
$60000 |
$60000 |
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Direct labor hours |
5000 |
4000 |
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Machine hours |
10000 |
15000 |
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During March, the
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Department |
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X |
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Z |
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Direct materials used |
$9200 |
$6400 |
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Direct labor costs |
$4800 |
$5000 |
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Manufacturing overhead incurred |
$6600 |
$6210 |
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Direct labor hours |
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|
400 |
420 |
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|
Machine hours |
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|
800 |
1260 |
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Required:
- Compute the predetermined overhead rate for each department.
- Compute the total
manufacturing costs assigned to jobs in March in each department. - Compute the under- or over applied overhead for each department at March 31.
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