Assume a service company has implemented an activity-based costing system with five activities as shown below: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (Number of deliveries) $ 400,000 8,000 deliveries Manual order processing (Number of manual orders) $ 280,000 5,000 manual orders Electronic order processing (Number of electronic orders) $ 150,000 15,000 electronic orders Line item picking (Number of line items picked) $ 450,000 375,000 line items Other organization-sustaining costs (None) $ 300,000 The company serves numerous customers, two of which include Hospital A and Hospital B. The activity demands pertaining to these two customers are as follows: Activity Measure Activity Hospital A Hospital B Number of deliveries 10 25 Number of manual orders 0 31 Number of electronic orders 15 0 Number of line items picked 120 250 How much cost would be assigned from the Manual Order Processing activity to Hospital B?
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.
Assume a service company has implemented an activity-based costing system with five activities as shown below:
| Activity Cost Pool (Activity Measure) | Total Cost | Total Activity | |
|---|---|---|---|
| Customer deliveries (Number of deliveries) | $ 400,000 | 8,000 | deliveries |
| Manual order processing (Number of manual orders) | $ 280,000 | 5,000 | manual orders |
| Electronic order processing (Number of electronic orders) | $ 150,000 | 15,000 | electronic orders |
| Line item picking (Number of line items picked) | $ 450,000 | 375,000 | line items |
| Other organization-sustaining costs (None) | $ 300,000 |
The company serves numerous customers, two of which include Hospital A and Hospital B. The activity demands pertaining to these two customers are as follows:
| Activity Measure | Activity | |
|---|---|---|
| Hospital A | Hospital B | |
| Number of deliveries | 10 | 25 |
| Number of manual orders | 0 | 31 |
| Number of electronic orders | 15 | 0 |
| Number of line items picked | 120 | 250 |
How much cost would be assigned from the Manual Order Processing activity to Hospital B?
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