Cancico Communications has supplied the following data for use in its ABC system: Overhead Costs Wages and salaries $ 292,500 Other overhead costs 162,000 Total overhead costs $ 454,500 Activity Cost Pool Activity Measure Total Activity Direct labour support Number of direct labour-hours 12,015 DLHs Order processing Number of orders 450 orders Customer support Number of customers 150 customers Other These costs are not allocated to products or customers NA Distribution of Resource Consumption across Activity Cost Pools Direct Labour Support Order Processing Customer Support Other Total Wages and salaries 15 % 40 % 35 % 10 % 100 % Other overhead costs 10 % 25 % 25 % 40 % 100 % During the year, Cancico Communications completed an order for special telephone equipment for a new customer, HurnTel. This customer did not order any other products during the year. Data concerning that order follow: Selling price $ 214 per unit Units ordered 175 units Direct materials $ 193 per unit Direct labour-hours 0.6 DLH per unit Direct labour rate $ 23 per DLH Required: 1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools. 2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.) 3. Prepare a report showing the overhead costs for the order from HurnTel, including customer support costs. (Round your answers to 2 decimal places.) 4. Prepare a report showing the customer margin for HurnTel. (Round your answers to 2 decimal places.)
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.
Cancico Communications has supplied the following data for use in its ABC system:
| Wages and salaries | $ | 292,500 | |
| Other overhead costs | 162,000 | ||
| Total overhead costs | $ | 454,500 | |
| Activity Cost Pool | Activity Measure | Total Activity | |
| Direct labour support | Number of direct labour-hours | 12,015 | DLHs |
| Order processing | Number of orders | 450 | orders |
| Customer support | Number of customers | 150 | customers |
| Other | These costs are not allocated to products or customers | NA | |
| Distribution of Resource Consumption across Activity Cost Pools | |||||||||||||||
| Direct Labour Support | Order Processing | Customer Support | Other | Total | |||||||||||
| Wages and salaries | 15 | % | 40 | % | 35 | % | 10 | % | 100 | % | |||||
| Other overhead costs | 10 | % | 25 | % | 25 | % | 40 | % | 100 | % | |||||
During the year, Cancico Communications completed an order for special telephone equipment for a new customer, HurnTel. This customer did not order any other products during the year. Data concerning that order follow:
| Selling price | $ | 214 | per unit |
| Units ordered | 175 | units | |
| Direct materials | $ | 193 | per unit |
| Direct labour-hours | 0.6 | DLH per unit | |
| Direct labour rate | $ | 23 | per DLH |
Required:
1. Prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.
2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)
3. Prepare a report showing the overhead costs for the order from HurnTel, including customer support costs. (Round your answers to 2 decimal places.)
4. Prepare a report showing the customer margin for HurnTel. (Round your answers to 2 decimal places.)
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