Company XYZ has 6 standard products from stainless steel and brass. The company’s most popular product is Product XX. The information below shows Product XX’s data for next year’s budget. Using this information a) calculate the budgeted overhead costs using activity-based costing principles b) calculate the budgeted overhead costs using absorption costing (absorb overhead using machine hours) c) how can the company reduce the ABC for Product XX: Customer AAA BBB Component Type A999 B999 Contract Value ($) $27,000 $100,000 Contract Quantity 1,000 unit 2,000 unit Material cost/unit $15 $20 Moulding time/batch 5 hours 7.5 hours Batch size 100 units 50 units Activity Cost Driver Cost Driver Volume/Yr Cost Pool Purchasing Purchase orders 1,500 $75,000 Setting Batches produced 2,800 $112,000 Materials handling Materials movements 8,000 $96,000 Inspection Batches produced 2,800 $70,000 Machining costs Machine hours 50,000 $150,000 Purchase orders 25 Output 15,000 units Production batch size 100 units Materials movements per batch 6 Machine hours per unit 0.1
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Company XYZ has 6 standard products from stainless steel and brass. The company’s most popular product is Product XX. The information below shows Product XX’s data for next year’s budget.
Using this information
a) calculate the budgeted
b) calculate the budgeted overhead costs using absorption costing (absorb overhead using machine hours)
c) how can the company reduce the ABC for Product XX:
|
Customer |
AAA |
BBB |
|
Component Type |
A999 |
B999 |
|
Contract Value ($) |
$27,000 |
$100,000 |
|
Contract Quantity |
1,000 unit |
2,000 unit |
|
Material cost/unit |
$15 |
$20 |
|
Moulding time/batch |
5 hours |
7.5 hours |
|
Batch size |
100 units |
50 units |
|
Activity |
Cost Driver |
Cost Driver Volume/Yr |
Cost Pool |
|
Purchasing |
Purchase orders |
1,500 |
$75,000 |
|
Setting |
Batches produced |
2,800 |
$112,000 |
|
Materials handling |
Materials movements |
8,000 |
$96,000 |
|
Inspection |
Batches produced |
2,800 |
$70,000 |
|
Machining costs |
Machine hours |
50,000 |
$150,000 |
|
Purchase orders |
25 |
|
Output |
15,000 units |
|
Production batch size |
100 units |
|
Materials movements per batch |
6 |
|
Machine hours per unit |
0.1 |
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