Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Activity Rate Supporting direct labor $ 7 per direct labor-hour Machine processing $ 3 per machine-hour Machine setups $ 40 per setup Production orders $ 150 per order
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.
Klumper Corporation is a diversified manufacturer of industrial goods. The company’s activity-based costing system contains the following six activity cost pools and activity rates:
| Activity Cost Pool | Activity Rate | |
|---|---|---|
| Supporting direct labor | $ 7 | per direct labor-hour |
| Machine processing | $ 3 | per machine-hour |
| Machine setups | $ 40 | per setup |
| Production orders | $ 150 | per order |
| Shipments | $ 115 | per shipment |
| Product sustaining | $ 900 | per product |
Activity data have been supplied for the following two products:
| Total Expected Activity | ||
|---|---|---|
| K425 | M67 | |
| Number of units produced per year | 200 | 2,000 |
| Direct labor-hours | 950 | 40 |
| Machine-hours | 3,200 | 30 |
| Machine setups | 17 | 2 |
| Production orders | 17 | 2 |
| Shipments | 34 | 2 |
| Product sustaining | 2 | 2 |
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