Manufacturing overhead Direct labor costs $ 290,000 $ 1,160,000 Job 721 Job 722 Direct labor hours 780 hours 60 hours Direct materials $ 23,400 $ 2,500
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.
Accounting for manufacturing overhead
This problem continues the Piedmont Computer Company situation from Chapter 16 Piedmont Computer Company uses a job order costing system in which each batch manufactured is a different job. Piedmont Computer Company assigns direct materials and direct labor to each job. The company assigns labor costs at $25 per hour. It allocates manufacturing overhead to jobs based on a predetermined overhead allocation rate, computed as a percentage of direct labor costs.
At the beginning of 2020, the controller prepared the following budget;
In November 2020, Piedmont Computer Company worked on several jobs, Records for two jobs appear here:
Requirements
- Compute Piedmont Computer Company’s predetermined overhead allocation rate for 2020.
- Compute the total cost of each job.
- Why does Piedmont assign
costs to jobs ?
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