Q- 11: Gulf manufacturing company of GCC makes specialty tools used in the mining industry. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below: Activity Cost Pool Activity Measure Activity Rate Order size Number of direct labor-hours $14.60 per direct labor-hour* Customer orders Number of customer orders $360 per customer order Product testing per testing hour Selling per sales call Number of testing hours $79 Number of sales calls $1,494 The managing director of the company would like information concerning the cost of a recently completed order for two companies PDP company & hard-rock drills. The order required 150 direct labor-hours, 18 hours of product testing, and nine sales calls. Required: Prepare a report showing the overhead cost of the order for hard- rock drills according to the activity based costing system. What is the total overhead cost assigned to the 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.
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