Shilongo Ltd uses costing to attribute costs to individual products and services provided to its customers. It has begun the preparation of its fixed production cost budget for the forthcoming period. The company three production departments Machining, Assembly and Finishing; and two service departments Stores and Maintenance. The following costs have been produced: Machining Assembly Finishing Stores Maintenance 2,500 1,500 1,000 Overhead cost $ 6,000 800 The number of machine and labor hours budgeted for the forthcoming period is budgeted as follows:- Machining Assembly Finishing Machine hours 500 40 50 Labor hours 100 300 200 Overheads are absorbed in Assembly and Finishing departments on a Labor hour basis; and in Machining departments they are absorbed on a machine hour basis. It has been estimated that service departments usage is as follows: Machining Assembly Finishing Stores Maintenance Maintenance 55% 20% 20% 5% - Stores 40% 30% 20% 10% Required: b) Calculate the overhead absorption rates for departments Machining, Assembly and Finishing for the forthcoming period. (work to nearest cent)
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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