A company incurs $1220000 of overhead each year in three departments, Processing, Packaging, and Testing. The company performs 800 processing transactions, 190000 packaging transactions, and 2000 tests per year in producing 398000 drums of oil and 592000 drums of sludge. The following data are available: Department Use of Cost Driver Cost Processing 800 $496000 Packaging 190000 496000 Testing 2000 228000 Production information for sludge is as follows: Department Use of Cost Driver Processing 500 Packaging 95000 Testing 600 Calculate the amount of overhead assigned to sludge. $459000 $610000 $626400 $593600
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.
|
Department
|
Use of Cost Driver
|
Cost
|
|
|---|---|---|---|
|
Processing
|
800
|
$496000
|
|
|
Packaging
|
190000
|
496000
|
|
|
Testing
|
2000
|
228000
|
Production information for sludge is as follows:
|
Department
|
Use of Cost Driver
|
|
|---|---|---|
|
Processing
|
500
|
|
|
Packaging
|
95000
|
|
|
Testing
|
600
|
Calculate the amount of overhead assigned to sludge.
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