Cost accumulation in two departments Rio Valde Co. uses a normal cost, job order costing system. In the Mixing Department, overhead is applied using machine hours; in Paving, overhead is applied using direct labor hours. In December of Year One, the company estimated the following data for its two departments for Year Two: Mixing Department Paving Department Direct labor hours 24,000 56,000 Machine hours 120,000 24,000 Budgeted overhead cost $960,000 $1,400,000 a. Compute the predetermined OH rate for each department of Rio Valde. Predetermined OH Rate Mixing Department per MH Paving Department per DLH b. Job #220 was started and completed during March of Year Two. The job cost sheet shows the following information: Mixing Department Paving Department Direct material $45,200 $6,800 Direct labor cost $2,500 $8,100 Direct labor hours 48 680 Machine hours 580 88 Compute the overhead applied to Job #220 for each department and in total. Applied Overhead to Job #220 Mixing Department Paving Department Total c. The president of Rio Valde suggested that, for simplicity, a single predetermined overhead rate be computed using machine hours. How much overhead would have been applied to Job #220 if that single rate had been used? Note: Round your final answer to the nearest whole dollar.
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.
Cost accumulation in two departments
Rio Valde Co. uses a normal cost,
| Mixing Department | Paving Department | |
|---|---|---|
| Direct labor hours | 24,000 | 56,000 |
| Machine hours | 120,000 | 24,000 |
| Budgeted overhead cost | $960,000 | $1,400,000 |
a. Compute the predetermined OH rate for each department of Rio Valde.
| Predetermined OH Rate | ||
|---|---|---|
| Mixing Department |
|
per MH |
| Paving Department |
|
per DLH |
b. Job #220 was started and completed during March of Year Two. The job cost sheet shows the following information:
| Mixing Department | Paving Department | |
|---|---|---|
| Direct material | $45,200 | $6,800 |
| Direct labor cost | $2,500 | $8,100 |
| Direct labor hours | 48 | 680 |
| Machine hours | 580 | 88 |
Compute the overhead applied to Job #220 for each department and in total.
| Applied Overhead to Job #220 | |
|---|---|
| Mixing Department |
|
| Paving Department |
|
| Total |
|
c. The president of Rio Valde suggested that, for simplicity, a single predetermined overhead rate be computed using machine hours. How much overhead would have been applied to Job #220 if that single rate had been used?
Note: Round your final answer to the nearest whole dollar.
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