You are a manufacturer who produces products in batches. You currently assign overhead to products based on machine hours (mh). One of the costs included is setup cost. Machines must be setup for each batch. For the past year, total setup costs were $100,000 for two products.
Product A Product B
#Units 4000 6000
Mh/unit 1 3
# Batches 10 40
a) Calculate the setup cost in total and per unit for each product under the current system. b) What is the cost allocation base? c) You have just finished a cost accounting course and have decided to switch to activity based costing system. Recalculate setup cost in total and per unit for each product using # of batches as the cost allocation base. d) Which of the two methods more accurately assigns setup costs to the two products? Explain your answer using cost accounting terminology.
You use a normal job order cost system, in which manufacturing overhead (moh) is assigned to products using a single monthly-predetermined moh rate based on direct labor cost. For the month of March, the budgeted moh rate is 300% of direct labor cost. Budgeted direct labor cost was $30,000. Beginning inventory was:
Beginning work in process $38,000 (related solely to job #11)
Beginning finished goods $104,000 (related solely to job #10)
During the month, Job #10 was sold. Job #11 was finished, but not sold. No new jobs were put into production. Costs incurred in finishing job were: $80,000 for direct materials and $44,000 for direct labor. Actual moh incurred in finishing job #11 was $110,000. a) Calculate budgeted moh for the month. B) Calculate the cost assigned to job #11 in March and the total cost of job #11. c) Calculate the ending balance in the work in process and finished goods inventory accounts. d) Calculate the cost of goods manufactured and the cost of goods sold for March
You are in the process of assigning costs to a specified cost object. You have determined which costs you will assign and are now in the process of deciding which costs to assign directly and which to assign indirectly. a) Explain specifically how you would decide which costs to assign directly versus which to assign indirectly. b) Define cost, cost object, direct cost and indirect cost. c) How would advanced information gathering technology affect your classification?