ACC 406 Lecture Notes - Lecture 6: Decision-Making, Finished Good, Voh

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orchidsea-lion570

21 Apr 2015

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Costing system: a set of procedures to accumulate and to distribute costs. Product costing system: a costing system in which the product is the cost objective. Job order costing system: a major example of product costing system. Fixed overhead is as product cost and applied to/ absorbed by product unit excluded from product cost, and expensed in the period. = actual overhead cost / actual activity volume. = expected overhead cost / expected activity volume. 99. 99 % of companies don t use this because actual information is not timely, too late. Ex: you do not have a total overhead cost and actual activity volume before dec 31! By doing estimation, company can make business decision based on the estimations rather than wait for the actual number. Oh applied to job 1($) = predetermine overhead rate (por) * actual volume for job 1. Oh applied to job 2 = por * actual volume for job 2 etc.

Related Questions

1. ActivityBased Costing

Duncan Company recently introduced a markers to complement theirother product, pencils. Accountants accumulate all overhead in asingle cost pool and allocate it based on machine-hours. With therecent addition of an expanded computer system, Duncan decided tobegin implementing ABC. A study reveals much overhead cost relatedto machine setups and batch changes. They select the number ofsetups and the number of batch changes as the activity driers forthe two new cost pools. They will continue to use machine-hours asthe base for allocating all remaining overhead. Accountants providethe following information about Duncan Companyâs most recent yearof operations:

Pencils Markers Total

Unitsproduced 5,0001,000 6,000

Direct material cost perunit $ 5 $ 3

Direct laborcost 200,000$300,000 $500,000

Machinehours 4,0006,000 10,000

Machinesetups 3050 80

Batchchanges 300700 1,000

Overhead:

Machinesetup-related $ 200,000

Batch-related 500,000

Other 1,500,000

$2,200,000

========

Required:

Using the current costing system (Absorption costing), determinethe total and unit cost for each product line.

Using the ABC costing system, determine the total and unit costfor each product line.

If you were the manager of the pencil department, which methodwould you prefer and why?

Product Costs using the Current Costing System

(Absorption Costing)

OHR =

Pencils Markers Total

Direct Material $ $ $

Direct Labor

Overhead

(OHR x AV)

TotalCost $ $ $

=======

Ã·Units produced

Cost per unit

======= =======

Product Costs using the ABC Costing System

OHR #1 =____________=

OHR #2 = ____________=

OHR #3 = ____________=

Pencils Markers Total

Direct Material $ $ $

Direct Labor

Overhead

(OHR x AV)

TotalCost $ $ $

Ã·Units produced =======

Cost per unit

======= =======

blueguinea-pig849

Tommy Lyons Company manufactures and sells two products: Product S3 and Product S2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce the output appear below:

Product Info

Product S3: 800 units @ 8.0 DLH/unit = 6,400 hours

Product K2: 900 units @6.0 DLH/unit = 5,400 hours

Direct Material Cost/Unit

The direct labor rate is $18.00 per DLH. The direct materials cost per unit for each product is given below:

Product S3: $280.70

Product K2: $157.90

Activity Cost Pools

The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, total overhead costs and expected activity for each product.

Labor Related

Direct labor hours, total OH $523,094

S3 = 6,400

K2 = 5,400

Total = 11,800 DLHs

Machine Set-ups

Number of tests, total OH = $135,478

S3 = 600

K2 = 800

Total = 1,400 Tests

General Factory

Machine hours, total OH = $392,327

S3 = 5,000

K2 = 5,300

Total = 10,300 MHs

Total Overhead Costs

Including: DLHs, machine set-ups, machine hours = $1,050,899

Required:

The company currently uses a traditional costing methodin which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method.

How much overhead would be applied to each product under the company's traditional costing method?

Determine the unit product cost of each product under the company's traditional costing method.

Compute the activity rates under the activity-based costing system.

Determine how much overhead would be assigned to each product under the activity-based costing system.

Determine the unit product cost of each product under the activity-based costing method.

What is the difference between the overhead per unit under the traditional costing method and the activity-based costing system for each of the two products?

jadewater-buffalo856

Bracey Company manufactures and sells one product. The following information pertains to the companyâs first year of operations:


Variable cost per unit:
Direct materials	$	23
Fixed costs per year:
Direct labor	$	275,000
Fixed manufacturing overhead	$	338,800
Fixed selling and administrative expenses	$	56,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Bracey produced 22,000 units and sold 20,700 units. The selling price of the companyâs product is $56 per unit.

Required:

1. Assume the company uses super-variable costing:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

2. Assume the company uses a variable costing system that assigns $12.50 of direct labor cost to each unit produced:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

3. Assume the company uses an absorption costing system that assigns $12.50 of direct labor cost and $15.40 of fixed manufacturing overhead cost to each unit produced:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

4a. Reconcile the difference between the super-variable costing and variable costing net operating incomes.

4b. Reconcile the difference between the super-variable costing and absorption costing net operating incomes.

pinkcheetah77

ACC 406 Lecture Notes - Lecture 6: Decision-Making, Finished Good, Voh

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