Bernacke Corp. is instituting an activity-based costing project in its ten-person purchasing department. Annual departmental overhead costs are $292,500. Because finding the best supplier takes the majority of effort in the department, most of the costs are allocated to this activity area. Many purchase orders are received in a single shipment. Activity Allocation Measure Quantity Total Cost Find best suppliers Number of telephone calls 75,000 $150,000 Issue purchase orders Number of purchase orders 46,875 75,000 Review receiving reports Number of receiving reports 28,125 67,500 One special-order product manufactured by the company required the following purchasing department activities: 25 telephone calls, 50 purchase orders, and 35 receipts. a. What amount of purchasing department cost should be assigned to this product? Note: Round your final answer to two decimal places (i.e. round $4.355 to $4.36). $Answer b. If 100 units of the product are manufactured during the year, what is the purchasing department cost per unit? Note: Round your final answer to two decimal places (i.e. round $4.355 to $4.36). $Answer per unit c. If purchasing department costs had been allocated using telephone calls as the allocation base, how much cost would have been assigned to this product? Note: Round your final answer to two decimal places (i.e. round $4.355 to $4.36). $Answer
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.
ABC
Bernacke Corp. is instituting an activity-based costing project in its ten-person purchasing department. Annual departmental overhead costs are $292,500. Because finding the best supplier takes the majority of effort in the department, most of the costs are allocated to this activity area. Many purchase orders are received in a single shipment.
| Activity | Allocation Measure | Quantity | Total Cost |
|---|---|---|---|
| Find best suppliers | Number of telephone calls | 75,000 | $150,000 |
| Issue purchase orders | Number of purchase orders | 46,875 | 75,000 |
| Review receiving reports | Number of receiving reports | 28,125 | 67,500 |
One special-order product manufactured by the company required the following purchasing department activities: 25 telephone calls, 50 purchase orders, and 35 receipts.
a. What amount of purchasing department cost should be assigned to this product?
Note: Round your final answer to two decimal places (i.e. round $4.355 to $4.36).
$Answer
b. If 100 units of the product are manufactured during the year, what is the purchasing department cost per unit?
Note: Round your final answer to two decimal places (i.e. round $4.355 to $4.36).
$Answer per unit
c. If purchasing department costs had been allocated using telephone calls as the allocation base, how much cost would have been assigned to this product?
Note: Round your final answer to two decimal places (i.e. round $4.355 to $4.36).
$Answer
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