Jason Anderson had been allocating MOH costs to his products using a single plant-wide rate of $14.00 per DL hour. His accountants were now suggesting the use of the following activity-based rates. $20 per production run $7 per direct labor hour $5 per inspection hour If the most recent job required 60 production runs, 450 DL hours, and 30 inspection hours, specify how much MOH cost would have been allocated under the previous plant-wide rate, as well as what would be allocated using the suggested ABC rates. Allocation using plant-wide rate $ Allocation using ABC rates Which of these approaches is likely the most accurate? ABC is likely the most accurate.
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.
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