Silken Draperies makes custom draperies for homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity cost pools: overhead costs production overhead 120,000 office expense 120,000 total 240,00 Distribution of Resource Consumption: activity cost pools Drapes Support other total Production overhead 35% 45% 20% 100% Office expense 5% 65% 30% 100% The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows: Activity Cost Pool Annual Activity Making Drapes 2000 metres Job Support 160 jobs Other not applicable Required: a) Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below: making drapes job support other total production overhead office expense total b) Compute the activity rates (i.e., cost per unit of activity) for the Making Drapes and Job Support activity cost pools by filling in the table below: making drapes job support production overheadoffice expensetotal c) Compute the total overhead assigned to a job that involves making 71 metres of drapes.
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.
Silken Draperies makes custom draperies for homes and businesses. The company uses an activity-based costing system for its
overhead costs
production overhead 120,000
office expense 120,000
total 240,00
Distribution of Resource Consumption:
activity cost pools
Drapes Support other total
Production overhead 35% 45% 20% 100%
Office expense 5% 65% 30% 100%
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Making Drapes 2000 metres
Job Support 160 jobs
Other not applicable
Required:
a) Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:
making drapes job support other total
production overhead
office expense
total
b) Compute the activity rates (i.e., cost per unit of activity) for the Making Drapes and Job Support activity cost pools by filling in the table below:
making drapes job support
production overhead
office expense
total
c) Compute the total overhead assigned to a job that involves making 71 metres of drapes.
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