ZS Co. has so far charged actual factory overhead to production. The system has not been proved satisfactory and, therefore, the company has decided to charge factory overhead on the basis of predetermined rate. Accordingly the following estimates have been made for the next year: Direct Labor 2,00,000 hours @tk10 Fixed Factory Overhead tk1,00,000 Variable Factory Overhead tk1,20,000 Semi Variable Overhead: Indirect Material (40% fixed) tk80,000 Indirect Labor (65% variable) tk92,000 Carriage outward (30% fixed)tk1,16,000 Required: Factory overhead recovery rates on the basis of direct labor cost and direct labor hours. The recovery rates if the direct labor hours were 1, 80,000 @tk12
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.
ZS Co. has so far charged actual factory
Direct Labor 2,00,000 hours @tk10
Fixed Factory Overhead tk1,00,000
Variable Factory Overhead tk1,20,000
Semi Variable Overhead:
Indirect Material (40% fixed) tk80,000 Indirect Labor (65% variable) tk92,000
Carriage outward (30% fixed)tk1,16,000
Required:
- Factory overhead recovery rates on the basis of direct labor cost and direct labor hours.
- The recovery rates if the direct labor hours were 1, 80,000 @tk12
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