The Bondi Company uses a predetermined overhead rate in applying overhead to production orders on a direct labor cost basis in Department A and on a machine hour basis in Department B. At the beginning of the year, the company made the following estimates: Dept. A Dept. B Direct labor cost $ 68,000 $ 48,000 Factory overhead $ 112,880 $ 53,720 Direct labor hours 6,800 9,800 Machine hours 2,800 15,800 What predetermined overhead rate would be used in Department A and Department B, respectively?
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.
The Bondi Company uses a predetermined
| Dept. A | Dept. B | ||||||
| Direct labor cost | $ | 68,000 | $ | 48,000 | |||
| Factory overhead | $ | 112,880 | $ | 53,720 | |||
| Direct labor hours | 6,800 | 9,800 | |||||
| Machine hours | 2,800 | 15,800 | |||||
What predetermined overhead rate would be used in Department A and Department B, respectively?
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