Production Departments Small Glove Medium Glove Large Glove Pattern Department Cut and Sew Department Direct labor hours per unit 0.30 0.20 0.45 0.40 0.55 0.70 0.70 0.75 1.15 Pattern Department overhead Cut and Sew Department overhead Total $294,000 560,000 $854,000 The direct labor estimated for each production department was as follows: Pattern Department Cut and Sew Department 42,000 direct labor hours 56,000 Total 98,000 direct labor hours
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.
Handy Leather , Inc., produces three size of sports gloves: small, medium, and large. A glove patterns is first stencilled onto leather in the Pattern Department. The Stencilled patterns are then sent to the cut and sew Department, where the glove is cut and sewed together. Handy Leather uses the multiple production department factory
Direct labour hours are used to allocate the production department overhead to the products. The direct labour hours per unit for each production department were obtained from the engineering records as follows:
a. Determine the two production department factory overhead rates.
b. Use the two production department factory overhead rates to determine the factory overhead per unit for each product.
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