The number of activities for standard and custom-made patios is as follows: Basic Grade Number of purchase orders 2,000 2,800 Number of deliveries 400 800 Hours of design time 400 1,600 Hours of installation time 1,400 600 During the past year, Outdoor Shade accepted order no. 147 for one Grade patio installation that would require the following: Direct labour hours 40 Number of purchase orders Number of deliveries 4 Hours of design time 10 Hours of installation time 8
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.
1. Calculate the
2. Calculate the total overhead applied to order no. 147 using the traditional overhead rate calculated in question 3.1 above.
3. Using activity based costing (ABC), calculate the overhead rate for the following activity: Purchasing. That is, what is the overhead rate per purchase order?
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