Demonstrate how each of the two costing methods you chose would allocate overhead and administrative costs by
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Question:
- Demonstrate how each of the two costing methods you chose would allocate overhead and administrative costs by calculating product costs using each method.
- Provide an income statement for each of the two methods.
*Attached is the table being used*
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Part #1 Justify to the CEO what type of costing method (job-order, process costing, variable costing and/or activity-based costing) you would recommend AFC use. Assume that all of the items produced are sold. Use the following accounting data in your analysis. Production & Cost Description Production & Cost Amounts Annual Production 5000 chairs/10 batches; 4000 tables/20 batches; 3000 dressers/20 batches Raw materials in board feet (BF) per unit 1 chair = 10 BF: 1 table = 15 BF; 1 dresser = 20 BF Raw materials price per unit Assembly labor time (hours per unit) $2 per BF 1 chair = 5 hours: 1 table = 7 hours; 1 dresser = 10 hours Labor pay rate $15 per hour Assembly department overhead per direct labor hour $5 Painting process machine hours (MH) 1 chair = 0.5 MH; 1 table = 1.5 MH; 1 dresser = 2 MH Painting department overhead per MH $20 Changeover cost per batch 1 chair = $100; 1 table = $150; 1 dresser = $200 Sales price 1 chair = $180; 1 table = $270; 1 dresser = $270 Fixed Cost $50,000 Variable SG&A $5 per unit Fixed SG&A $25,000 Part #1 Justify to the CEO what type of costing method (job-order, process costing, variable costing and/or activity-based costing) you would recommend AFC use. Assume that all of the items produced are sold. Use the following accounting data in your analysis. Production & Cost Description Production & Cost Amounts Annual Production 5000 chairs/10 batches; 4000 tables/20 batches; 3000 dressers/20 batches Raw materials in board feet (BF) per unit 1 chair = 10 BF: 1 table = 15 BF; 1 dresser = 20 BF Raw materials price per unit Assembly labor time (hours per unit) $2 per BF 1 chair = 5 hours: 1 table = 7 hours; 1 dresser = 10 hours Labor pay rate $15 per hour Assembly department overhead per direct labor hour $5 Painting process machine hours (MH) 1 chair = 0.5 MH; 1 table = 1.5 MH; 1 dresser = 2 MH Painting department overhead per MH $20 Changeover cost per batch 1 chair = $100; 1 table = $150; 1 dresser = $200 Sales price 1 chair = $180; 1 table = $270; 1 dresser = $270 Fixed Cost $50,000 Variable SG&A $5 per unit Fixed SG&A $25,000
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Absorption costing Batch Calculation Particulars Chairs Tables Dressers Annual Quantity 5000 4000 30... View the full answer
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