Week 3 DQ1 | Managerial Accounting | Westcliff University

In the third week of our course, we dealt with almost all of the concepts of Activity-Based Costing which is an accounting method that allocates the costs of overhead activities and assigns those costs to products. Various concepts of job order costing, process costing has been discussed in the previous weeks.

It is fairly straight forward to combine process costing and activity based costing in one statement. Yes, it is possible to combine job order costing, process costing, and activity based costing in one statement with the help of hybrid costing system depending upon the need and requirement of the organization.

For example SYRE company produces the bike. The bike model itself is mass-produced which makes the bike a likely candidate for the process costing system. The only problem is that each SYRE model bike can be completely customized with hundreds of different parts and paint schemes. Since each bike is a custom order, the job costing system can also be used.

In this case, cost accountants and managers would most likely use a hybrid costing system to track the manufacturing expenses of producing a bike. Process costing systems would be used for the mass produced parts like the bike frames. Whereas, job costing systems would be used for the customized parts and custom assembly processes on each bike (Shaun).

Solution:

Cost Machining Department Assembly Department
Direct Material $2,000,000* 0.4 = $8,00,000 $2,000,000*0.6 = $1,200,000
Direct Labor $1,000,000* 0.6 = $6,00,000 $1,000,000*0.4 = $4,00,000
Overhead $5,00,000*0.5 = $2,50,000 $5,00,000*0.5 = $2,50,000
Total $1,650,000 $1,850,000
Cost Per Unit $235.715 $264.285
Total Cost per Unit ($235.715+$264.285) = $500

References

Shaun. (n.d.). What is a Hybrid Costing System? Retrieved from My Accounting Tools: https://www.myaccountingcourse.com/accounting-dictionary/hybrid-costing-system

Note : Only for Reference. Only this material will not be sufficient.

Author: Smirti

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.