System designed to eliminate waste in the accounting process and better reflect the benefits of lean manufacturing techniques. Show
-Lean thinking to eliminate waste in the accounting process. -Alternative performance measures, like the percentage of products made without defects and the percentage of on-time deliveries. -Simplified product costing. With JIT, most of the product costs during a period will be included in cost of goods sold rather than in inventory. Instead of transferring costs across inventory accounts during a period, a backflush costing system measures the costs of inventory only at the end of the period. Costs of unfinished products are "flushed out" of Cost of Goods Sold and transferred to inventory accounts. Lake Erie Company uses a plantwide overhead rate with machine hours as the allocation base. Next year, 610,000 units are expected to be produced taking 0.70 machine hours each. How much overhead will be assigned to each unit produced given the following estimated amounts? Estimated: Department 2 Angle Max Industries produces a product which goes through two operations, Assembly and Finishing, before it is ready to be shipped. Next year's expected costs and activities are shown below. Assembly Assume that the Assembly Department allocates overhead based on machine hours, and the Finishing Department allocates overhead based on direct labor hours. How much total overhead will be assigned to a product that requires 1 direct labor hour and 3.5 machine hours in the Assembly Department, and 4.2 direct labor hours and 0.5 machine hours in the Finishing Department? Recommended textbook solutions
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When overhead is allocated to every product using the same manufacturing overhead rate this rate is called the departmental overhead rate?When overhead is allocated to every product using the same manufacturing overhead rate, this rate is called the departmental overhead rate. With increased competition, managers need more accurate estimates of product costs in order to set prices and to identify the most profitable products.
Which approach to cost allocation of overhead is considered the most accurate?An activity-based costing system is considered more complex than using a single plantwide rate to allocate overhead, but an ABC system is also considered a more accurate way to allocate overhead costs.
Which of the following is a method of assigning overhead costs to a product using a single overhead rate?A method of assigning overhead costs to a product using a single overhead rate is: Plantwide overhead rate method.
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