1. Assume a retailer has fixed costs of $10,000, a unit variable cost of $25, and a 50% retail margin. a. How many units must be sold for her to break-even? b. If she has a target profit of $200,000, how many units must she sell to achieve the target profit?
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.
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- The manufacturer of Aromello, a new body lotion, sells it directly to retailers who take a 40% margin. The retail price of Aromello is $5 per bottle. Industry sales for Aromello and other products of its type are 25 million units annually; Aromello has 20% of the market. The
manufacturer’s fixed costs , including all expenses but advertising, amount to $2 million per year. The annual advertising budget is another $2 million. The raw materials of each bottle of Aromello cost 50 cents, while packaging, bottling, and all other variable costs (including shipping, breakage, insurance…) are another 50 cents.
- What is the unit margin of Aromello for the manufacturer?
- What is the break-even volume?
- What is the current volume of Aromello given its market share? Are they making profit?
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