A Company expects to incur the following costs at the planned production level of 10,000 units. Direct materials 100,000 Direct Labor 120,000 Variable overhead 60,000 30,000 Fixed overhead The selling price is $50 per unit. The company currently operates at full capacity of 10,000 units. Capacity can be increased to 13,000 units by operating overtime. Variable costs increase by $14 per unit for overtime production. Fixed overhead costs remain unchanged when overtime operations occur. The Company has received a special order from a wholesaler who has offered to buy 1,000 units at $45 each. What is the incremental cost associated with this special order? What is the impact on operating income if this special order is accepted?
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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