a)Calculate the deficiency in labour hours for the month. and determine the priority ranking for production. b)Calculate the maximum profit that can be made next month c)Calculate the loss of profit due to this limiting factor and consider the maximum amount the company would be willing to pay,per hour for agency staff
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.
A company makes two products, the variable costs are as follows;
Product A Product B
£ £
Direct materials 1 3
Direct labour (£6 per hour) 6 3
Variable
8 7
The sale price of A is £14 and B is £11. During the month of July the availability of Direct Labour is limited to 5000 hours due to staff taking holidays. Sales demand is expected to be 3000 units of A and 5000 units of B. Monthly fixed costs are £20,000 and opening stocks are zero.
a)Calculate the deficiency in labour hours for the month. and determine the priority ranking for production.
b)Calculate the maximum profit that can be made next month
c)Calculate the loss of profit due to this limiting factor and consider the maximum amount the company would be willing to pay,per hour for agency staff
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