Boston Executive, Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: Variable Costs: Variable Cost Amount: Fixed Costs: Fixed Cost Amount: Direct materials $950 Depreciation – equipment $500 Direct labor 650 Depreciation – building 200 Variable overhead 300 Supervisor salaries 300 Total variable costs 1,900 Total Fixed costs 1,000 Assume that Boston Executive, Inc. uses the total cost method of applying the cost-plus approach to product pricing and desires a profit equal to a 21% return on invested assets of $600,000. a. Determine the total costs and the total cost amount per unit for the production and sale of 1,000 mini-bars. b. Determine the total cost markup percentage (rounded to two places behind the decimal) for mini-bars. c. Determine the selling price of mini-bars. (Round markup to the nearest cent.
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.
|
Variable Costs: |
Variable Cost Amount: |
Fixed Costs: |
Fixed Cost Amount: |
|
Direct materials |
$950 |
|
$500 |
|
Direct labor |
650 |
Depreciation – building |
200 |
|
Variable |
300 |
Supervisor salaries |
300 |
|
Total variable costs |
1,900 |
Total Fixed costs |
1,000 |
Assume that Boston Executive, Inc. uses the total cost method of applying the cost-plus approach to product pricing and desires a profit equal to a 21%
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a. Determine the total costs and the total cost amount per unit for the production and sale of 1,000 mini-bars.
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