Buggs-Off Corporation produces and sells a line of mosquito repellants that are sold usually all year round. The product sells at $100 per box. The following cost data has been prepared for its estimated upper and lower limits of activity for the year ended December 31, 2020. Lower Limit Upper Limit Production (# of boxes) Production Costs: Direct Materials 4,000 6,000 $60,000 $90,000 Direct Labour 80,000 120,000 Overhead: Indirect Materials.... 25,000 37,500 Indirect Labour 40,000 50,000 Depreciation ... 20,000 20,000 Selling & Administrative Expenses: Sales Salaries 50,000 65,000 Office Salaries 30,000 30,000 Advertising 45,000 45,000 Other 15.000 20.000 Total $365.000 $477,500
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) Classify each cost element as either fixed, variable, or mixed
b) Calculate: (i) the variable production cost per unit and the total fixed production
(ii) The total variable cost per unit and the total fixed costs Hint: Use the high-low method to separate mixed costs into their fixed and variable components.
c) Assuming sales of 5,000 units, prepare a contribution margin income statement for the year ended December 31, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income.
Step by step
Solved in 5 steps with 5 images
