Colby Company makes cases for cell phones of all sizes and types for sale through specialty retailers. The company makes a standard model for the most recent iPhone as well as a deluxe model. Management has designed an ABC system with the following activity cost pools and activity rates for these models: Activity Cost Pool Supporting manufacturing Order processing Customer service. Management would like an analysis of the profitability of a particular customer, Cell City, which has ordered the following products over the last 12 months: Number of cases Number of orders Direct labour-hours per case Activity Rates $3 per direct labour-hour $15 per order $50 per customer Selling price per case Direct materials cost per case The company's direct labour rate is $19 per hour. Standard Model 120 5 $ 0.20 35 10 $ Deluxe Model 35 2 0.40 $ 55 $ 12 Required: Using the company's ABC system, compute the customer margin of Cell City.
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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