Collins Co. produces 10,000 units of sewing machines annually. Per unit data are given below: Selling price $100 Direct materials, direct labor, and variable manufacturing overhead 35 Fixed manufacturing overhead 15 Variable selling and administrative expenses 20 Fixed selling and administrative expenses 10 The company has received a special, one-time-only order for 800 units of the product with a selling price of $70. There would be a 60% reduction in variable selling and administrative expenses on this special order. In addition, total fixed manufacturing overhead and total fixed selling and administrative expenses of the company would not be affected by the order. If Collins Co. accepts the order, it will have no effect on other customers. What is the financial advantage or disadvantage of accepting the special order? Multiple Choice a)$8,000 financial disadvantage b)$18,400 financial advantage c)$21,600 financial advantage d)$24,000 financial disadvantage
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.
Collins Co. produces 10,000 units of sewing machines annually. Per unit data are given below:
|
Selling price |
$100 |
|
Direct materials, direct labor, and variable manufacturing |
35 |
|
Fixed manufacturing overhead |
15 |
|
Variable selling and administrative expenses |
20 |
|
Fixed selling and administrative expenses |
10 |
The company has received a special, one-time-only order for 800 units of the product with a selling price of $70. There would be a 60% reduction in variable selling and administrative expenses on this special order. In addition, total fixed manufacturing overhead and total fixed selling and administrative expenses of the company would not be affected by the order. If Collins Co. accepts the order, it will have no effect on other customers. What is the financial advantage or disadvantage of accepting the special order?
Multiple Choice
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