Company A manufactures and sells one product. During the first year the company produced and sold 30000 units, during the second - the company produced 37500 units and sold 25000 units. The selling price is 29 €. Other information is provided in the table. Items Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses Amounts 10 € 6 € 2€ 1€ 180 000 € 40 000 €
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.
![Company A manufactures and sells one product. During the first year the company
produced and sold 30000 units, during the second - the company produced 37500
units and sold 25000 units. The selling price is 29 €. Other information is provided in
the table.
Items
Variable costs per unit:
Direct materials
Direct labour
Variable manufacturing overhead
Variable selling and administrative
Fixed costs per year:
Fixed manufacturing overhead
Fixed selling and administrative expenses
Amounts
10 €
6 €
2€
1€
180 000 €
40 000 €
Prepare the income statement, using absorption costing, and compute the gross profit
for the first year.
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