David Company produces two types of gears, Gear A and Gear B, with unit contribution margins of $6 and $8, respectively. Each gear must spend time on a special machine. The firm owns five machines that together provide 12,000 hours of machine time per year. Gear A requires 12 minutes of machine time; Gear B requires 24 minutes of machine time. A. What is the contribution margin per hour of machine time for Gear A? Gear B? ______________________________ B. If David faces only the production constraint (12,000 hours of machine time), how many units of Gear A should be produced? Gear B? What is the total contribution margin from this product mix? ______________________________ C. Now suppose that David cannot sell more than 40,000 units of each type of gear. How many units of Gear A should be produced? Gear B? What is the total contribution margin from this product mix? ______________________________
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.
David Company produces two types of gears, Gear A and Gear B, with unit contribution margins of $6 and $8, respectively. Each gear must spend time on a special machine. The firm owns five machines that together provide 12,000 hours of machine time per year. Gear A requires 12 minutes of machine time; Gear B requires 24 minutes of machine time.
|
A. |
What is the contribution margin per hour of machine time for Gear A? Gear B?
______________________________ |
|
B. |
If David faces only the production constraint (12,000 hours of machine time), how many units of Gear A should be produced? Gear B? What is the total contribution margin from this product mix?
______________________________ |
|
C. |
Now suppose that David cannot sell more than 40,000 units of each type of gear. How many units of Gear A should be produced? Gear B? What is the total contribution margin from this product mix?
______________________________ |
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