$ 48.10 Direct labor $ 9.20 Variable manufacturing overhead $ 2.20 Fixed manufacturing overhead $ 19.50 Variable selling & administrative expense $ 4.00 Fixed selling & administrative expense $ 19.00 The normal selling price of the product is $108.10 per unit. An order has been received from an overseas customer for 3,100 units to be delivered this month at a special discounted price. This order would not change the total amount of the
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.
Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 51,000 units per month is as follows:
| Per Unit | |
|---|---|
| Direct materials | $ 48.10 |
| Direct labor | $ 9.20 |
| Variable manufacturing |
$ 2.20 |
| Fixed manufacturing overhead | $ 19.50 |
| Variable selling & administrative expense | $ 4.00 |
| Fixed selling & administrative expense | $ 19.00 |
The normal selling price of the product is $108.10 per unit.
An order has been received from an overseas customer for 3,100 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $2.30 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $87.40 per unit. The monthly financial advantage (disadvantage) for the company as a result of accepting this special order should be:
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