Electric spark Co., uses 60,000 of component Zima. The cost of placing an order is estimated at $17.28 per order. The annual holding cost is 20% of the purchase price of $20 per unit. The following information is provided to you by the management accountant to use in your analysis: The Normal usage 200 units per day Maximum usage 280 units per day Minimum usage 120 units per day Reorder period 20 to 30 days Required: 1. Determine the EOQ using the equation method 2. Calculate the total cost of inventory per year, in case the company decided to use the EOQ. 3. Electric spark has been offered a 2 per cent discount on the cost if it places orders in quantities of 20,000. Discuss whether the company should accept the discount and place larger orders .
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.
Electric spark Co., uses 60,000 of component Zima. The cost of placing an order is estimated at $17.28 per order. The annual holding cost is 20% of the purchase price of $20 per unit. The following information is provided to you by the
|
The Normal usage
|
200 units per day |
|
Maximum usage |
280 units per day |
|
Minimum usage |
120 units per day |
|
Reorder period |
20 to 30 days |
Required:
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