ELU Company makes two products in a single facility. These products have the following unit product costs: Product A Product B Direct materials $10.90 $15.80 Direct labour 12.50 12.60 Variable manufacturing overhead 2.40 1.20 Fixed manufacturing overhead 11.60 7.20 Unit product cost $37.40 $36.80 Additional data concerning these products are listed below. Product A Product B Mixing minutes per unit 2.00 1.00 Selling price per unit $55.80 $54.60 Variable selling cost per unit $2.10 $1.40 Monthly demand in units 2,000 1,000 The mixing machines are potentially a constraint in the production facility. A total of 4,000 minutes are available per month on these machines. Direct labour is a variable cost in this company. Required: How many minutes of mixing machine time would be required to satisfy demand for both products? How many of each product should be produced, rounded to the nearest whole unit, to maximize operating income?
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.
ELU Company makes two products in a single facility. These products have the following unit product costs:
|
|
Product A |
Product B |
|
Direct materials |
$10.90 |
$15.80 |
|
Direct labour |
12.50 |
12.60 |
|
Variable manufacturing |
2.40 |
1.20 |
|
Fixed manufacturing overhead |
11.60 |
7.20 |
|
Unit product cost |
$37.40 |
$36.80 |
Additional data concerning these products are listed below.
|
|
Product A |
Product B |
|
Mixing minutes per unit |
2.00 |
1.00 |
|
Selling price per unit |
$55.80 |
$54.60 |
|
Variable selling cost per unit |
$2.10 |
$1.40 |
|
Monthly demand in units |
2,000 |
1,000 |
The mixing machines are potentially a constraint in the production facility. A total of 4,000 minutes are available per month on these machines.
Direct labour is a variable cost in this company.
Required:
- How many minutes of mixing machine time would be required to satisfy demand for both products?
- How many of each product should be produced, rounded to the nearest whole unit, to maximize operating income?
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