Ethel Company produces 50,000 units of Product A and 6,000 units of Product B during a period. In that period, four set-ups were required for color changes. All units of Product A are black, which is the color in the process at the beginning of the period. A set-up was made for 1,000 blue units of Product B; a set-up was made for 4,500 red units of Product B; a set-up was made for 500 green units of Product B. A set-up was then made to return the process to its standard black coloration and the units of product A were run. Each set up costs $500. a. Assume that Ethel Company has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per unit set-up cost for the green units of Product? b. If set-up cost is assigned on a volume basis for the department, what is the approximate per unit set up cost for Product B?
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.
Ethel Company produces 50,000 units of Product A and 6,000 units of Product B during a period. In that period, four set-ups were required for color changes. All units of Product A are black, which is the color in the process at the beginning of the period. A set-up was made for 1,000 blue units of Product B; a set-up was made for 4,500 red units of Product B; a set-up was made for 500 green units of Product B. A set-up was then made to return the process to its standard black coloration and the units of product A were run. Each set up costs $500.
a. Assume that Ethel Company has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per unit set-up cost for the green units of Product?
b. If set-up cost is assigned on a volume basis for the department, what is the approximate per unit set up cost for Product B?
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