Example: The Jones Company currently manufactures all component parts used in the manufacture of various hand tools. A steel handle is used in three different tools. The budget for these handles is 20,000 units with the following unit cost: Direct material $0.60 Direct labor 0.40 Variable overhead 0.10 Fixed overhead 0.20 Total unit cost $1.30 Steel Co has offered to supply 20,000 units of the handle to Jones Company for $1.25 each, delivered. If Jones currently has idle capacity that cannot be used, accepting the offer will:
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.
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