Fantastic Plastics manufactures plastic bottles that are used by other companies for packaging. The have four operating machines in the factory that operate at 80% capacity. One machine can produce 10 000 plastic bottles per month at full capacity. There are four weeks in a month and all bottles are sold in the month of manufacture. Bottles are sold at R5 each. The following costs are incurred on a monthly basis in the manufacturing of plastic bottles. Plastic purchased per week. R8 000. Wages of machine operators R2 000 per week. There are four operators on duty at any time. Monthly salary of factory supervisor R20 000. Deprecation of machines R6 000 per machine per annum. Water and electricity of R12 000 per month. Must be apportioned according to floor space. (Factory takes up 80% of total floor space). Q1)Calculate the variable cost per unit manufactured and the fixed cost per month.
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.
Fantastic Plastics manufactures plastic bottles that are used by other companies for packaging. The have four operating machines in the factory that operate at 80% capacity. One machine can produce 10 000 plastic bottles per month at full capacity. There are four weeks in a month and all bottles are sold in the month of manufacture. Bottles are sold at R5 each.
The following costs are incurred on a monthly basis in the manufacturing of plastic bottles.
- Plastic purchased per week. R8 000.
- Wages of machine operators R2 000 per week. There are four operators on duty at any time.
- Monthly salary of factory supervisor R20 000.
- Deprecation of machines R6 000 per machine per annum.
- Water and electricity of R12 000 per month. Must be apportioned according to floor space. (Factory takes up 80% of total floor space).
Q1)Calculate the variable cost per unit manufactured and the fixed cost per month.
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