GEM Ltd leases a photocopy machine with terms that include a fixed fee each month plus a charge for each photocopy made. GEM made 5,000 copies and paid a total of $600 in January. In April, they paid $400 for 3,000 copies. Required: a) What is the variable cost per copy if GEM uses the high-low method to analyze costs? b) How much would GEM Ltd pay if it made 7,500 copies? (Hint: Need to solve for Fixed cost)
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.
Part A
Asco Company has a relevant range of production between 15,000 and 30,000 units. The following
Required:
a) If 25,000 units are produced, what is the variable cost per unit?
- b) If 16,000 units are produced, what is the variable cost per unit?
- c) Comment briefly on your answers to (a) and (b).
- d) If 18,000 units are produced, what are the total variable costs?
Part B
GEM Ltd leases a photocopy machine with terms that include a fixed fee each month plus a charge for each photocopy made. GEM made 5,000 copies and paid a total of $600 in January. In April, they paid $400 for 3,000 copies.
Required:
- a) What is the variable cost per copy if GEM uses the high-low method to analyze costs?
- b) How much would GEM Ltd pay if it made 7,500 copies? (Hint: Need to solve for Fixed cost)
Step by step
Solved in 2 steps with 3 images
