Hutchison Inc. makes three products. Information related to these products are as follows: Products X Y Z Selling price per unit $ 67.90 $ 57.70 $ 43.90 Direct materials per unit $ 12.10 $ 10.30 $ 8.60 Direct labor per unit $ 14.10 $ 8.00 $ 6.80 Variable manufacturing overhead $ 2.60 $ 2.20 $ 1.80 Variable selling cost per unit $ 2.50 $ 2.20 $ 2.50 Mixing minutes per unit 2.7 3.3 4.7 Monthly demand in units 1,000 3,000 3,000 The mixing machines are potentially constraint in the production facility. A total of 25,800 minutes are available per month on these machines. Direct materials and direct labor are variable costs. Calculate (In excel with workings if possible) How many minutes of mixing machine time is required to meet the demand for all three products? How much of each product should be produced to maximize operating profits? Up to how much should Hutchison be willing to pay for one additional hour of mixing machine time if they made the best use of the existing mixing machine capacity?
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.
Hutchison Inc. makes three products. Information related to these products are as follows:
| Products | |||
| X | Y | Z | |
| Selling price per unit | $ 67.90 | $ 57.70 | $ 43.90 |
| Direct materials per unit | $ 12.10 | $ 10.30 | $ 8.60 |
| Direct labor per unit | $ 14.10 | $ 8.00 | $ 6.80 |
| Variable manufacturing |
$ 2.60 | $ 2.20 | $ 1.80 |
| Variable selling cost per unit | $ 2.50 | $ 2.20 | $ 2.50 |
| Mixing minutes per unit | 2.7 | 3.3 | 4.7 |
|
Monthly demand in units |
1,000 | 3,000 | 3,000 |
The mixing machines are potentially constraint in the production facility. A total of 25,800 minutes are available per month on these machines. Direct materials and direct labor are variable costs.
Calculate (In excel with workings if possible)
- How many minutes of mixing machine time is required to meet the demand for all three products?
- How much of each product should be produced to maximize operating profits?
- Up to how much should Hutchison be willing to pay for one additional hour of mixing machine time if they made the best use of the existing mixing machine capacity?
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