JKL Ltd has prepared the following cost estimates for the manufacture of a subassembly component based on an annual production of 8000 units: Direct materials Direct labour Variable labour Fixed overhead applied (150% direct labour cost) Total Per Unit $ 10 8 8 12 38 Total $80,000 64,000 64,000 96,000 304,000 The supplier has
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.
JKL Ltd has prepared the following cost estimates for the manufacture of a subassembly component based on an annual production of 8000 units:
|
Direct materials Direct labour Variable labour Fixed Total |
Per Unit $ 10 8 8 12
38 |
Total $80,000 64,000 64,000 96,000
304,000 |
The supplier has offered the subassembly at a price of $32 each. Two thirds of fixed factory overhead, which represents executive salaries, rent,
1. Should the company buy or make the product? Give two (2) reasons to support your decision . Answer with calculations.
2. Explain the concept of opportunity cost used in relevant Give an example:
3. Outline two (2) qualitative factors affecting decision to drop a product line or eliminate a department
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