Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product. Askin Bskin Total Sales $ 4,011,000 $ 2,605,500 $ 6,616,500 Cost of goods sold (2,605,500 ) (2,111,000 ) (4,716,500 ) Gross profit $ 1,405,500 $ 494,500 $ 1,900,000 Research and development (1,181,000 ) Selling expenses (135,500 ) Profit before taxes $ 583,500 Seventy-five percent of the research and development and selling expenses were traceable to Askin. Profit before taxes for the Bskin product, per life-cycle income statements, is:
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.
Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product.
| Askin | Bskin | Total | |||||||||
| Sales | $ | 4,011,000 | $ | 2,605,500 | $ | 6,616,500 | |||||
| Cost of goods sold | (2,605,500 | ) | (2,111,000 | ) | (4,716,500 | ) | |||||
| Gross profit | $ | 1,405,500 | $ | 494,500 | $ | 1,900,000 | |||||
| Research and development | (1,181,000 | ) | |||||||||
| Selling expenses | (135,500 | ) | |||||||||
| Profit before taxes | $ | 583,500 | |||||||||
Seventy-five percent of the research and development and selling expenses were traceable to Askin.
Profit before taxes for the Bskin product, per life-cycle income statements, is:
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