Kraken Limited needs two new machines, machine X and machine Y. You are provided with the following information: Cost to purchase Cost to produce in-house: Labour Materials (to be purchases) Variable Overheads Fixed Overhead Machine X Machine Y 50,000 40,000 10,000 16,000 22,000 19,000 12,000 14,000 20,000 7,000 The labour cost relates to the salaries of the company's engineers who will be employed whether or not these machines are purchased or made in-house. However due to a fall in demand in recent months, if not working on these projects these workers would be idle. Which is the best option, on a cost basis, for Kraken Limited: Purchase Machine Y and make Machine X Purchase Machine X and make Machine Y Purchase both machines O Make both machines in-house
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.
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