Laser Cast Inc. manufactures color laser printers. Model J20 presently sells for $175 and has a product cost of $140, as follows: Direct materials $100 Direct labor 30 Factory overhead 10 Total $140
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.
Target Costing
Laser Cast Inc. manufactures color laser printers. Model J20 presently sells for $175 and has a product cost of $140, as follows:
| Direct materials | $100 |
| Direct labor | 30 |
| Factory |
10 |
| Total | $140 |
It is estimated that the competitive selling price for color laser printers of this type will drop to $170 next year. Laser Cast has established a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost-reduction ideas:
- Purchase a plastic printer cover with snap-on assembly, rather than with screws. This will reduce the amount of direct labor by 9 minutes per unit.
- Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $4 per unit.
- Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 42% of the factory overhead are related to running injection molding machines.
The direct labor rate is $13 per hour.
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