Maxwell Company manufactures and sells three (3) product lines with contribution margin per unit and the required production time as follows: CM per unit Machine hour per unit of product Product A P5.00 2.5 hours Product B 3.00 3 hours Product C 4.00 1 hour The company has a capacity of 20,000 machine hours a month. The market can absorb P4,000 units of product A, 6,000 units of B, and 10,000 units of C. Determine the contribution margin per hour of each What is the most profitable product line based on the contribution margin per machine hour? Justify your answer. Compute the maximum contribution margin for the month that will meet the conditions
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.
- Maxwell Company manufactures and sells three (3) product lines with contribution margin per unit and the required production time as follows:
|
|
CM per unit |
Machine hour per unit of product |
|
Product A |
P5.00 |
2.5 hours |
|
Product B |
3.00 |
3 hours |
|
Product C |
4.00 |
1 hour |
The company has a capacity of 20,000 machine hours a month. The market can absorb P4,000 units of product A, 6,000 units of B, and 10,000 units of C.
- Determine the contribution margin per hour of each
- What is the most profitable product line based on the contribution margin per machine hour? Justify your answer.
- Compute the maximum contribution margin for the month that will meet the conditions
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