Mohammed LLC Trading Company has produced 15,000 units which is 50% capacity level in the factory. The company has used raw material to make the production worth of RO 65 per unit. The company has incurred direct labour cost at RO 32 per unit along with direct expenses RO 25 per unit. The company spent RO 150,000 on fixed expenses in the factory with per unit cost of RO 10. Other factor expenses for the total production of 15,000 units has arrived at RO 8 per unit. Administration expenses were incurred RO 5 per unit and fixed expenses belongs to 65%. Company has appointed a salesman for selling the products produced in the company at RO 9 per unit produced out of which 20% belongs to fixed. The company has also incurred distribution expenses of RO 7 per unit out of which 40% are variable. Requirements: The company has approached the you and ask to prepare the flexible budgets for two more required capacity levels; - 20,000 units and 30,000 units
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.
Mohammed LLC Trading Company has produced 15,000 units which is 50% capacity level in the factory. The company has used raw material to make the production worth of RO 65 per unit. The company has incurred direct labour cost at RO 32 per unit along with direct expenses RO 25 per unit. The company spent RO 150,000 on fixed expenses in the factory with per unit cost of RO 10. Other factor expenses for the total production of 15,000 units has arrived at RO 8 per unit. Administration expenses were incurred RO 5 per unit and fixed expenses belongs to 65%. Company has appointed a salesman for selling the products produced in the company at RO 9 per unit produced out of which 20% belongs to fixed. The company has also incurred distribution expenses of RO 7 per unit out of which 40% are variable.
Requirements: The company has approached the you and ask to prepare the flexible budgets for two more required capacity levels; -
- 20,000 units and
- 30,000 units
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