Month Case Production Utility Total Cost: January February 500 $600 800 660 March 1,200 740 April May 1,100 720 950 690 June 1,025 705 DIRECT MATERIALS Cost Units Direct Materials Cost per Unit Behavior per Case Cost per Case Cream base Variable 100 ozs. $0.02 $ 2.00 Natural oils Variable 30 ozs. 0.30 9.00 Bottle (8-oz.) Variable 12 bottles 0.50 6.00 $17.00 DIRECT LABOR Time per Case 20 min. Labor Rate Direct Labor Cost per Case $6.00 Cost Department Behavior per Hour Mixing Filling Variable $18.00 Variable 14.40 1.20 25 min. $7.20 FACTORY OVERHEAD Cost Behavior Total Cost Utilities Mixed 600 Facility lease Equipment depreciation Supplies Fixed 14,000 Fixed 4,300 Fixed 660 $19,560
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.
Genuine Spice Inc. began operations on January 1 of the current year. The company produces
8-ounce bottles of hand and body lotion called Eternal Beauty. The lotion is sold wholesale in
12-bottle cases for $100 per case. There is a selling commission of $20 per case. The January
direct materials, direct labor, and
Part A—Break-Even Analysis
The management of Genuine Spice Inc. wishes to determine the number of cases required to
break even per month. The utilities cost, which is part of factory overhead, is a mixed cost. The
following information was gathered from the first six months of operation regarding this cost:
Instructions
1. Determine the fixed and variable portions of the utility cost using the high-low method.
2. Determine the contribution margin per case.
3. Determine the fixed costs per month, including the utility fixed cost from part (1).
4. Determine the break-even number of cases per month.
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