Pacific Company produces and sells car brake shoes. It supplies you the following information regarding costs at various levels of monthly production: Production volume 7 000 units 10 000 units Accountant’s Classification Direct materials $70 000 $100 000 Variable Direct labour 56 000 80 000 Variable Indirect materials 21 000 30 000 Variable Supervisors’ salaries 12 000 12 000 Fixed Depreciation on plant 10 000 10 000 Fixed Maintenance 32 000 44 000 Variable Utilities 15 000 21 000 Variable Insurance on plant and equipment 1 600 1 600 Fixed Property taxes on plant 2 000 2 000 Fixed Total $219 600 $300 600 Required: question no 1 The Accountant of the company has limited knowledge about various types of costs and cost behaviour. He has classified the costs into Fixed and Variable as appears in the right-hand column in the above table. Do you agree with the Accountant’s cost classification? Why, or why not? Can you identify each cost as being variable, fixed, or mixed by writing the name of each cost under one of the following headings: Variable Costs Fixed Costs Mixed Costs question no 2 One of the junior trainee accountant who is a recent Uni. graduate has mentioned that not all costs can be strictly classified into fixed and variable. There may be some costs that are not strictly variable or fixed. They are called mixed costs. Do you agree with this trainee? If so, how do you split the mixed costs into Fixed and Variable elements and develop an equation for total monthly production costs?
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.
Pacific Company produces and sells car brake shoes. It supplies you the following information regarding costs at various levels of monthly production:
|
Production volume |
7 000 units |
10 000 units |
Accountant’s Classification |
|
Direct materials |
$70 000 |
$100 000 |
Variable |
|
Direct labour |
56 000 |
80 000 |
Variable |
|
Indirect materials |
21 000 |
30 000 |
Variable |
|
Supervisors’ salaries |
12 000 |
12 000 |
Fixed |
|
|
10 000 |
10 000 |
Fixed |
|
Maintenance |
32 000 |
44 000 |
Variable |
|
Utilities |
15 000 |
21 000 |
Variable |
|
Insurance on plant and equipment |
1 600 |
1 600 |
Fixed |
|
Property taxes on plant |
2 000 |
2 000 |
Fixed |
|
Total |
$219 600 |
$300 600 |
|
Required:
question no 1
The Accountant of the company has limited knowledge about various types of costs and cost behaviour. He has classified the costs into Fixed and Variable as appears in the right-hand column in the above table. Do you agree with the Accountant’s cost classification? Why, or why not? Can you identify each cost as being variable, fixed, or mixed by writing the name of each cost under one of the following headings:
|
Variable Costs |
Fixed Costs |
Mixed Costs
|
question no 2
One of the junior trainee accountant who is a recent Uni. graduate has mentioned that not all costs can be strictly classified into fixed and variable. There may be some costs that are not strictly variable or fixed. They are called mixed costs.
Do you agree with this trainee? If so, how do you split the mixed costs into Fixed and Variable elements and develop an equation for total monthly production costs?
kindly provide me the answer to these two question with explanation without any plagirism and copy paste
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