Paste Corporation has established new plant for the production of new product called “Diazinon”. There are two different manufacturing methods available to produce Diazinon. Either by using a process or an order base method. The assembling technique won't influence the quality or deals of the item. The evaluated manufacturing expenses of the two strategies are as per the following: Process base Order base Variable manufacturing cost per unit..................... Rs14.00 Rs.17.60 Fixed manufacturing cost per year ......................Rs. 2,440,000 Rs. 1,320,000 The organization's statistical surveying office has suggested an initial selling cost of Rs.35 per unit for Diazinon. The yearly fixed selling and admin costs of the Diazinon are Rs.500, 000. The variable selling and regulatory costs are Rs. 2 per unit. Required: I. CM ratio and variable expenses ratio. If Paste Corporation uses the: 1. Process base manufacturing method. 2. Order base manufacturing method. II. Break-even point in units and amount by formula method. If Paste Corporation uses the: 1. Process base manufacturing method. 2. Order base manufacturing method. III. Margin of safety. Assuming 250,000 units are actual sales for. 1. Process base manufacturing method. 2. Order base manufacturing method. IV. Degree or operating leverage at actual sales level for. 1. Process base manufacturing method. 2. Order base manufacturing method.
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.
b)
Paste Corporation has established new plant for the production of new product called “Diazinon”. There are two different manufacturing methods available to produce Diazinon. Either by using a process or an order base method. The assembling technique won't influence the quality or deals of the item. The evaluated manufacturing expenses of the two strategies are as per the following:
Process base Order base
Variable
Fixed manufacturing cost per year ......................Rs. 2,440,000 Rs. 1,320,000
The organization's statistical surveying office has suggested an initial selling cost of Rs.35 per unit for Diazinon. The yearly fixed selling and admin costs of the Diazinon are Rs.500, 000. The variable selling and regulatory costs are Rs. 2 per unit.
Required:
I. CM ratio and variable expenses ratio. If Paste Corporation uses the:
1. Process base manufacturing method.
2. Order base manufacturing method.
II. Break-even point in units and amount by formula method. If Paste Corporation uses the:
1. Process base manufacturing method.
2. Order base manufacturing method.
III. Margin of safety. Assuming 250,000 units are actual sales for.
1. Process base manufacturing method.
2. Order base manufacturing method.
IV. Degree or operating leverage at actual sales level for.
1. Process base manufacturing method.
2. Order base manufacturing method.
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