Payne Ltd manufactures three products, all of which use the same machine. Only 50,000 machine hours are available per period. The variable costs for each product are shown below and the fixed costs are £300,000 per period. Product A Product B Product C £ £ £ Direct materials 70 40 80 Direct Labour: Machinists (£8 per hour) 48 32 56 Assemblers (£6 per hour) 36 40 42 Total variable cost 154 112 178 Selling price per unit £200 £158 £224 Maximum demand in units 3000 2500 5000 Payne Ltd could buy in similar products at the following unit prices. A £175 B £140 C £200 Calculate the deficiency in machine hours for the next period.
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.
Payne Ltd manufactures three products, all of which use the same machine. Only 50,000 machine hours are available per period. The variable costs for each product are shown below and the fixed costs are £300,000 per period.
Product A Product B Product C
£ £ £
Direct materials 70 40 80
Direct Labour:
Machinists (£8 per hour) 48 32 56
Assemblers (£6 per hour) 36 40 42
Total variable cost 154 112 178
Selling price per unit £200 £158 £224
Maximum demand in units 3000 2500 5000
Payne Ltd could buy in similar products at the following unit prices.
A £175
B £140
C £200
- Calculate the deficiency in machine hours for the next period.
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