Penbirch Electronics manufactures most of the components that make up its products. A company has approached Penbirch offering to sell them A-12 Motherboards for $52 each, a component that they currently manufacture in-house. Cost information for an A-12 is given below: Cost per Unit Direct materials 17.50 Direct labour 12.75 Manufacturing overhead Total cost per unit 28.75 59.00 The manufacturing overhead is made up of $14.50 per unit in variable costs and $14.25 in fixed cost allocations that will be assigned to other products if Penbirch accepts the offer. Should Penbirch continue to manufacture the A-12 Motherboards or should they purchase them from the outside supplier?
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.
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