Pharoah Company manufactured 6,720 units of a component part that is used in its product and incurred the following costs: Direct materials $39,200 Direct labor 16,800 Variable manufacturing overhead 11,200 Fixed manufacturing overhead 22,400 $89,600
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.
Pharoah Company manufactured 6,720 units of a component part that is used in its product and incurred the following costs:
| Direct materials | $39,200 | ||
| Direct labor | 16,800 | ||
| Variable manufacturing |
11,200 | ||
| Fixed manufacturing overhead | 22,400 | ||
| $89,600 |
Another company has offered to sell the same component part to the company for $13 per unit. The fixed manufacturing overhead consists mainly of
Prepare an incremental analysis report for Pharoah Company which can serve as informational input into this make or buy decision.
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