Prince Rupert company manufactures product A. B, C and D. Data for the year ended Dec 31, 2021, is as follows. Product Units/ Production Production run Cost of material per unit ($) Direct labourhours required per unit Machine hours required per unit A 20 3 80 2 1 B 40 4 60 5 8 C 45 6 70 7 5 D 120 12 65 9 3 Cost of Direct labor per hour: $ 6 Overhead costs for Prince Rupert company. Set up cost $ 12,000 Handling material cost $ 6,000 Scheduling costs $ 14,000 i. Using the peanut butter costing approach, calculate the cost per unit. (use Direct labor hours as a basis of allocation) ii. Using ABC Costing, calculate the cost per unit. Please justify why you choose that allocation base. iii. Show the difference of cost per unit using peanut butter and ABC costing
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.
Prince Rupert company manufactures product A. B, C and D. Data for the year ended Dec 31, 2021, is as follows.
|
Product |
Units/ Production |
Production run |
Cost of material per unit ($) |
Direct labourhours required per unit |
Machine hours required per unit |
|
A |
20 |
3 |
80 |
2 |
1 |
|
B |
40 |
4 |
60 |
5 |
8 |
|
C |
45 |
6 |
70 |
7 |
5 |
|
D |
120 |
12 |
65 |
9 |
3 |
Cost of Direct labor per hour: $ 6
|
Set up cost |
$ 12,000 |
|
Handling material cost |
$ 6,000 |
|
Scheduling costs |
$ 14,000 |
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