Regen Ltd offers a service to those wishing to customise their luxury cars. The business has overheads of £156,000 each month. Each month 8,000 direct labour hours are worked and charged to cost units (jobs carried out by the business). A particular job undertaken by the business used materials costing £2,640. Direct labour worked on the job was 110 hours and the wage rate is £19 an hour. Regen Ltd charges overheads to jobs on a direct labour hour basis and adds a mark-up of 120% to the full cost for pricing purposes. 1. What is the full (absorption) cost of the customisation job? 2. What price will be charged to the customer for the job?
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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