Rio Ltd makes and sells two products, Sham and Wham. The following information is available for period 3: Sham Wham Production (units) 7,500 5,400 Sales (units) 7,000 3,600 Opening stock (units) 480 300 Budgeted capacity (units) 8000 5000 Financial Data: $ $ Unit selling price 115 110 Unit cost: Direct materials 25 10 Direct labour 35 10 Variable production overheads 15 5 75 25 Fixed production overheads 30 20 Fixed administration overheads were $340,000 and Fixed selling overheads were $40,000. As the Cost Accountant you have been asked to do the following: c. Management is planning on launching a marketing campaign to increase the sale of Sham. They believe that the higher selling price of Sham means that it will generate more revenue and profit than Wham. Advise management on the product they should focus on increasing sales for.
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.
Rio Ltd makes and sells two products, Sham and Wham. The following information is available for period 3:
|
Sham |
Wham |
|
|
Production (units) |
7,500 |
5,400 |
|
Sales (units) |
7,000 |
3,600 |
|
Opening stock (units) |
480 |
300 |
|
Budgeted capacity (units) |
8000 |
5000 |
|
Financial Data: |
|
|
|
$ |
$ |
|
|
Unit selling price |
115 |
110 |
|
Unit cost: |
||
|
Direct materials |
25 |
10 |
|
Direct labour |
35 |
10 |
|
Variable production |
15 |
5 |
|
75 |
25 |
|
|
Fixed production overheads |
30 |
20 |
Fixed administration overheads were $340,000 and Fixed selling overheads were $40,000.
As the Cost Accountant you have been asked to do the following:
c. Management is planning on launching a marketing campaign to increase the sale of Sham. They believe that the higher selling price of Sham means that it will generate more revenue and profit than Wham. Advise management on the product they should focus on increasing sales for.
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