Rooney Company is considering adding a new product. The cost accountant has provided the following data: Expected variable cost of manufacturing $ 49 per unit Expected annual fixed manufacturing costs $ 68,000 The administrative vice president has provided the following estimates: Expected sales commission $ 3 per unit Expected annual fixed administrative costs $ 52,000 The manager has decided that any new product must at least break even in the first year. Required Use the equation method and consider each requirement separately. If the sales price is set at $67, how many units must Rooney sell to break even? Rooney estimates that sales will probably be 10,000 units. What sales price per unit will allow the company to break even? Rooney has decided to advertise the product heavily and has set the sales price at $72. If sales are 7,000 units, how much can the company spend on advertising and still break even?
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.
Rooney Company is considering adding a new product. The cost accountant has provided the following data:
| Expected variable |
$ | 49 | per unit |
| Expected annual fixed manufacturing costs | $ | 68,000 | |
The administrative vice president has provided the following estimates:
| Expected sales commission | $ | 3 | per unit |
| Expected annual fixed administrative costs | $ | 52,000 | |
The manager has decided that any new product must at least break even in the first year.
Required
Use the equation method and consider each requirement separately.
-
If the sales price is set at $67, how many units must Rooney sell to break even?
-
Rooney estimates that sales will probably be 10,000 units. What sales price per unit will allow the company to break even?
-
Rooney has decided to advertise the product heavily and has set the sales price at $72. If sales are 7,000 units, how much can the company spend on advertising and still break even?
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