Roseboro, Inc. manufactures a part that is used in producing one of its products. The costs per unit to manufacture 10,000 units of this part are provided below. ROSEBORO, INC. COSTS PER UNIT TO MANUFACTURE PART USED IN Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Total Costs PRODUCTION $ 5.00 8.00 6.00 3.00 $ 22.00 The fixed manufacturing overhead costs are unavoidable. Roseboro has been approached by an outside company to make the part for them at a cost of $20 each. If the company purchased the part from the outside, it could use the facilities currently used to manufacture 10,000 units of another product that would provide a contribution margin of $4 per unit with no additional fixed costs incurred. Roseboro Company should: Make the part since the company will incur an additional cost of $10,000 if it buys the part.
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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