Scott Corporation produces a part that is used in the production of one of its products. The per-unit costs associated with the annual production of 5,000 units of this part are as follows: Direct materials $ 2.00 Direct labor $ 3.00 Variable factory overhead $ 2.00 Fixed factory overhead $ 8.00 Total costs $15.00 Smith Company has offered to sell 5,000 units of the same part to Scott Corporation for $8 per unit. If Scott buys them from Smith Company, $2 fixed factory overhead cost per unit can be saved. In this condition, Scott should: Group of answer choices
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.
Scott Corporation produces a part that is used in the production of one of its products. The per-unit costs associated with the annual production of 5,000 units of this part are as follows:
Direct materials $ 2.00
Direct labor $ 3.00
Variable factory
Fixed factory overhead $ 8.00
Total costs $15.00
Smith Company has offered to sell 5,000 units of the same part to Scott Corporation for $8 per unit. If Scott buys them from Smith Company, $2 fixed
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
