Star Company's manager, Tom, is thinking about production of a new product. Tom is considering three different products. Tom would like to select a product with highest profit. Following table contains the expected selling price and costs for each product: Selling price per unit Cost: Direct material coast per unit Direct labor cost per unit Variable overhead cost per unit Total Fixed costs A $20.90 $5 $6 $1.4 $500,000 Tom expects the same demand for all three products. Annual Demand in units 300,000 450,000 600,000 750,000 Products B $30 $8 $7 $2.5 $900,000 Probability 45% 30% 15% 10% Step 1: Identify a choice criterion. Step 2: Identify the set of alternative actions that can be taken. C $28.50 Require: Review Chapter 3 Appendix in text book, the PP slides and video for Chapter 3 Appendix and answer the following. Step 3: Identify the set of events that can occur. Step 4: Assign a probability to each event that can occur. Step 5: Identify the set of possible outcomes. Calculate the expected value for each option. $4 $5.5 $9 $1,000,000
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.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
