Summertime Cledus Productions recently switched to using an activity-based costing (ABC) system. The company produces two products CYT56 & RWK29. The annual production and sales volume of CYT56 is 8,000 units and of RWK29 is 6,000 units. There are three activity cost pools with the following expected activities and estimated total costs: Activity Cost Pool Estimated Cost Expected Activity CYT56
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.
Summertime Cledus Productions recently switched to using an activity-based costing (ABC) system. The company produces two products CYT56 & RWK29. The annual production and sales volume of CYT56 is 8,000 units and of RWK29 is 6,000 units. There are three activity cost pools with the following expected activities and estimated total costs:
|
Activity
Cost Pool |
Estimated
Cost |
Expected Activity CYT56 </th |
Expected Activity RWK29 </th |
Total </th |
|---|---|---|---|---|
| Activity 1 |
$20,000
|
100
|
400
|
500
|
| Activity 2 |
$37,000
|
800
|
200
|
1,000
|
| Activity 3 |
$91,200
|
800
|
3,000
|
3,800
|
Using ABC, the cost per unit of RWK29 is approximately:
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