the amount of the relevant costs that would be saved by using the released facilities in the manufacture of part No. YYY would have to be
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.
The Calvary Company manufactures Part No. XXX for use in its production cycle. The cost per unit for 20,000 units of part No. XXX are as follows:
Direct materials P 6
Direct labor 30
Variable
Fixed overhead applied 16
P64
The Cross Company has offered to sell 20,000 units of part No. XXX to Calvary for P60 per unit. Calvary will make the decision to buy the part from Cross if there is a savings of P25,000 for Calvary. If Calvary accepts Cross’s offer, P9 per unit of the fixed overhead applied would be totally eliminated. Furthermore, Calvary has determined that the released facilities could be used to save relevant costs in the manufacture of part No. YYY. In order to have a savings of P25,000, the amount of the relevant costs that would be saved by using the released facilities in the manufacture of part No. YYY would have to be
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