The company uses the absorption costing system Required A) Calculate the cost of producing one unit. B) Assuming the company would like to make a profit of €6 from the sale of each umbrella, how much they should sell each one? C) What is the total sales value
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.
You are given the following costs and expenses for the production and sale of 5,000 units.
• Cost of Direct materials used €900
- Cost of Direct labor €1,000
• Administration expenses €1,500
• Selling and promotional expenses €2,000
• Variable production
• Fixed production overhead costs €200
The company uses the absorption costing system
Required
A) Calculate the cost of producing one unit.
B) Assuming the company would like to make a profit of €6 from the sale of each umbrella, how much they should sell each one?
C) What is the total sales value?
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