The data below relates to ABC company. The company has three products. Product X Product Y Product Z Selling price per unit $10 $20 $40 Variable costs per unit 7 12 16 The company’s experience has been that about 20 percent of sales comes from Product A, 60 percent from Product B, and the rest from Product C. It has an annual fixed cost of $840,000. Required: a) Compute the number of units of each product that would be sold at break even point. b) Suppose the company expected to sell $2.5 million at the normal mix. Do think it would be better to spend an additional $100,000 on advertisement which would increase the sales of Product C to 30 percent while reducing the mix of product A to 10 percent? Total sales will remain the same.
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 data below relates to ABC company. The company has three products.
|
|
Product X |
Product Y |
Product Z |
|
Selling price per unit |
$10 |
$20 |
$40 |
|
Variable costs per unit |
7 |
12 |
16 |
The company’s experience has been that about 20 percent of sales comes from Product A, 60 percent from Product B, and the rest from Product C. It has an annual fixed cost of $840,000.
Required:
a) Compute the number of units of each product that would be sold at break even point.
b) Suppose the company expected to sell $2.5 million at the normal mix. Do think it would be better to spend an additional $100,000 on advertisement which would increase the sales of Product C to 30 percent while reducing the mix of product A to 10 percent? Total sales will remain the same.
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