The Don't Bothers Co. manufactures moderate to high end hockey sticks. The FlyGrip Lite model has the following full unit costs for 5,000 units: Direct materials $25 Direct labor 10 Manufacturing overhead (60% variable) 24 Selling expenses (40% variable) 14 Administrative expenses (10% variable) 5 Total per unit $78 Gordon Bombay recently approached The Don't Bothers with a special order to purchase 1,000 units for $60. The Don't Bothers currently sell the model to consumers for $100. Capacity is sufficient to produce the extra 1,000 units. Variable selling expenses will be incurred on the special order. REQUIRED 1. Ignoring the special order, create a contribution margin income statement that shows the operating profit of the 5,000 units The Don't Bothers currently sells. 2. Determine the impact on profit of accepting the order. Should The Don't Bothers accept the special order? 3. Determine the minimum price The Don't Bothers would need on the special order so that before tax profits for the company would increase by $25,000 (over their current profit calculated in #1).
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.
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