The Interiors Company located in Dominica, manufactures executive desks. Selected costs associated with the manufacture of the executive desks and the general operations of the company are given below: a) Wood used in the manufacture of the executive desks, at a cost of $500 per desk. b) The executive desks are assembled by workers, at a cost of $100 per desk. c) Workers assembling the executive desks are supervised by a factory supervisor who is paid $75,000 per year. d) Electrical cost of $50 per machine-hour are incurred in the factory in the manufacture of the executive desks (five machine hours are required to produce a desk). e) The depreciation cost of the machines used in the manufacture of the executive desks totals $5,000 per year. f) The salary of the president of the Company is $250,000 per year. g) The Company spends $100,000 per year to advertise its products. h) Salespersons are paid a commission of $80 for each desk sold. Questions: Identify the variable costs in the case above. Identify the Fixed costs in the case above. Identify the Period costs in the case above.
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.
QUESTION 1.
The Interiors Company located in Dominica, manufactures executive desks. Selected costs associated with the manufacture of the executive desks and the general operations of the company are given below:
- a) Wood used in the manufacture of the executive desks, at a cost of $500 per desk.
- b) The executive desks are assembled by workers, at a cost of $100 per desk.
- c) Workers assembling the executive desks are supervised by a factory supervisor who is paid $75,000 per year.
- d) Electrical cost of $50 per machine-hour are incurred in the factory in the manufacture of the executive desks (five machine hours are required to produce a desk).
- e) The
depreciation cost of the machines used in the manufacture of the executive desks totals $5,000 per year. - f) The salary of the president of the Company is $250,000 per year.
- g) The Company spends $100,000 per year to advertise its products.
- h) Salespersons are paid a commission of $80 for each desk sold.
Questions: - Identify the variable costs in the case above.
- Identify the Fixed costs in the case above.
- Identify the Period costs in the case above.
- Identify the Product cost in the case above.
- Identify the direct cost in the case above.
- Identify the indirect cost in the case above
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