United printers run a business of developing and printing T-shirts. The current costs of developing and printing the T-shirts are given as follows: Per unit 100,000 prints Costs directly traceable: Direct materials Sh. 0.05 Sh. 5,000 Direct labour 0.12 12,000 Variable manufacturing overhead .03 3,000 Fixed manufacturing overhead 4,000 Common costs allocated to this product line 10,000 Total costs 34,000 United printers received an offer from an outside developer to process 100,000 of prints for sh. 0.25 each. Required: Should United printers accept this offer?
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.
United printers run a business of developing and printing T-shirts. The current costs of developing and printing the T-shirts are given as follows:
|
|
Per unit |
100,000 prints |
|
Costs directly traceable: |
|
|
|
Direct materials |
Sh. 0.05 |
Sh. 5,000 |
|
Direct labour |
0.12 |
12,000 |
|
Variable manufacturing |
.03 |
3,000 |
|
Fixed manufacturing overhead |
|
4,000 |
|
Common costs allocated to this product line |
|
10,000 |
|
Total costs |
|
34,000 |
United printers received an offer from an outside developer to process 100,000 of prints for sh. 0.25 each.
Required:
Should United printers accept this offer?
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