Vision Limited manufactures a product that has the following costs: Per unit Per year Direct materials $6.00 Direct labour 5.00 Variable manufacturing overhead 4.00 Fixed manufacturing overhead $360,000 Variable SG&A expenses 5.00 Fixed SG&A expenses 120,000 The company applies the absorption costing approach to cost-plus pricing. The calculations are based on budgeted production and sales of 30,000 units per year. The company has spent $600,000 on this product and expects a return on investment of 15%. Required: a) Calculate the markup on absorption cost. b) Compute the target selling price of the product using the absorption costing approach.
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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