We have been producing product A for several years and look forward to several more years of sales at 500,000 units per year or 2,000 units per day. The present method requires a standard time of 2.0 mins per unit or 30 pcs per hour. At this rate, it takes 33.33 hrs to make 1,000 units. All production will run on the day shift. Present Method and Costs - with a labor rate of $10.00/hr, the labor cost will be $333.30 to produce 1,000 units. The cost of 500,000 units per year would be $166,650.00 in direct labor. New Method and Cost- we have a reduction idea. If we buy this new machine attachment for $1000, the new time standard would be lowered to 1.5 minutes per unit. Will this investment be good for us?
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.
Step by step
Solved in 2 steps
