You are the new cost accountant for ABX Corporation. After careful review of the company’s operations you have been tasked to determine the company’s break-even point, the numbers sold to meet the company’s target profit and contribution income statement for both outcomes. Management has also asked that you provide the pros and cons for variable, traditional and activity-based costing method. After providing the pros and cons of each method recommend one method for the company’s use and support your discussion. Company’s Data: ABX Corporation sold 450,000 units at $65/unit. Fixed cost are $12,500,000 per year. Variable costs are $30 per unit. ABX Corporation desires a target profit of $7,500,000 per year.
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.
You are the new cost accountant for ABX Corporation. After careful review of the company’s operations you have been tasked to determine the company’s break-even point, the numbers sold to meet the company’s target profit and contribution income statement for both outcomes. Management has also asked that you provide the pros and cons for variable, traditional and activity-based costing method. After providing the pros and cons of each method recommend one method for the company’s use and support your discussion.
Company’s Data:
ABX Corporation sold 450,000 units at $65/unit. Fixed cost are $12,500,000 per year. Variable costs are $30 per unit. ABX Corporation desires a target profit of $7,500,000 per year.
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