Your Company produces 1,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts is: Per Unit Variable manufacturing expenses $12 Fixed manufacturing expenses $9 $21 The part can be purchased from an outside supplier at $20 per unit. If the part is purchased from the outside supplier, two thirds of the fixed manufacturing costs can be eliminated. The annual impact on the company's net operating income as a result of buying the part from the outside supplier would be:
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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