Example: Glide-Free, Inc. manufactures two models of patio swings, Deluxe (upholstered with a woven-vinyl material) and Standard (with stained-wood finish). The following data relate to the company's production activities and costs: Manufacturing Activity Budgeted Activity Cost Driver Used Cost Per Unit of Costs for Year as Allocation Base Allacation Base Materials Handling $300,000 Number of parts $0.40 Cutting 1,500,000 Number of parts 2.00 Assembly 4,500,000 Number of parts 6.00 Upholstery 1,200,000 Direct labor hours 20.00 Wood finishing 3,000,000 Direct labor hours 15.00 Actual production data for the month of April is as follows: Direct Labor Hours # of Units Direct Total # Model Produced Material Costs of Parts Upholstery Wood Refin. Standard 8,000 $100,000 64,000 16,200 Deluxe 2,500 62,500 30,000 5,100 Required: 1. Compute for each model the total manufacturing costs and manufacturing cost per unit. 2. In addition, various upstream costs (for product design and research) have been identified and applied to the Standard model at $15 per unit and to the Deluxe model at $25 per unit. Also, downstream costs (for marketing, distribution, and customer service) of $120 and $180 have been applied to each unit of the Standard and Deluxe models, respectively. Compute the full product cost per unit of each model.
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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