Fine Juice Limited manufactures and sells organic juice for special events. Its manufacturing plant has the capacity to produce 17,000 bottles each month; its current monthly production is 15,500 bottles. The company’s regular selling price is $120 per bottle. The following data are provided for the current level of production: Variable costs: ($) Direct materials 850,000 Direct labour 475,000 Selling and administrative 17,000 Fixed costs: Manufacturing
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.
- Fine Juice Limited manufactures and sells organic juice for special events. Its manufacturing plant has the capacity to produce 17,000 bottles each month; its current monthly production is 15,500 bottles. The company’s regular selling price is $120 per bottle. The following data are provided for the current level of production:
|
Variable costs: |
($) |
|
Direct materials |
850,000 |
|
Direct labour |
475,000 |
|
Selling and administrative |
17,000 |
|
Fixed costs: |
|
|
Manufacturing |
705,175 |
|
Selling and administrative |
265,675 |
The company has just received a special one-time order for 950 bottles at $86 each. This order would not affect fixed costs.
Required:
- i) Should the company accept this special order? Explain your answers.
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Type in answers to Question 4. b. i. (expand the space as needed)
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- ii) Assume that no variable selling and administrative costs would be incurred for this particular order. All other data presented above would remain the same. Should the company accept this special order? Explain your answers.
|
Type in answers to Question 4. b. ii. (expand the space as needed)
|
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