Grease Company makes three products. Following are the revenue and cost data for a typical month. PRODUCTS X Y Z TOTAL Sales P300 P500 P800 P1,600 Variable Costs 100 200 400 700 Contribution Margin P200 P300 P400 P900 Fixed Costs: Avoidable P80 P100 P120 P300 Common, allocated on the basis of peso sales 60 100 160 320 Total Fixed Costs P140 P200 P280 P620 PROFIT P60 P100 P120 P280 REQUIRED: Answer each of the following questions independently. What will total profit be if the company simply drops Product X? The company is considering selling the new product, Product P, in place of Product X. Product P will sell for P7 per unit, have variable costs of P5 per unit, and have avoidable fixed costs of P130. How many units of Product P would be the company has to sell to maintain its total income of P280? The company charges P10 per unit for product Z. A chain store offers to buy 40 units of Z per month at P8 per unit. The additional sales would not affect total fixed costs or variable costs per unit. The company has the capacity to produce 110 units of Z per month. If the company accepts the offer, what will its total monthly income 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.
Grease Company makes three products. Following are the revenue and cost data for a typical month.
|
|
PRODUCTS |
|
||
|
|
X |
Y |
Z |
TOTAL |
|
Sales |
P300 |
P500 |
P800 |
P1,600 |
|
Variable Costs |
100 |
200 |
400 |
700 |
|
Contribution Margin |
P200 |
P300 |
P400 |
P900 |
|
Fixed Costs: |
|
|
|
|
|
Avoidable |
P80 |
P100 |
P120 |
P300 |
|
Common, allocated on the basis of peso sales |
60 |
100 |
160 |
320 |
|
Total Fixed Costs |
P140 |
P200 |
P280 |
P620 |
|
PROFIT |
P60 |
P100 |
P120 |
P280 |
REQUIRED: Answer each of the following questions independently.
- What will total profit be if the company simply drops Product X?
- The company is considering selling the new product, Product P, in place of Product X. Product P will sell for P7 per unit, have variable costs of P5 per unit, and have avoidable fixed costs of P130. How many units of Product P would be the company has to sell to maintain its total income of P280?
- The company charges P10 per unit for product Z. A chain store offers to buy 40 units of Z per month at P8 per unit. The additional sales would not affect total fixed costs or variable costs per unit. The company has the capacity to produce 110 units of Z per month. If the company accepts the offer, what will its total monthly income be?
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