. CDE Corporation produces a single product and has the following cost structure: Number of units produced each year 7,000 Variable costs per unit: Direct materials P 51 Direct labor P 12 Variable manufacturing overhead P 2 Variable selling and administrative expense P 5 Fixed costs per year: Fixed manufacturing overhead P 441,000 Fixed selling and administrative expense P 112,000 Required: 1. Compute the product cost per unit under: a. Absorption costing b. Varibale Costing 2. If the company produced 6,000 units, what is the product cost per unit under absorption costing.
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.
I. CDE Corporation produces a single product and has the following cost structure:
Number of units produced each year 7,000
Variable costs per unit:
Direct materials P 51
Direct labor P 12
Variable manufacturing overhead P 2
Variable selling and administrative expense P 5
Fixed costs per year:
Fixed manufacturing overhead P 441,000
Fixed selling and administrative expense P 112,000
Required:
1. Compute the product cost per unit under:
a. Absorption costing
b. Varibale Costing
2. If the company produced 6,000 units, what is the product cost per unit under absorption costing.
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