........................................................................................... 80 Variable manufacturing overhead...................................................................................................... 48 Fixed manufacturing overhead..........................
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.
. La Salle, Inc. makes 1,000 units per year of a part called a widget for use in one of its products. Per the cost accounting department, the cost to make one widget is as follows:
|
|
Direct materials...................................................................................................... |
$342 |
|
|
Direct labor...................................................................................................... |
80 |
|
|
Variable manufacturing overhead...................................................................................................... |
48 |
|
|
Fixed manufacturing overhead...................................................................................................... |
520 |
|
|
Total |
$990 |
An outside supplier has offered to sell La Salle, Inc. all of the widgets it requires. All of the fixed manufacturing overhead costs will continue even if the widgets are purchased from the outside supplier.
Required:
Assume La Salle, Inc. has no alternative use for the facilities presently devoted to production of the widgets. If the outside supplier offers to sell the widgets to La Salle, Inc. for $850 each, should La Salle, Inc. accept the offer? Fully support your answer with appropriate calculations.
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