6. The following data are for the two products produced by Johan Company. Product A Product B Direct materials Direct labor hours Machine hours Batches Volume P15 per unit 0.3 DLH per unit 0.1 MH per unit 125 batches 10,000 units 12 modifications 500 customers P30 per unit P24 per unit 1.6 DLH per unit 1.2 MH per unit 225 batches 2,000 units 58 modifications 400 customers P120 per unit Engineering modifications Number of customers Market price The company's direct labor rate is P20 per direct labor hour (DLH). Additional information follows. Costs Driver Indirect manufacturing: Engineering support Electricity Setup costs Nonmanufacturing: Customer service P24,500 Engineering modifications 34,000 52,500 Machine hours Batches 81,000 Number of customers 4. How much gross prorit is generated by each customer of Product A using ABC? How much gross profit is generated by each customer of Product B using ABC? Is the gross profit per customer adequate? 5. Which method of product costing gives better information to managers of this company? Explain why.
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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