A company produces a single product. The material cost for one unit is £18. The product takes 2 labour hours to produce and labour is paid at £9 per hour. Variable overheads are charged at the rate of £4 per labour hour. The budgeted fixed overhead cost is £20000 and will be absorbed based on labour hours. Budgeted production is 4000 units for the period. Calculate the unit cost 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.
A company produces a single product. The material cost for one unit is £18. The product takes 2 labour hours to produce and labour is paid at £9 per hour. Variable overheads are charged at the rate of £4 per labour hour. The budgeted fixed overhead cost is £20000 and will be absorbed based on labour hours. Budgeted production is 4000 units for the period. Calculate the unit cost under absorption costing.
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