A corporation is considering the addition of new automated manufacturing equipment in one of its production departments. Currently, the department produces 50,000 units a year with average unit costs as follows: Direct materials Direct labor (2 hours at $15 per hour) Fixed overhead $50 30 20 Both direct materials and direct labor are variable costs. The ratio of unit fixed costs to unit variable costs (direct materials plus direct labor) in the current labor-intensive operation is 25% ($20 ÷ $80). The new machinery will increase total fixed overhead costs in the
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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