abor cost $ 7 Unit-level overhead $ 6 Batch-level set-up cost (4,000 units per batch) $ 30,000 Product-level supervisory salaries $ 40,000 Allocated facility-level costs
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.
Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $40 each. The company is considering making the switches internally at the following projected annual production costs:
| Unit-level material cost | $ | 8 | |
| Unit-level labor cost | $ | 7 | |
| Unit-level |
$ | 6 | |
| Batch-level set-up cost (4,000 units per batch) | $ | 30,000 | |
| Product-level supervisory salaries | $ | 40,000 | |
| Allocated facility-level costs | $ | 25,000 | |
The company expects an annual need for 4,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $2,000 a month. If the company decides to make the parts, total costs will be:
Multiple Choice
a.$18,000 more than if the switches are purchased.
b.$43,000 more than if the switches are purchased.
c.$22,000 less than if the switches are purchased.
d.$25,000 less than if the switches are purchased.
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