Assume that a company makes 30,000 units of Part A each year. At this level of production, the company's accounting system reports the following cost per unit Direct materials Direst labor Variable manufacturing overhead Fixed manufacturing overhead $ 16 10 Total cust per unit $ 38 An outside suppler hes offered te sell the compamy 30.000 parts per year for a price ef $33 per part. All of the compamy's fixed costs will continue to be incurred even if the pert is purchased from the outside supplier. What is the firancial advantage disadvantege) of buying the parts from the outside supplier?
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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