Evercreen manufactures products that sell at $ 37 each. The company can produce 50,000 units per year. The costs of producing and selling the 50,000 units are as follows: Total cost Unit cost Details 800000 16 Direct Material 200000 4 Direct Labor 50000 1 Variable manufacturing costs 150000 3 Fixed manufacturing costs 200000 4 Variable selling expenses 100000 2 Fixed selling expenses 1500000 30 Total cost Required: Assuming that the company is currently producing and selling 50,000 units as mentioned above. HighStar has requested, with its desire to book a one-time special order for 10,000 units, at a price of $ 23 per unit. Note that Evercreen will not bear any variable selling expenses for special orders. If Evercreen accepts Highstar's request, it will have to reduce its regular sales to regular customers by 10,000 units. For financial considerations only, should Evercreen accept this special request or reject it and corroborate it with numbers?
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.
Evercreen manufactures products that sell at $ 37 each. The company can produce 50,000 units per year. The costs of producing and selling the 50,000 units are as follows:
|
Total cost |
Unit cost |
Details |
|
800000 |
16 |
Direct Material |
|
200000 |
4 |
Direct Labor |
|
50000 |
1 |
Variable |
|
150000 |
3 |
Fixed manufacturing costs |
|
200000 |
4 |
Variable selling expenses |
|
100000 |
2 |
Fixed selling expenses |
|
1500000 |
30 |
Total cost |
Required: Assuming that the company is currently producing and selling 50,000 units as mentioned above. HighStar has requested, with its desire to book a one-time special order for 10,000 units, at a price of $ 23 per unit. Note that Evercreen will not bear any variable selling expenses for special orders. If Evercreen accepts Highstar's request, it will have to reduce its regular sales to regular customers by 10,000 units. For financial considerations only, should Evercreen accept this special request or reject it and corroborate it with numbers?
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