Faxaco has the following cost information regarding a component to be used in making its product, fax machine. The company has a capacity of manufacturing the component up to 900 units. The manufacturing costs for making 100 units are: Direct materials and labor $1,800 Variable overhead $2,600 Fixed overhead $9,000 $13,400 Of fixed overhead, 60% can be eliminated if the component is not manufactured. If the component is not manufactured, the facilities can be rented for $6,700. An outside vendor, Fast Company has offered to provide Kappa with the component for $150 each. Faxaco is making a Make or Buy decision. Compared to "Make", "Buy" is: A. $1,600 worse B. $600 better C. $4,900 worse D. $1,500 better E. $3,300 better
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.
QUESTION 40
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Faxaco has the following cost information regarding a component to be used in making its product, fax machine. The company has a capacity of manufacturing the component up to 900 units. The
manufacturing costs for making 100 units are:Direct materials and labor $1,800
Variable overhead $2,600
Fixed overhead $9,000
$13,400
Of fixed overhead, 60% can be eliminated if the component is not manufactured. If the component is not manufactured, the facilities can be rented for $6,700.
An outside vendor, Fast Company has offered to provide Kappa with the component for $150 each. Faxaco is making a Make or Buy decision. Compared to "Make", "Buy" is:
A. $1,600 worse
B. $600 better
C. $4,900 worse
D. $1,500 better
E. $3,300 better
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