Glover Company makes three products in a single facility. These products have the following unit product costs: Product A B C Direct materials $ 35.10 $ 51.60 $ 58.00 Direct labor 22.50 25.10 15.90 Variable manufacturing overhead 2.30 1.70 1.60 Fixed manufacturing overhead 12.20 7.80 8.40 Unit product cost $ 72.10 $ 86.20 $ 83.90 Additional data concerning these products are listed below. Product A B C Mixing minutes per unit 1.30 0.80 0.20 Selling price per unit $ 81.00 $ 103.40 $ 96.90 Variable selling cost per unit $ 2.90 $ 3.40 $ 3.20 Monthly demand in units 3100 4400 2400 The mixing machines are potentially the constraint in the production facility. A total of 7930 minutes are available per month on these machines. Direct labor is a variable cost in this company. Required : How many minutes of mixing machine time be required to satisfy demand for all three products? How much of each product should be produced to maximize net operating income? A B C Optimal production Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity?
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.
Glover Company makes three products in a single facility. These products have the following unit product costs:
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Product |
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A |
B |
C |
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Direct materials |
$ |
35.10 |
$ |
51.60 |
$ |
58.00 |
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Direct labor |
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22.50 |
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25.10 |
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15.90 |
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Variable manufacturing overhead |
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2.30 |
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1.70 |
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1.60 |
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Fixed manufacturing overhead |
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12.20 |
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7.80 |
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8.40 |
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Unit product cost |
$ |
72.10 |
$ |
86.20 |
$ |
83.90 |
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Additional data concerning these products are listed below.
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Product |
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A |
B |
C |
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Mixing minutes per unit |
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1.30 |
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0.80 |
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0.20 |
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Selling price per unit |
$ |
81.00 |
$ |
103.40 |
$ |
96.90 |
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Variable selling cost per unit |
$ |
2.90 |
$ |
3.40 |
$ |
3.20 |
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Monthly demand in units |
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3100 |
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4400 |
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2400 |
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The mixing machines are potentially the constraint in the production facility. A total of 7930 minutes are available per month on these machines. Direct labor is a variable cost in this company.
Required :
- How many minutes of mixing machine time be required to satisfy demand for all three products?
- How much of each product should be produced to maximize net operating income?
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A |
B |
C |
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Optimal production |
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- Up to how much should the company be willing to pay for one additional hour of mixing machine time if the company has made the best use of the existing mixing machine capacity?
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