Jharna Ltd. Co. is currently operating at 50% capacity and produces 10,000 units at a cost of Rs. 180 per unit, the details of which are as follows: Materials per unit Rs. 100 Wages per unit Rs. 30 Factory overheads (40% fixed) per unit Rs. 30 Administration Overheads (50 % variable) per unit Rs. 20 Current Selling Price per unit Rs. 200 At 60% capacity, the material cost per unit increases by 2% and the selling price per unit falls by 2 %. At 80% capacity, the material cost per unit increases by 5 % and the selling price per unit falls by 5%. Prepare a Marginal Cost Statement showing the Total Cost and Profit at 50%, 60% and 80% capacity of production. Also give your comments on the profitability at these levels of performance.
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.
64. Jharna Ltd. Co. is currently operating at 50% capacity and produces 10,000 units at a cost of Rs. 180 per unit, the details of which are as follows:
Materials per unit Rs. 100
Wages per unit Rs. 30
Factory
Administration Overheads (50 % variable) per unit Rs. 20
Current Selling Price per unit Rs. 200
At 60% capacity, the material cost per unit increases by 2% and the selling price per unit falls by 2 %.
At 80% capacity, the material cost per unit increases by 5 % and the selling price per unit falls by 5%.
Prepare a Marginal Cost Statement showing the Total Cost and Profit at 50%, 60% and 80% capacity of production. Also give your comments on the profitability at these levels of performance.
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