Kantrovitz Company is a manufacturer of industrial components. One of its products, AP110, is used as a subcomponent in appliance manufacturing. This product has the following information per unit: Selling price $150.00 Costs: Direct material $20.00 Direct labor 15.00 Variable manufacturing overhead 12.00 Fixed manufacturing overhead 30.00 Shipping and handling 3.00 Fixed selling and administrative 10.00 Total per-unit cost $90.00 a. Kantrovitz has received a special, one-time order for 1,600 AP110 parts. Assuming Kantrovitz has excess capacity, what is the minimum price that is acceptable for beginning negotiations on this order? $______ b. Kantrovitz has 8,000 units of AP110 in inventory that have some defects. The units cannot be sold through regular channels without a significant price reduction. What per-unit cost figure is relevant for setting a minimum selling price on these units? $______ c. During the next year, sales of AP110 are expected to be 16,000 units. All costs will remain the same except that fixed manufacturing overhead will increase by 20 percent and direct material will increase by 10 percent. The selling price per unit for next year will be $160. Based on these data, calculate the total contribution margin generated by part AP110. $______
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.
Kantrovitz Company is a manufacturer of industrial components. One of its products, AP110, is used as a subcomponent in appliance manufacturing. This product has the following information per unit:
| Selling price | $150.00 |
| Costs: | |
| Direct material | $20.00 |
| Direct labor | 15.00 |
| Variable manufacturing overhead | 12.00 |
| Fixed manufacturing overhead | 30.00 |
| Shipping and handling | 3.00 |
| Fixed selling and administrative | 10.00 |
| Total per-unit cost | $90.00 |
a. Kantrovitz has received a special, one-time order for 1,600 AP110 parts. Assuming Kantrovitz has excess capacity, what is the minimum price that is acceptable for beginning negotiations on this order? $______
b. Kantrovitz has 8,000 units of AP110 in inventory that have some defects. The units cannot be sold through regular channels without a significant price reduction. What per-unit cost figure is relevant for setting a minimum selling price on these units? $______
c. During the next year, sales of AP110 are expected to be 16,000 units. All costs will remain the same except that fixed manufacturing overhead will increase by 20 percent and direct material will increase by 10 percent. The selling price per unit for next year will be $160. Based on these data, calculate the total contribution margin generated by part AP110. $______
d. Referring to (a), Kantrovitz has received a special, one-time order for 1,600 AP110 parts. Assume that Kantrovitz is operating at full capacity, and that the contribution of the output would be displaced by the one-time special order. Using the original data, compute the minimum acceptable selling price for this order. $______
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