marginal costing
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.
At the start of period one Tommy has no opening inventories. Tommy sells his
product for £12 per unit incurring the following unit variable costs:
£
Direct materials 4.80
Direct labour 2.00
Variable production
Fixed production overheads are £3,000, fixed selling overheads are £1,000, and
production and sales are as follows:
Pd 1 Pd 2
Sales 1200 units 1800 units
Production 1400 units 1600 units
Overhead absorption rates are calculated based on budgeted production of 1500
units.
Required:
a) Prepare profit statements using marginal costing
b) Prepare profit statements using absorption costing
c) Explain why the profit figures differ using the two different methods
d) Explain why the adjustment is necessary for under and over absorption of
overheads in the absorption costing model
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