Oz Studs produces a handcrafted musical instrument which is sold for $850. Selected data for the company’s operations last year follow: Units in beginning inventory 0 Units produced 250 Units sold 225 Units in ending inventory 25 Variable costs per unit: Direct materials $100 Direct labor $40 Variable selling and administrative $20 Fixed costs: Fixed manufacturing overhead $60,000 Fixed selling and administrative $20,000 Required: 1. Assume that the company uses absorption costing. Compute the unit product cost for one instrument. 2. Assume that the company uses variable costing. Compute the unit product cost for one instrument.
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.
Oz Studs produces a handcrafted musical instrument which is sold for $850. Selected data for the
company’s operations last year follow:
Units in beginning inventory 0
Units produced 250
Units sold 225
Units in ending inventory 25
Variable costs per unit:
Direct materials $100
Direct labor $40
Variable selling and administrative $20
Fixed costs:
Fixed manufacturing
Fixed selling and administrative $20,000
Required:
1. Assume that the company uses absorption costing. Compute the unit product cost for one instrument.
2. Assume that the company uses variable costing. Compute the unit product cost for one instrument.
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