Product X Product Y Sales price per unit $52 $40 Direct materials cost per unit $18 $8 Direct labor hours per unit 1.5 1.0 Machine hours per unit 3.0 2.0 The labor rate is $10 per hour. Variable overhead is $2 per direct labor hour. The company can hire sufficient labor for any production level. The company has 15,000 machine hours available each period. There is unlimited demand for each product. Assuming a company has achieved a reasonable level of cost accuracy, what is the most important determinant of whether cost information should be even more accurate
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.
Consider the following production and cost data for two products, X and Y, manufactured by Company.
|
Product X |
Product Y |
|
|
Sales price per unit |
$52 |
$40 |
|
Direct materials cost per unit |
$18 |
$8 |
|
Direct labor hours per unit |
1.5 |
1.0 |
|
Machine hours per unit |
3.0 |
2.0 |
The labor rate is $10 per hour.
Variable overhead is $2 per direct labor hour.
The company can hire sufficient labor for any production level.
The company has 15,000 machine hours available each period.
There is unlimited demand for each product.
Assuming a company has achieved a reasonable level of cost accuracy, what is the most important determinant of whether cost information should be even more accurate?
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