The head of operations of a manufacturing company has conducted an analysis with respect to the capacity of his production line. The major findings are the following: Theoretical capacity is 530 units per day. The effective capacity is 515 units per day The process capacity is 450 units per day. Two projects have been proposed to increase the capacity. The first proposal focuses on improving maintenance in order to reduce machine breakdowns. The second proposal focuses on increasing the capacity of the inventory buffer between various stages. Given that there is only enough budget to implement one of the proposals, which proposal should be selected based on the given information. Clearly motivate your answer. Please do fast.. ASAP ..fast please
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.
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