The internal manufacturing cost per unit of a component is as follows – Direct Material $5.00 Direct Labour $10.00 Fixed costs $15.00 Total costs $30.00 (a) Given the information above, if the company buys the component, it would however have to pay $17.00, but would still have to meet its fixed cost. Should the company make or buy the component? (b) Based on your answer in (a) above name two factors that can influence the company to buy the product.
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.
- The internal
manufacturing cost per unit of a component is as follows –
Direct Material $5.00
Direct Labour $10.00
Fixed costs $15.00
Total costs $30.00
(a) Given the information above, if the company buys the component, it would however have to pay $17.00, but would still have to meet its fixed cost. Should the company make or buy the component?
(b) Based on your answer in (a) above name two factors that can influence the company to buy the product.
2. (a) Describe two (2) methods for allocating support costs to departments.
(b) Explain why support costs are allocated to departments.
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