Top Wood is a small manufacturing company currently making a single type of chair. The managing director presents to you the following details of estimated revenue and cost per unit for the year ended 31 December 2021: Quantity (Units) 2,000 Number of Chairs made and sold Price per unit (RM) 100 Selling price Total variable cost per unit: Raw material Direct labour Manufacturing overheads Selling cost RM 15 16 11 The following information is taken into consideration: (1) Total manufacturing overheads cost estimated for the year amounting to $110,000 of which 20% is variable manufacturing overhead cost. (2) The company's total selling costs for the year amounting to $19,500 inclusive of fixed and variable costs. (3) All units produced can be sold as soon as they are made, and no stocks are kept. (4) The directors have been considering their plan for the year ending 31 December 2021. The company intends to increase the sales by 30% if the fixed selling costs increase by $14,964 and the direct labour cost per unit increase to $18. Required: (1) Prepare a Contribution Income Statement to show the contribution (per unit & total) and the total profit to be made during the year ended 31 December 2021.
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.
Step by step
Solved in 2 steps