XYZ Inc. manufactures a component D12, and two main products F45 and P67. The following details relate to each of these items: D12 D45 P67 Selling price ? 146 159 Material cost 10 15 26 Component D12 (bought-in price) ? 25 25 Direct labour 5 10 15 Variable overheads 6 12 18 Total variable cost per unit 21 62 84 Fixed overhead costs: P per annum P per annum P per annum Avoidable* 9,000.00 18,000.00 40,000.00 Non-avoidable 36,000.00 72,000.00 160,000.00 Total 45,000.00 90,000.00 200,000.00 * The avoidable fixed costs are product-specific fixed costs that would be avoided if the product or component were to be discontinued. 1. Assuming that the annual demand for component D12 is 5,000 units and that XYZ Inc. has sufficient capacity to make the component itself, the maximum price that should be paid to an external supplier for 5,000 components per year is 2. Assuming that component D12 is bought from an external supplier for P25.00 per unit, the number of units of product F45 that must be sold to cover its own costs without contributing to XYZ Inc.’s non-avoidable fixed costs is closest to
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.
XYZ Inc. manufactures a component D12, and two main products F45 and P67. The following details relate to each of these items:
D12 D45 P67
Selling price ? 146 159
Material cost 10 15 26
Component D12 (bought-in price) ? 25 25
Direct labour 5 10 15
Variable overheads 6 12 18
Total variable cost per unit 21 62 84
Fixed overhead costs: P per annum P per annum P per annum
Avoidable* 9,000.00 18,000.00 40,000.00
Non-avoidable 36,000.00 72,000.00 160,000.00
Total 45,000.00 90,000.00 200,000.00
* The avoidable fixed costs are product-specific fixed costs that would be avoided if the product or component were to be discontinued.
1. Assuming that the annual demand for component D12 is 5,000 units and that XYZ Inc. has sufficient capacity to make the component itself, the maximum price that should be paid to an external supplier for 5,000 components per year is
2. Assuming that component D12 is bought from an external supplier for P25.00 per unit, the number of units of product F45 that must be sold to cover its own costs without contributing to XYZ Inc.’s non-avoidable fixed costs is closest to
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