Your Company uses a total of 13,000 units of a part that are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $2.90 Direct labor. $7.50 Variable manufacturing overhead. $8.00 Supervisor's salary.. $3.40 Depreciation of special equipment. A $1.80 Other fixed costs. $7.00 An outside supplier has offered to make the part and sell it to the company for $29.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs can be avoided. If the part were purchased instead of produced. $2 of the other overhead could be avoided. In addition, the space used to make the part could be used to make more of one of the company's other products, generating an additional segment margin of $25.000 per year for that product. What would be the impact on the company's overall net operating income of buying the part? OA Decrease by $79.000 per year. O B. Decrease by $53.000 per year. OC. Decrease by $39.000 per year. OD. Increase by $25.000 per year. O E. Decrease by $14,000 per year.
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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