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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Unit cost analysis
The management of Colfax Manufacturing Inc. uses cost information from job sheets to assess its performance, Information on the total, product type, and quantity of items produced is as follows:


a. Develop a graph for each product (three graphs), with Job No. (in date order) on the horizontal axis and unit cost on the vertical axis. Use this information to determine Colfax Manufacturing's cost performance over time for the three products.
b. What additional information would you require to investigate Colfax Manufacturing's cost performance more precisely?

To determine

(a)

Concept introduction:

Direct Cost:

The cost which is directly related to the product and affects those items directly which contributes to the revenue generation in the business is referred as direct cost. It makes a direct relation to the manufacturing cost.

Indirect Cost:

The cost which is not directly related to the product and does not affect those items directly which contributes to the revenue generation in the business is referred as indirect cost. These can be fixed cost or such costs are incurred as a whole and cannot be make relation to manufacturing cost.

To construct:

The graph for each product.

Explanation

Thetable for computing per unit cost of mercury is as follows:

    Cost per unit of mercury
    DateJob no.Quantity
      (a)
    Amount
      ($)
      (b)
    Cost per unit
      ($)
      (ba)
    Jan.1311804,50025
    Mar.144955012,10022
    Jun.12834007,20018
    Nov.1410972510,15014

The graph for the product is as follows:

  

The table for computing per unit cost of venus is as follows:

    Cost per unit of venus
    DateJob no.Quantity
      (a)
    Amount
      ($)
      (b)
    Cost per unit
      ($)
      (ba)
    Jan.29261,0208,1608
    Feb
To determine

(b)

Concept introduction:

Direct Cost:

The cost which is directly related to the product and affects those items directly which contributes to the revenue generation in the business is referred as direct cost.It makes a direct relation to the manufacturing cost.

Indirect Cost:

The cost which is not directly related to the product and does not affect those items directly which contributes to the revenue generation in the business is referred as indirect cost. These can be fixed cost or such costs are incurred as a whole and cannot be make relation to manufacturing cost.

The information required for analyzing the manufacturing cost in more detail.

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