Assuming that Betty Company Ltd uses activity-based costing to apply overhead to production, calculate the unit manufacturing costs of the XO and X1 products if the estimated manufacturing volume is attained
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.
- Betty Company Ltd manufactures two products, XO and X1. Estimates for the company’s products for next year are provided below:
|
|
XO |
X1 |
|
Estimated production volume |
4 000 |
3 000 |
|
Direct material cost |
$70 / unit |
$95 / unit |
|
Direct labour per unit |
2 hours @ $25 / hour |
3 hours @ $25 / hour |
Betty’s estimated
Estimated activity levels for the next year are as follows:
|
|
XO |
X1 |
Total |
|
Orders processed |
400 |
600 |
1000 |
|
Machine hours |
38 000 |
42 000 |
80 000 |
|
Inspection hours |
8 000 |
16 000 |
24 000 |
Required:
Assuming that Betty Company Ltd uses activity-based costing to apply overhead to production, calculate the unit
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