Chocolate, filling, wrappers, box Employee time to fill and wrap the box (10 min.) Manufacturing overhead Total manufacturing cost $ 14.00 2.00 1.00 $ 17.00 Chocolate, filling, wrappers, box Employee time to fill and wrap the box (10 min.) Manufacturing overhead Total manufacturing cost $ 15.00 2.20 1.10 $ 18.30
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.
Hiebert Chocolate, Ltd. is located in Memphis. The company prepares gift boxes of chocolates for private parties and corporate promotions. Each order contains a selection of chocolates determined by the customer, and the box is designed to the customer’s specifications. Accordingly, Hiebert uses a
One of Hiebert’s largest customers is the Goforth and Leos law firm. This organization sends chocolates to its clients each Christmas and also provides them to employees at the firm’s gatherings. The law firm’s managing partner, Bob Goforth, placed the client gift order in September for 500 boxes of cream-filled dark chocolates. But Goforth and Leos did not place its December staff-party order until the last week of November. This order was for an additional 100 boxes of chocolates identical to the ones to be distributed to clients.
Hiebert budgeted the cost per box for the original 500-box order as follows:
Ben Hiebert, president of Hiebert Chocolate, Ltd., priced the order at $20 per box. In the past few months, Hiebert has experienced price increases for both dark chocolate and direct labor. All other costs have remained the same. Hiebert budgeted the cost per box for the second order as follows:
Requirements
1. Do you agree with the cost analysis for the second order? Explain your answer.
2. Should the two orders be accounted for as one job or two in Hiebert’s system?
3. What sale price per box should Ben Hiebert set for the second order? What are the advantages and disadvantages of this price?
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