Alfanar Company produces a part used in the manufacture of one of its products. The unit product cost of the part is $33, computed as follows: Direct Material: 12 $ Direct Labor: 8$ Variable Manufacturing Overhead: 3 $ Fixed Manufacturing Overhead: 10 $ Unit Prodcut Cost : 33 $ An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each. The company estimates that 30% of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data, the per unit dollar advantage or disadvantage of purchasing the parts from the outside supplier would be:
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.
Alfanar Company produces a part used in the manufacture of one of its products. The unit product cost of the part is $33, computed as follows:
Direct Material: 12 $
Direct Labor: 8$
Variable Manufacturing
Fixed Manufacturing Overhead: 10 $
Unit Prodcut Cost : 33 $
An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each. The company estimates that 30% of the fixed
A.$3 advantage
B. $1 advantage
C. $1 disadvantage
D. $4 disadvantage
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