Jaime Ltd manufactures and sells a small electric product to order for the computer industry. The estimated selling price and variable costs per unit for next year are as follows: (£ per unit) Selling price 654.00 Variable costs: Direct materials 216.00 Direct labour 108.00 Production overhead 54.00 Selling & distribution overhead 27.00 Jaime Ltd expects to sell 108,000 units next year. Jaime Ltd expects the stock level at the start of the year to be NIL and the stock at the end of the year to be 18,000 units. Information on fixed costs is as follows: Fixed costs: Production overhead 1,452,000 Selling & distribution 360,000 Administration overhead 342,000
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.
Using Marginal costing:
(i) Calculate the production cost per unit.
(ii) Prepare an income statement for the year
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