erlal Devices (ID) has offered to supply the state government with one model of its security screening device at "cost plus 20 cent." ID operates a manufacturing plant that can produce 66,000 devices per year, but it normally produces 60,000. The cos duce 60,000 devices follow: Cost per Device Total Cost roduction costs: Materials $ 4,500,000 9,000,000 2,700,000 2,700,000 1,800,000 5,400,000 $26,100,000 $ 75 Labor Supplies and other costs that will vary with production Indirect cost that will not vary with production ariable marketing costs dministrative costs (will not vary with production) "otals 150 45 45 30 90 $ 435 sed on these data, company management expects to receive $522 (= $435 x 120 percent) per monitor for those sold on this ntract. After completing 500 monitors, the company sent a bill (invoice) to the government for $261,000 (= 500 monitors x $522 onitor). e president of the company received a call from a state auditor, who stated that the per monitor cost should be: Materials Labor Supplies and other costs that will vary with production 75 150 45 $ 270 merefore, the price per monitor should be $324 (= $270 x 120 percent). The state government ignored marketing costs because the ontract bypassed the usual selling channels.
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.
For each of the four situations, calculate the cost basis per device based on the information shown above. (Round intermediate calculations and final answers to 2 decimal places.)
A. Only the differential production costs could be considered as the cost basis.
B. The total cost per device for normal production of 60,000 devices could be used as the cost basis.
C. The total cost per device for productions of 66,000 devices, excluding marketing costs, could be used as the cost basis.
D. The total cost per device for production of 66,000 devices, including marketing costs, could be used as the cost basis.
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