A value stream has three activities and two products. The units produced and shipped per week are 50 of the deluxe model (Model A) and 150 of the basic model (Model B). The resource consumption patterns are shown as follows: Costs of Value Stream Acthities Model A Modd B 2,400 min. Cell manufacturing Engineering Testing Total $ 76,800 27,200 24,000 $128,000 7,200 min. 260 hrs. 60 hrs. 100 hrs. 220 hrs. Required: 1. Calculate the ABC product cost for Models A and B. 2. Calculate the value-stream average product cost. Assuming reasonable stability in the consumption patterns of the products and product mix, assess how well the products are grouped based on similarity.
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.
3. Calculate the cycle time for each product by dividing the total hours used for each product by the units produced for each product. Now calculate the DBC cost for each product. Comment on the significance of DBC for this setting
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