The Salsa Division of the Spicy Foods Company has provided you with the following information at a volume of 40,000 bottles: Cost Per unit Direct material $8.00 Direct labor $4.00 Variable overhead $3.00 Fixed overhead - Traceable $6.00 Fixed overhead - Allocated $5.00 Total $26.00 An outside vendor has approached Salsa and offered to produce 30,000 bottles of salsa at a price of $22.00 per unit. By outsourcing, the company could begin operating a new line of Hot Sauce that is expected to generate sales of $500,000. Outsourcing will also allow Salsa to eliminate 30% of the division's traceable fixed overhead. NOTE: The contribution margin ratio for Hot Sauce = 40%. %3D Determine the impact on income if Salsa accepts the outside supplier's offer.
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.
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