chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry Love, the firm’s new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Listed
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.
The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry Love, the firm’s new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Listed below are activity and cost information relating to two of Chocolate Baker’s major products.
Muffins |
Cheesecake |
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|
|
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Revenue |
$53,000 |
$46,000 |
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Cost of goods sold |
26,000 |
21,000 |
Delivery activity: |
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Number of deliveries |
150 |
85 |
Average length of delivery |
10 minutes |
15 minutes |
Cost per hour for delivery |
$20.00 |
$20.00 |
Using activity-based costing, which one of the following statements is correct?
A. The cheesecakes are $75 more profitable.
B. The muffins have a higher profitability as a percentage of sales and therefore are more advantageous.
C. The muffins are $2,000 more profitable.
D. The muffins are $1,925 more profitable.
please answer it with explanation , formula and computation
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