Essay paper help

Raw materials transport costs Essay

Category: Finance & Accounting Pages: 4 Type: Essay Level: College
total
1,190,000

The overhead costs are assigned to products on the basis of machine hours and in this case it is evident that there were 10000 machine hours, however 500 machine hours are included in work in progress, therefore for the finished goods have utilized 9500 machine hours.
For the finished goods the following overhead cost should be assign to each product:
1,190,000/9500 = 125.26
Therefore each finished good should be assigned 125.26 per machine hour it consumes.
For the work in progress they have consumed 500 machine hours, should be assigned the overhead cost depending on a percentage set, example the company may decide that for the work in progress the overhead costs will be assigned at 50%, if this is the case the work in progress overhead cost will be 62.63 per machine hour.


Finished goods:
The table below summarizes the cost incurred by these goods and some costs that the goods may incurred, the following table summarizes the gross profit that will be gained as a result of modification and sale of these products.

Stock Line
A ()
B()
C()
selling price
50000
20000
22000




Costs incurred to date
40000
10000
15000
modification costs
10000
4000
4000
marketing costs
5000
4000
5000
cost of production
55000
18000
24000




gross profit
-5000
2000
-2000

We calculate the cost of production by adding up all the cost that the goods have incurred and those that are to be icnured, to get gross profit we subtract cost of production from the selling price which in this case stands for the revenue that is to be gained, the gross profit for product A and C is negative while product B has a positive gross profit. Therefore product B will gain a profit and therefore it is best to modify and sell the product, for the other product the firm may