Product costing example

For example, if Batch X consists of 5,000 units of product, the setup cost per unit is $0.10 ($500 divided by 5,000 units). If Batch Y is 50,000 units, the cost per unit for setup will be $0.01 ($500 divided by 50,000 units).

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Applications of Marginal Costing – 15 Important Applications: Optimum Sales Mix, Market Expansion, Product Mix, Sales Mix, Profit Target and a Few Others. Marginal costing is taking a significant place in the total cost of Management Accountant. It is widely used for planning and decision making.

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Process Costing - Characteristics, Features, Application in Industry Process Costing - Elements/Components of Cost, Recording/Accounting Methodology Process Costing - Collection of information, Cost ledgers, integrated accounting Activity-Based Costing is an accounting method used to trace costs to a product or process of an organization. Rather than assigning costs directly to the products, they are assigned to the activities performed by the company. Then, the cost of the products are calculated by determining how much each product uses each activity [2]. Multiply the amount of expenses for one drink with four or five, and you will get your price for the drink. If you multiply drink expenses with 4 your earnings would be 75%, if you multiply costs with 5 your earnings will be 80%. In our example, gin tonic selling price would be: 0,75 x 4 = $3 or 0.75 x 5 = $3.75.


Both are types of product costing systems. Absorption or full costing includes direct materials, direct labour and both variable and fixed manufacturing overhead in the product costs whereas variable costing does not include manufacturing fixed costs along with direct material and direct labour (Weygandt, Keiso and Kimmel, 2005, p. 265). To determine the cost of each joint product, the units produced of each joint product is multiplied with the average unit cost. Example: A chemical industry gets three joint products from 10 litres of...

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