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Production Unit Costing - Overheads, Cost Accounting Video Lecture | Cost Accounting - B Com

106 videos|173 docs|18 tests

FAQs on Production Unit Costing - Overheads, Cost Accounting Video Lecture - Cost Accounting - B Com

1. What is meant by production unit costing?
Ans. Production unit costing refers to the process of calculating the cost of producing a single unit of a product. It involves considering all the direct and indirect costs associated with the production process, including materials, labor, and overheads. The aim is to determine the total cost per unit, which helps in making pricing decisions and assessing the profitability of the product.
2. What are overheads in production unit costing?
Ans. Overheads in production unit costing refer to indirect costs that are not directly attributable to a specific product or production process. These costs include rent, utilities, depreciation of machinery, administrative expenses, and other similar expenses. Overheads are allocated to the production units based on certain allocation methods, such as machine hours, labor hours, or material usage, in order to determine the total cost per unit.
3. How are overheads allocated in production unit costing?
Ans. Overheads are allocated in production unit costing using various allocation methods. The most common methods include: - Direct labor hours: Overheads are allocated based on the number of hours of direct labor required to produce the units. - Machine hours: Overheads are allocated based on the number of hours the machines are used in the production process. - Percentage of direct labor cost: Overheads are allocated based on a certain percentage of the total direct labor cost. - Material usage: Overheads are allocated based on the quantity or value of materials used in the production process. The choice of allocation method depends on the nature of the business and the availability of data.
4. What is the importance of cost accounting in production unit costing?
Ans. Cost accounting plays a crucial role in production unit costing as it helps in determining the accurate cost per unit of production. It provides valuable insights into the cost structure of the business and enables effective cost control and decision-making. Cost accounting helps in identifying cost variances, analyzing cost behavior, evaluating cost-effectiveness, and comparing actual costs with budgeted costs. It also assists in pricing decisions, cost estimation, budgeting, and performance evaluation.
5. How does production unit costing help in pricing decisions?
Ans. Production unit costing provides a detailed breakdown of the cost components involved in producing a single unit of a product. This information is essential for making pricing decisions. By knowing the total cost per unit, businesses can set prices that cover all the costs incurred in the production process and also ensure a reasonable profit margin. Production unit costing helps in avoiding underpricing or overpricing of products, which can impact the profitability and competitiveness of the business.
106 videos|173 docs|18 tests
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