Job-Order and Process Costing
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Call me manufactures telephones. In 2004, Call me introduced a stylish telephone with a clear plastic casing, allowing you to see the parts of the phone. The two products are manufactured in separate batches. Overhead is allocated on the basis of machine hours. The information from 2004 is as follows:
Total Easy Touch Clear Phone
Units produced 110,000 80,000 30,000
Materials cost $640,000 $400,000 $240,000
Direct labor cost $110,000 $80,000 $30,000
Machine hours 140,000 80,000 60,000
Overhead $500,000
a. For each product, what is the cost per unit using process costing?
b. For each product, what is the cost per unit using job-order costing?
c. Which costing method is more accurate for this example? Explain
d. Assume Call Me decides to use process costing to calculate unit cost. If Call Me prices its phones at a 30% markup on cost, what would be the unit price for the phones? Is this a good pricing strategy or is one product being overcharged and the other being undercharged?
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Solution Summary
The solution explains how to calculate the cost per unit using job order costing and process costing
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