Explain what is involved in a product costing system


Assignment

You, the managerial accountant, are asked by the CFO (Mr. Smith) of Wilson-West Manufacturing (a new company) to set up a product costing system. The following are the types of expenses that will be included:

o Direct labor
o Direct materials
o Utilities
o Depreciation
o Maintenance
o Insurance on the equipment
o Rent on the plant
o Administrative salaries
o Rent for the office

In a memo format, explain to Mr. Smith and the president what will be included in product costing.

1. Explain what is involved in a product costing system.

2. Explain why Wilson-West Manufacturing needs to have a product costing system.

3. Allocate the above expenses as fixed, mixed, or variable expenses.

4. Prepare calculations for the following, and explain your computations:

a. Variable cost: The unit rate is $0.25, and the actual hours used for manufacturing are 15,000.
b. Mixed cost: The unit rate is $0.25, actual hours are 10,000, and the fixed cost is $5,000 per month.
c. Total cost: Use your calculations from above.

5. Explain this to Mr. Smith who will prepare these calculations on a monthly basis.

Format your assignment according to the following formatting requirements:

o The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.

o The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.

o Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.

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Managerial Accounting: Explain what is involved in a product costing system
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