Best Cars, Iine is the mamufacturer of best cars Recentdly best ear has faced a
ID: 341950 • Letter: B
Question
Best Cars, Iine is the mamufacturer of best cars Recentdly best ear has faced a lot of competition in the market place and is ed a lot of competition in the market place and is looking for ways to increase profitability. Best car sells two different models A and B. With the increased competition, Best Cars, Inc produces its cars using the following departments: 1) Flattening department-where aluminum is uncoiled and cut into blanks 2) Press lines- Where the aluminum blanks are cut to make panels 3) Body center- where cut parts are brought together 4) Framing- Where parts are joined by welding and fastening 5) Assembly: Where assembly is completed 6) Painting-where the car is painted management wants to see if ABC can help them better understand the cost of their cars ) Quality control -each car is tested for durability 8) Finishing department the finished car is moved here for transportation to car dealers. Required: 1) What costing method would be most suitable for Best car's product? Why? (5 points) 2) Illustrate or describe the flow of cost in Best Car, Inc. (10 points)
Explanation / Answer
1. The Best car, being the car manufacturer, where the production is mainly in continuous process, so the Process costing method would be appropriate for them to implement in their operation. Each and every production activities can be grouped into one process of resembling activities and per unit cost of processing is almost the same. Each process or department is a cost center where the cost of product can be determined at a level. Same type of raw-materials and spare parts are utilized in each and every process or department of the manufacturing of cars. Each process or department is determined by its operational boundries, supervisions, similarity of work performed and physical location of the similar machines or plants.
2.When in the car manufacturing, the unit of product are processed in more than one department or process, costs of one department are transferred from previous process or department to the next department or process at the original/initial cost. The total costs or per unit cost of the car is being determined on cumulative costs of all departments or processes
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