Question

Because of seasonal fluctuations, Noble Corporation has a problem determining the unit cost of the products it produces. For example, high heating costs during the winter months causes per-unit cost to be higher than per-unit cost in the summer months even when the same number of units of product is produced. Suggest several ways that Noble can improve the computation of per-unit costs.

Answer 1

Answer:

Unit cost is a pivotal cost measure in the operational analysis of an organization. Distinguishing and breaking down an organization's unit costs is a quick method to check if an organization is producinng an item effectively. In the given case, the distinction in the per unit overhead expense is because of overhead expenses that were brought about non-consistently. Noble Corporation can improve the per unit cost by assigning the overhead at predetermined rate.

We can see here that Noble Corporation is utilizing the genuine or actual costing technique which gives the real rate per unit for consistently. Ordinary costing takes care of this issue related with real costing. A cost framework that estimates overhead expenses on a predetermined basis and uses real expenses for direct material and direct labor is called ordinary or normal costing framework.

Predetermined overhead or action rates are determined toward the start of the year and are utilized to apply overhead to production as the year goes on.Any contrast between genuine and applied overhead is dealt with as an overhead variance.