Final answer:
To find the unit cost in a Job Order Cost System, total fixed and variable costs are calculated and divided by total units produced. Additionally, average variable cost, average total cost, and marginal cost are essential for a detailed understanding of cost structure.
Step-by-step explanation:
Unit Cost Formula in Job Order Costing
To calculate the unit cost in a Job Order Cost System, the cost structure of the firm must first be determined. This involves calculating the total cost, which is the sum of fixed and variable costs.
To compute the unit cost for a specific job, you may use the following equation:
- Total Unit Cost = (Total Fixed Costs + Total Variable Costs) / Total Units Produced
The calculations of average variable cost (AVC), average total cost (ATC), and marginal cost (MC) are also important for understanding the cost structure.
These can be derived from Table 8.8, as mentioned earlier:
- AVC = Total Variable Costs / Total Units Produced
- ATC = Total Costs / Total Units Produced
- MC = Change in Total Costs / Change in Output
Understanding these calculations helps in setting the right pricing strategy and maintaining profitability in business operations.