A factory producing article X also produces a by-product Y which is further processed into finished product. The joint cost of manufacturing is given below: Material RO 8,000 Labor RO 4,000 Overheads RO 2,000 Subsequent costs are given below: X Y Material RO 2,000 RO 4,000 Labor RO 4,000 RO 3,000 Overheads RO 2,400 RO 2,600 Sales value for X is RO 20,000 and Y is RO 30,000 Estimated profits on selling prices are 40% for X and 30% for Y. Assume that selling and distributing expenses are in proportion of subsequent cost of material. a. Show how you would apportion joint cost of manufacture. b. Prepare a statement showing cost of production of X and Y.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
A factory producing article X also produces a by-product Y which is further processed into finished product. The joint cost of manufacturing is given below:
|
Material |
RO 8,000 |
|
Labor |
RO 4,000 |
|
|
RO 2,000 |
Subsequent costs are given below:
|
|
X |
Y |
|
Material |
RO 2,000 |
RO 4,000 |
|
Labor |
RO 4,000 |
RO 3,000 |
|
Overheads |
RO 2,400 |
RO 2,600 |
Sales value for X is RO 20,000 and Y is RO 30,000
Estimated profits on selling prices are 40% for X and 30% for Y. Assume that selling and distributing expenses are in proportion of subsequent cost of material.
a. Show how you would apportion joint cost of manufacture.
b. Prepare a statement showing cost of production of X and Y.
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