A product passes through two processes A and B. During the month ended June, 1,500 products were produced. The detailed cost break up is as follows: Process A Process B Direct materials P90 000 P75 000 Direct Labour P75 000 P150 000 Direct expenses P15 000 P18 000 Indirect overhead cost during the period were P60,000 apportioned to the processes based on direct labour costs. No work in progress existed at the beginning and end of the period. Prepare relevant process accounts?
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.
The following information relates to company XYZ.
Manufacturing
BWP
Lighting & Heating 8 000
Administration employees 70 000
Employee accident insurance 1 200
Plant and Equipment Insurance 70 000
Plant and Equipment maintenance & repairs (minor) 20 000
Plant and Equipment maitenance & repairs (major) 200 000
Rent 25 000
Allocation by department
Department A Department B Total
Area occupied (sqm2) 1 200 2300 3 500
Depreciation 20 000 40 000 60 000
No. of employees 10 18 28
Book value 250 000 450 000 700 000
Maintenance hours 18 000 25 000 43 000
Indirect Materials 8 000 12 000 20 000
Indirect Labour 10 000 14 000 24 000
A product passes through two processes A and B. During the month ended June, 1,500
products were produced. The detailed cost break up is as follows:
Process A Process B
Direct materials P90 000 P75 000
Direct Labour P75 000 P150 000
Direct expenses P15 000 P18 000
Indirect overhead cost during the period were P60,000 apportioned to the processes based on
direct labour costs. No work in progress existed at the beginning and end of the period.
Prepare relevant process accounts?
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