All Things Brass produces brass handles for the furniture industry in a four-stage process –Mixing, Moulding, Polishing and Packaging. Costs incurred in the Polishing Department during January are summarized as follows:
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.
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All Things Brass produces brass handles for the furniture industry in a four-stage process –Mixing,
Moulding, Polishing and Packaging. Costs incurred in the Polishing Department during January are
summarized as follows:
WIP - Polishing Process A/C
January 1 Bal. $ 0
Transfer from Moulding 20,000 1,310,000
Direct Materials Added 391,600
Direct Labour 638,000
Manufacturing Overhead 307,000
Normal losses are estimated to be 2½% of input during the period. Inspection takes place during the processing operation, at which point damaged handles are separated from good handles and sold as scrap to local furniture manufacturers at $85 each. At inspection, 2,000 handles were rejected as scrap. These units had reached the following degree of completion:
Transfer from Moulding 100%
Direct material added 40%
Conversion costs 20%
Work-in-progress at the end of January was 4,000 handles and had reached the following degree of
completion:
Transfer from Moulding 100%
Direct material added 80%
Conversion costs 50%
Direct materials added and conversion costs are incurred uniformly throughout the process.
Required:
(a) Prepare a statement of equivalent production to determine the equivalent units for direct materials
(From Moulding & Direct Material Added), and conversion costs and the cost per equivalent unit for
direct materials and conversion costs.
(b) Calculate the:
- Total cost of units completed and transferred to the Packaging Department
- Cost of the unexpected losses
- Cost of ending work-in-process inventory in the Polishing Department
(c) Complete All Things Brass Work-In-Process Inventory – Polishing Process T-account, clearly showing the
ending balance.
Prepare the
▪ assignment of direct materials, direct labour incurred, and the manufacturing overhead applied to
the Polishing
▪ cost
(e) Given that 30% of the unexpected losses were because of pilferage, prepare the abnormal spoilage
statement, clearly showing All Things Brass true loss associated with the Polishing Process.
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