(b) McPro Company, a manufacturer of tennis racket, started production in January 2015. For the proceeding 5 years McPro had been a retailer of sports equipment. After a thorough survey of tennis racket markets, McPro decided to turns its retail store into a tennis racket factory. Raw materials cost for a tennis racket will total RM40 per racket. Workers on the production lines are paid on average RM15 per hour. A racket usually takes 2 hours to complete. In addition, the rent on the factory equipment used to produce rackets amounts to RM1,000 per month. Indirect materials cost RM3 per racket. A supervisor was hired to oversee production; her monthly salary is RM3,500. Factory janitorial cost are RM1200 monthly. Advertising costs for the rackets will be RM6000 per month. The factory building depreciation expense is RM8,400 per year. Property taxes on the factory building will be RM 4,320 per year. Required : Categorize (CLO3,C4) the above cost item according to the following column headings. Product Costs Direct Materials Labour Overhead (RM) Cost Item Direct Manufacturing Period Prime Conversion Costs Costs |(RM) (RM) Costs | (RM) _(RM) (RM) Assuming that McPro manufactures, on average, 2,000 tennis rackets per month, enter each cost item and amount per month (RM) under the appropriate headings. Total the amounts in each of the columns. Support your answer with calculation.
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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