Closing inventory at 31 January 2020 amounted to 450 units, complete as to: Process 1 materials 100% added materials 60% labour 50% production overhead 50%
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 Process 2 of a two-stage production process for the month of January 2020.
Opening inventory
300 units complete as to:
|
|
|
GHS |
|
materials from process 1 |
100% |
4,400 |
|
added materials |
90% |
1,150 |
|
labour |
80% |
540 |
|
production overhead |
80% |
810 |
|
|
|
6,900 |
In January 2020, a further 1,800 units were transferred from Process 1 at a valuation of GHS27,000. Added materials amounted to GHS6,600 and direct labour to GHS3,270. Production overhead is absorbed at the rate of 150% of direct labour cost.
Closing inventory at 31 January 2020 amounted to 450 units, complete as to:
|
Process 1 materials |
100% |
|
added materials |
60% |
|
labour |
50% |
|
production overhead |
50% |
Required
Prepare the Process 1 account for January 2020 using FIFO valuation method.
Step by step
Solved in 2 steps with 2 images
