Dream Limited manufactures ice cream. The company employs a process costing system for its manufacturing operations. All direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. The company’s production quantity schedule for January is as follow: Work in process on 1 January (55% complete as to conversion) 8,000 UNITS Units started during January 11,000 UNITS Total units to account for 19,000 UNITS Units from beginning work in process, which were completed and transferred out during January 8,000 UNITS Unit started and completed in January 6,000 UNITS Work in process on 31 January (35% complete as to conversion) 5,000 UNITS Total units to account for 19,000 UNITS Required: a) Calculate each of the following amounts: Equivalent units of direct material during January. Use the FIFO method. Equivalent units of conversion during January. Use the FIFO method. Equivalent units of direct material during January. Use the weighted average method.
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.
Dream Limited manufactures ice cream. The company employs a
Work in process on 1 January (55% complete as to conversion) 8,000 UNITS
Units started during January 11,000 UNITS
Total units to account for 19,000 UNITS
Units from beginning work in process, which were completed and transferred out during January 8,000 UNITS
Unit started and completed in January 6,000 UNITS
Work in process on 31 January (35% complete as to conversion) 5,000 UNITS
Total units to account for 19,000 UNITS
Required:
a) Calculate each of the following amounts:
-
Equivalent units of direct material during January. Use the FIFO method.
-
Equivalent units of conversion during January. Use the FIFO method.
-
Equivalent units of direct material during January. Use the weighted average method.
-
Equivalent units of conversion during January. Use the weighted average method.
b) Explain the major difference between weighted average and FIFO method in process costing systems
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