Operations Costing Sign It! makes outdoor advertising signs which it sells to advertising companies. The company uses operation costing and manufactures their outdoor signs in four operations. In the Cutting operation, the signs are cut into the correct size from large, unfinished sheets they acquire from an outside supplier. In Finishing, the edges are smoothed and a magnetic metal surface is added. In Framing, the signs are inserted into a metal frame and stand. In Packaging, the signs are inspected and packaged. Not all signs are framed as some customers prefer to insert the sign into their own frames. During January of the current year, the following conversion costs will be incurred by the company: Cutting Finishing Framing Packaging $280,000 $130,200 $84,000 $56,000 Sign It! computes conversion cost rates per unit each month. In January, the company will manufacture 70,000 signs, 20,000 of which will NOT be framed. Details of two work orders for January are as follows: W.O. #85 W.O. #86 Number of Signs Direct Materials costs Framed? 4,000 $ 96,000 No 6,000 $ 152,000 Yes REQUIRED: Compute the Conversion Cost allocation rates per unit for January. Calculate the total costs and the costs per sign for each of the two work orders. Journalize W/O #86 from start to finish. Assume all direct materials are added at the start of the Cutting operation.
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.
Operations Costing
Sign It! makes outdoor advertising signs which it sells to advertising companies. The company uses operation costing and manufactures their outdoor signs in four operations. In the Cutting operation, the signs are cut into the correct size from large, unfinished sheets they acquire from an outside supplier. In Finishing, the edges are smoothed and a magnetic metal surface is added. In Framing, the signs are inserted into a metal frame and stand. In Packaging, the signs are inspected and packaged. Not all signs are framed as some customers prefer to insert the sign into their own frames.
During January of the current year, the following conversion costs will be incurred by the company:
|
Cutting |
Finishing |
Framing |
Packaging |
|
$280,000 |
$130,200 |
$84,000 |
$56,000 |
Sign It! computes conversion cost rates per unit each month. In January, the company will manufacture 70,000 signs, 20,000 of which will NOT be framed.
Details of two work orders for January are as follows:
|
W.O. #85 |
W.O. #86 |
|
|
Number of Signs Direct Materials costs Framed? |
4,000 $ 96,000 No |
6,000 $ 152,000 Yes |
REQUIRED:
- Compute the Conversion Cost allocation rates per unit for January.
- Calculate the total costs and the costs per sign for each of the two work orders.
- Journalize W/O #86 from start to finish. Assume all direct materials are added at the start of the Cutting operation.
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