Process costing is a term used in cost accounting to describe one method for collecting and assigning manufacturing costs to the units produced.’ There are some statements about the process costing: An abnormal loss occurs when expected output exceeds actual output. The scrap value of an abnormal loss is credited to the process account. The allocated cost of an abnormal gain is credited to the process account. The inputs to a process less the normal loss is the expected output. The normal loss in a process is allocated a cost in order to reconcile the costs of inputs and outputs. The FIFO method assumes opening WIP is the first group of units to be completed. Therefore, opening WIP is charged separately to completed production and CPU is based on current period costs. Please identify which of the above statements are false and explain the reasons. In Management Accounting, there are some investment appraisal methods to analyse the performance of investment projects. The following table lists out the financial data of two projects for London Technology Ltd: Projects/Methods A B Payback Period 2 year and 4 months 2 year and 9 months Accounting Rate of Return 27.6% 15.44% Net Present Value £23,040 £21,798 Which project should company accept? In the discussion, please explain which method can leads to better decision.
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.
PLease answer question bolded.
‘
- An abnormal loss occurs when expected output exceeds actual output.
- The scrap value of an abnormal loss is credited to the process account.
- The allocated cost of an abnormal gain is credited to the process account.
- The inputs to a process less the normal loss is the expected output.
- The normal loss in a process is allocated a cost in order to reconcile the costs of inputs and outputs.
- The FIFO method assumes opening WIP is the first group of units to be completed. Therefore, opening WIP is charged separately to completed production and CPU is based on current period costs.
Please identify which of the above statements are false and explain the reasons.
In
|
Projects/Methods |
A |
B |
|
Payback Period |
2 year and 4 months |
2 year and 9 months |
|
Accounting |
27.6% |
15.44% |
|
|
£23,040 |
£21,798 |
Which project should company accept? In the discussion, please explain which method can leads to better decision.
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