What are the prime costs? Conversion costs?
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.
What are the prime costs? Conversion costs?
Prime cost: Prime cost includes cost which are related to direcly production of Finished goods. This includes Direct material and Direct labour. which are main component of production of good.
For example: Total cost of product is 20,000. Bifurcation as:
Direct Material: 10,000
Direct labour 5,000
Other factory overheads : 5,000
Units 1000
Now prime cost per unit will include only Direct material and direct labour = (10,000+5000)/1000 = 15 per unit
Step by step
Solved in 2 steps
