A manufacturing Company started 1,500 units in process on the job order #2003. The prime cost placed in process consisted of P300,000 and P180,000 for materials and direct labor, respectively, and a predetermined rate was used to charge factory overhead to production at 133-1/3% of direct labor cost. Upon completion of the job order, 100 units were rejected for failure to meet strict quality control requirements. The company bills customers at 50% above cost but sells rejected units at only 1/3 of production cost.
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.
A manufacturing Company started 1,500 units in process on the job
order #2003. The prime cost placed in process consisted of P300,000 and P180,000 for materials and direct labor, respectively, and a predetermined rate was used to charge factory overhead to production at 133-1/3% of direct labor cost. Upon completion of the job order, 100 units were rejected for failure to meet strict quality control requirements. The company bills customers at 50% above cost but sells rejected units at only 1/3 of production cost.
REQUIRED: Give the entries to record the following:
1) The cost of production
2) To record the completion of the job assuming the rejected units is ascribed to a
company failure which is normal.
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