A product ‘Riddle’ is manufactured by two distinct processes, namely: Process 1 and Process 2. During the month of March 2020, the following information was obtained with respect to this product. Process 1 Direct Material 1,000 kg at RM25 per kg Direct Expenses RM24,000 Direct Labour RM15,000 Additional information: (i) Overhead is absorbed by the process on a basis of direct labour cost rate of 70%. (ii) Actual output is 950kg. Process 2 Direct Material 600 kg at RM50 per kg Direct Expenses RM12,000 Direct Labour RM10,000 Additional information: (i) Overhead is absorbed by the process on a basis of direct labour cost rate of 40%. (ii) Actual output is 1,350 kg. Normal loss is estimated at 10% of total input for each process. All losses can be sold at RM2 per kg. Required to prepare the following: Process 1 account. Process 2 account.
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 product ‘Riddle’ is manufactured by two distinct processes, namely: Process 1 and Process 2. During the month of March 2020, the following information was obtained with respect to this product.
Process 1
Direct Material 1,000 kg at RM25 per kg
Direct Expenses RM24,000
Direct Labour RM15,000
Additional information:
(i) Overhead is absorbed by the process on a basis of direct labour cost rate of 70%.
(ii) Actual output is 950kg.
Process 2
Direct Material 600 kg at RM50 per kg
Direct Expenses RM12,000
Direct Labour RM10,000
Additional information:
(i) Overhead is absorbed by the process on a basis of direct labour cost rate of 40%.
(ii) Actual output is 1,350 kg.
Normal loss is estimated at 10% of total input for each process. All losses can be sold at RM2 per kg.
Required to prepare the following:
- Process 1 account.
- Process 2 account.
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