Due Date: 16th January 2022 A company manufactures a single product which requires two separate process operations in the çourse of manufacture. The output from Process 1 is transferred to Process 2 for completion. The following information relates to Process 2 for a period. Units Opening Work in Progress 750 4,090 $2,000 Materials Added $1,000 Conversion Cost $1,090 Process 1 Transfers from Process 1 18,600 67,340 20,185 34,694 Materials Added Conversion Costs Normal Loss 400 Transfers to Warehouse 17,900 Closing Work in Progress 900 Stages of completion of Work in Progress Closing Material Added 100% Conversion Costs 65% All losses occur at the end of Process 2 and have no saleable value. REQUIRED: (a) Determine the equivalent units of production, and the cost per equivalent unit, for each element of cost. (b) Prepare the Process 2 account showing clearly both units and value.
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.
INTRODUCTION
Equivalent units of production:
The concept of equivalent units of production is used to estimate however much revenue partially finished items are worth to a business. They are helpful for process costing, which analyzes the flow of money across the process of production.
A manufacturer's work on output units that are only half finished at the end of an accounting period is expressed as an equivalent unit of production.
Cost per equivalent unit:
The sum of the expenses added during this period and the initial work-in-progress costs divided by the equivalent units is the cost per equivalent unit.
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