Nico Manufacturing Company applies process costing in the manufacture of its best-seller product, "brilliant" Manufacturing starts in Department 1 where all materials are added at the start of the process. The good units ar then transferred to Department 2 where all the incremental materials needed for its completion are added after fina inspection. In Department 1, units are inspected at the 100% stage of production while in Department 2, inspectioI takes place when the units are 90% completed. Department 1 uses FIFO costing while Department 2 uses th weighted average costing. The production data for the month of February show the following: Department 1 Department 2 UNITS Units in process, February 1, 2014 Work completed Units in process, February 28 Work to be completed Started in process during February Normal spoilage Abnormal spoilage Work in Process, February 1: Transferred in Materials 8,000 4,000 1/5 4/5 12,000 1/3 7,000 2/7 60,000 (4% of units started in process) (25% of normal spoilage) 1,000 500 P - P 216,000 P 156,000 P 456,720 P 343,800 Conversion costs P 449,160 Current costs: P - P3,168,000 P4,942,080 Transferred in P 2 P1,344,000 Materials Conversion costs P2,052,000
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.
1.) Total costs transferred to the Storeroom
2.) Total costs transferred to Department 2
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