Annual cost of manufactured goods (manufacturing cost). b) Cost of items sold total year
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 company dedicated to the production and sale of N95 masks on a large scale, is currently conducting an in-depth analysis of its costs given that last year it closed with a net loss of US $ 25,000, even with an annual demand of 7,500 units. At the beginning of that year, the inventory of materials in process was valued at US $ 40,000 and at the end of the year it was US $ 15,000. For the execution of operations, it made an annual investment of US $ 100,000 in raw materials, US $ 900,000 maintenance of equipment, US $ 700,000 in electrical energy, and US $ 100,000 in inputs. With these investments, they were able to produce the quantity of parts demanded. During the entire year, they also invested US $ 2,200 in reprocessing of non-conforming products and received complaints from customers that represented costs of US $ 600, for which they decided to train personnel in order to avoid errors, investing a total of US $ 500 in these trainings year. Each raw material that enters the process is duly analyzed, costing this process US $ 1,500 a year on average. These materials are analyzed in a laboratory that entails costs of $ 200 average per month and tests valued at US $ 2,500 total year are carried out. During that year, they paid a total of US $ 37,524,132 to the plant's production supervisors and US $ 375,238,944 to direct operators. Considering that the company had total annual sales revenue of US $ 450,000 and general and administrative expenses of US $ 50,000, determine:
a) Annual cost of manufactured goods (
b) Cost of items sold total year
Cost of goods manufactured is the original cost of of manufacturing the goods. It includes all the direct costs which are associated with the manufacturing of goods such as cost of raw material, maintenance cost, direct labor charges and many more.
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