At Pablo Company, direct materials (DM) are added at the start of the process and conversion costs (CC) are added evenly during the process. Company is using FIFO Method. The following is given for a cooking department for month of May: Physical Units Beginning Work in process inventory (CC 75% complete) 12,000 Units started during current month 74,000 Units completed and transferred out during current month: 65,000 Ending Work in process inventory (CC 80% complete) 18,000 Inspection occurs when production is 100 percent completed. Normal spoilage is 4 percent of good units that successfully pass the inspection point in current month. The following cost data are available: Beginning Work in Process Costs: DM $216,000; CC $27,000 Costs added during current period: DM $1346,800; CC $234,880 1. What is the equivalent units for direct materials for May? 2. Compute the direct materials cost per equivalent unit during May. 3. What is the cost of units completed and transferred out to Testing Department?
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.
At Pablo Company, direct materials (DM) are added at the start of the process and conversion costs (CC) are added evenly during the process. Company is using FIFO Method.
The following is given for a cooking department for month of May:
| Physical Units | |
| Beginning Work in process inventory (CC 75% complete) | 12,000 |
| Units started during current month | 74,000 |
| Units completed and transferred out during current month: | 65,000 |
| Ending Work in process inventory (CC 80% complete) | 18,000 |
Inspection occurs when production is 100 percent completed. Normal spoilage is 4 percent of good units that successfully pass the inspection point in current month.
The following cost data are available:
| Beginning Work in |
| Costs added during current period: DM $1346,800; CC $234,880 |
1. What is the equivalent units for direct materials for May?
2. Compute the direct materials cost per equivalent unit during May.
3. What is the cost of units completed and transferred out to Testing Department?
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