Better Choice Foods makes a single product using two processes. Quality control check takes place during the process, at which point, rejected units are separated from good units. The following details relate to production for the month of April 20X9, for Process 2. (1) Work-in-process, beginning inventory: (11) Transfer from Process 1: 15,000 units valued at $51.40 each (ii) Other manufacturing costs incurred during April: -0- Direct material added $513,000 $365,000 $211,000 Direct labour Manufacturing overhead (iv) Normal losses were estimated to be 5% of input during the period. Losses from Process 2 are deemed to be scrap, and sold at $40 per unit. (v) At inspection 1,750 units were rejected as scrap. These units had reached the following degree of completion: Input material 100% Direct material added 50% Conversion costs 30% (vi) 12,000 units were completed and transferred to Finished Goods Inventory. (vii) Work-in-process at the end of April had reached the following degree of completion: Input material 100% Direct material added 80% Conversion costs 40%
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) Prepare a statement of equivalent production to determine the equivalent units for direct materials (From Process 1 & Direct Material Added), and conversion costs and the cost per equivalent unit for
direct materials and conversion costs.
(b) Calculate the:
- Total cost of units completed and transferred to Finished Goods inventory
- Cost of abnormal losses
- Cost of ending work-in-process inventory in Process 2
(c) Prepare Better Choice’s Work-In-Process Inventory - Process 2 T-account, clearly showing the ending balance.
(d) State the
(e) Given that 20% of the unexpected losses were as a result of pilferage, prepare the abnormal spoilage statement, clearly showing Better Choice’s true loss.
Answer questions c, d and e.
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