Compute the total production cost of each job. Prepare the journal entry to transfer the cost of jobs completed to Finished Goods. Compute the cost per unit for each job.
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.
PROBLEMS: Job Order Costing
- Leen Production Co. uses the job order cost system of accounting. The following information was taken from the company’s books after all posting had been completed at the end of May:
Jobs Direct Materials Direct Labor Factory No. of units
Completed Cost Cost
1040 P 3,600 P 4,000 P 1,600 400
1065 2,380 2,500 1,000 240
1120 1,800 1,700 680 200
Required:
- Compute the total production cost of each job.
- Prepare the
journal entry to transfer thecost of jobs completed to Finished Goods. - Compute the cost per unit for each job.
- Compute the selling price per unit for each job, assuming a mark-up percentage of 40%.
- Prepare the journal entries to record the sale on account of Job 1065.
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