Currently, Bouwens uses a job costing system in which each month's production for each customer type is considered a "job." Thus, every month, Bouwens starts and completes one job in B-155 and one job In B-159. (There is never any beginning or ending work In process at Bouwens.) Recently, a dispute arose between Jack, the product manager for the military solvent, and Jill, the product manager for the commercial solvent, over the proper costing system.
Currently, Bouwens uses a job costing system in which each month's production for each customer type is considered a "job." Thus, every month, Bouwens starts and completes one job in B-155 and one job In B-159. (There is never any beginning or ending work In process at Bouwens.) Recently, a dispute arose between Jack, the product manager for the military solvent, and Jill, the product manager for the commercial solvent, over the proper costing system.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
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Transcribed Image Text:Currently, Bouwens uses a job costing system in which each month's production for each customer type is considered a "Job." Thus,
every month, Bouwens starts and completes one job in B-155 and one job In B-159. (There is never any beginning or ending work In
process at Bouwens.) Recently, a dispute arose between Jack, the product manager for the military solvent, and Jill, the product
manager for the commercial solvent, over the proper costing system.
Jack: It is ridiculous to use job costing for this. We are producing solvent. Everyone knows that the chemicals are the same. The fact
the B-155 has high-cost labor is because all the senior employees want to work there. We could produce the same product with the
employees in B-159. We should be using process costing and consider all the production in both buildings for each month as the
batch.
Jill: Jack, the fact is that the military requires us to use a special chemical, and their contracts require we keep track of the costs for
their business. If we don't separate the costing, we won't know how profitable elther business is.
The following is production and cost Information for a typical month, July.
lv (B- C-S
155)
(B-
159)
10,000
2,000
$ 14,000
30,000
$ 40,000
120,000
$ 44,000 $ 160,000
Units started
Materials cost
Conversion cost
Total
Required:
a. Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens.
b. Compute the costs of M-Solv and C-Solv for July if Bouwens were to treat all production as the same (combining B-155 and B-159
production).
c. Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv.
d. For your recommended costing system, compute the cost of both M-Šolv and C-Solv for July.
1. Compute the unit costs for materials and conversion costs separately.
2. Then compute conversion costs for the factory.
3. Now, compute the unit product cost.
Total
12,000
$ 54,000
150,000
$ 204,000
Complete this question by entering your answers in the tabs below.
Req A
Req B
Req C
Req D1
2. Then compute conversion costs for the factory.
Note: Round "Unit cost" to 2 decimal places.
Unit cost
< Req D1
Req D2
Req D3
Req D3 >
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VIEWStep 2: (a) Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing):
VIEWStep 3: (b) Compute the costs of M-Solv and C-Solv for July if Bouwens were to treat all production as same:
VIEWStep 4: (c) Recommend the costing method that best reflects the cost of producing M-Solv and C-Solv:
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