Development Limited uses the FIFO (first in, first out) method in its process costing system. The following data summarizes the operations of the company’s first processing department for August. Work in process 1st August: Units in process 850 units Percent complete with respect to materials 80% Percent complete with respect to conversion 20% Costs in the beginning inventory: Materials cost $7,000 Conversion cost $3,800 Units started into production 11,000 units Units completed & transferred out in August 11,100 units Costs added to production during August Materials cost $150,000 Conversion cost $195,000 Work in process 31st August Units in process 750 units Percent complete with respect to materials 90% Percent complete with respect to conversion 50% Required (show your calculation): a. Calculate the equivalent units of production for August. b.Calculate the costs per equivalent unit. c. Determine the total cost of the units transferred to the next 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.
Development Limited uses the FIFO (first in, first out) method in its
Work in process 1st August:
Units in process 850 units
Percent complete with respect to materials 80%
Percent complete with respect to conversion 20%
Costs in the beginning inventory:
Materials cost $7,000
Conversion cost $3,800
Units started into production 11,000 units
Units completed & transferred out in August 11,100 units
Costs added to production during August
Materials cost $150,000
Conversion cost $195,000
Work in process 31st August
Units in process 750 units
Percent complete with respect to materials 90%
Percent complete with respect to conversion 50%
Required (show your calculation):
a. Calculate the equivalent units of production for August.
b.Calculate the costs per equivalent unit.
c. Determine the total cost of the units transferred to the next department.
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