i. Explain why the process costing approach is appropriate for this barbershop. ii. Calculate the cost per haircut. iii. Identify and explain at least two possible types of supplies that can be termed as direct materials used by the high-end hair salons. Explain when a service provider will use a Workin-Process account.
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.
COSTING SYSTEMS
A local barbershop provided services to 1,200 customers during the month of June. The
clients are men, and the barbers offer a simple cut with no special styling. The cost of
haircuts for June includes the following:
Direct labour $10,000
Total $12,000
Required: Show ALL workings.
i. Explain why the
ii. Calculate the cost per haircut.
iii. Identify and explain at least two possible types of supplies that can be termed as direct
materials used by the high-end hair salons. Explain when a service provider will use a Workin-Process account.
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