is a French company that produces and sells 2 products, A and B. It uses 2 raw materials, X and Y for its production. It is organized in 5 departments: Administration, Maintenance, Purchasing, Production and Sales department. The administration and Maintenance are support departments and the 3 others are considered as operational departments. The Administration department estimates that it works equally for each other department. The Maintenance department spends 80% of its time for the production workshop and 20% for the sales department. The drivers for the operational departments are the following: purchasing: X or Y kg purchased
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.
Accounting
Marco S.A. is a French company that produces and sells 2 products, A and B. It uses 2 raw materials, X and Y for its production.
It is organized in 5 departments: Administration, Maintenance, Purchasing, Production and Sales department. The administration and Maintenance are support departments and the 3 others are considered as operational departments. The Administration department estimates that it works equally for each other department. The Maintenance department spends 80% of its time for the production workshop and 20% for the sales department. The drivers for the operational departments are the following:
- purchasing: X or Y kg purchased
- production: direct labor hours
- sales: finished good units sold
The following data was recorded for last month:
Indirect costs:
- administration: €120,000
- maintenance: 50,000
- purchasing: 50,000
- production: 126,500
- sales department: 66,500
Direct costs:
- material X: 1,000 kg, for a total amount of € 50,300
- material Y: 3,000 kg, for a total amount of €120,750
- direct labor: 22,050 hours, of which 10,250 for the product A and 11,800 for the product B; each hour costs €14.
- sellers’ commissions: 3% of the sales revenue.
Beginning Inventories:
- material X inventory: 300 kg for €20,700
- material Y inventory: 500 kg for € 29,250
- product A inventory: 50 units for € 49,000
- product B inventory: 100 units for €78,800
Ending Inventories:
- material X inventory: 200 kg for €14,000
- material Y inventory: 1,000 kg for € 60,000
- product A inventory: 20 units for € 20,000
- product B inventory: 80 units for €64,000
Materials consumption by the two products:
- by the product A: 500 kg of material X and 1,500 kg of material Y
- by the product B: 600 kg of material X and 1,000 kg of material Y
Volume produced:
- 370 units for the product A
- 480 units for the product B
Sales:
- product A: 400 units x €1,200 = 480,000
- product B: 500 units x €950 = 475,000
Required: Prepare the full cost and the income statement with a FBC approach.
Step by step
Solved in 2 steps
