John Manufacturing Co. Ltd. makes a product by way of three consecutive processes. The following data relates to process 2 for the month of May. (i) During May, 1,500 units valued at $226.50 each were transferred from process 1 to process 2. (ii) Other costs incurred during the month were: Direct material added $114,750 Direct manufacturing wages $124,850 Manufacturing overheads $158,250 (iii) 200 units were scrapped during the period. Normal losses were estimated to be 81/3% of input during the period. The scrap value of any loss is $78.00 per unit. (iv) Work-in-progress at the end of May was 400 units and had reached the following degree of completion: Transfer from process 1 100% Direct material added 75% Direct manufacturing wages 40% Production overhead 20% (v) There were no unfinished goods in process 2 at the beginning of the period. (a) State the journal entries necessary to record the assignment of direct materials, direct manufacturing wages and manufacturing overhead applied to Process 2. Also give the journal entries to record the cost of product completed and transferred to Process 3.
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.
John Manufacturing Co. Ltd. makes a product by way of three consecutive processes. The following data relates to process 2 for the month of May.
(i) During May, 1,500 units valued at $226.50 each were transferred from process 1 to process 2.
(ii) Other costs incurred during the month were:
Direct material added $114,750
Direct manufacturing wages $124,850
Manufacturing
(iii) 200 units were scrapped during the period. Normal losses were estimated to be 81/3% of input during the period. The scrap value of any loss is $78.00 per unit.
(iv) Work-in-progress at the end of May was 400 units and had reached the following degree of completion:
Transfer from process 1 100%
Direct material added 75%
Direct manufacturing wages 40%
Production overhead 20%
(v) There were no unfinished goods in process 2 at the beginning of the period.
(a) State the
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