Jones Manufacturing Co. Ltd. makes a product by way of three consecutive processes. Inspection takes place during the processing operation, at which point bad units are separated from good units and sold as scrap at $20 each. Normal losses are estimated to be 5% of input during the period. The following data relates to processing 2 for the month of October. During October, 20,000 units valued at $400,000 were transferred from process 1 to process 2. Other costs incurred during the month were: Direct material added $272,000 Direct labour $254,000 Production overheads $ 120,400 At inspection, 3000 units were rejected as scrap. These units had reached the following degree of completion: Transfer from process 1 100% Direct material added 80% Conversion costs 50% Work-in-progress at the end of October was 4,000 units and had reached the following degree of completion: Transfer from process 1 100% Direct material added 60% Conversion costs 40% There were no unfinished goods in process 2 at the beginning of the period. Question: i) The work in process inventory - Process 2 T-account ii) A statement clearly showing the equivalent units for each cost element, namely Transfer from Process 1, direct material added and conversion costs. iii) Calculate: Cost per unit of the finished product, by element of cost and total. Cost of units transferred to process 3 Cost of abnormal loss/gain Cost of uncompleted units in WIP at the end of October.-
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.
Question 3
Jones Manufacturing Co. Ltd. makes a product by way of three consecutive processes. Inspection takes place during the processing operation, at which point bad units are separated from good units and sold as scrap at $20 each. Normal losses are estimated to be 5% of input during the period. The following data relates to processing 2 for the month of October. During October, 20,000 units valued at $400,000 were transferred from process 1 to process 2. Other costs incurred during the month were:
Direct material added $272,000
Direct labour $254,000
Production
At inspection, 3000 units were rejected as scrap. These units had reached the following degree of completion:
Transfer from process 1 100%
Direct material added 80%
Conversion costs 50%
Work-in-progress at the end of October was 4,000 units and had reached the following degree of completion:
Transfer from process 1 100%
Direct material added 60%
Conversion costs 40%
There were no unfinished goods in process 2 at the beginning of the period.
Question:
i) The work in process inventory - Process 2 T-account
ii) A statement clearly showing the equivalent units for each cost element, namely Transfer from Process 1, direct material added and conversion costs.
iii) Calculate:
- Cost per unit of the finished product, by element of cost and total.
- Cost of units transferred to
process 3 - Cost of abnormal loss/gain
- Cost of uncompleted units in WIP at the end of October.-
iv) Prepare the abnormal loss/gain statement, clearly showing the amount transferred to the costing
v) Present the journal entries to record the assignment of direct materials and direct labour and the allocation of manufacturing overhead to Process Also give the
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