Lilly Spa produces two different spa products: Carefree and Spring. The company uses three operations to manufacture the detergents: mixing, blending, and packaging. The budgeted number of containers and expected direct materials and the budgeted conversion costs for May are as follows: Read the requirements3.
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.
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(1)
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(2)
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=
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Conversion cost rate
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Mixing
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÷
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=
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Blending
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÷
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=
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Packaging
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=
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Carefree
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Direct materials
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Mixing
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Blending
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Packaging
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Total
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Spring
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Carefree
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Spring
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Total budgeted costs
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Divide by number of containers
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Budgeted cost per container
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Carefree
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Spring
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Number of containers
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15,000
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12,000
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Direct materials cost
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$46,725
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$42,180
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Department
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Allocation of Conversion Costs
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Budgeted Conversion Cost
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Mixing
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Direct labor hours
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$1,500
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Blending
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Number of containers
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$31,050
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Packaging
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Machine hours
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$945
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1.
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Calculate the conversion cost rates for each department.
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2.
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Calculate the budgeted cost of goods manufactured for Carefree and
Spring for the month of May.
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3.
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Calculate the cost per container for each product for the month of
May.
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