Mention the characteristics of a company that uses process costing! Make a Cost of Production Report for the Filling of the Department and Labeling Department in October 2020 using the Average Method! Journal entries made in the Labeling department are related to the information above!
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.
PROCESS COSTING
PT NGA'-QUA is a company engaged in the manufacture of mineral water in plastic bottles through 3 departments, namely the Department of Filling, Labeling and Packaging. At the Filling Department, mineral water is filled into 500ml bottles. Then at the Labeling Department, mineral water bottles are given caps and labels. Finally, the finished bottles are packed into boxes containing 12 bottles per box. Data related to operational activities in the Filling and Labeling Department in October 2020 are
|
|
Filling Department |
Labeling Department |
|
WIP Beginning Inventory Filling Department (100% DM; 40% CC) Labeling Department (100% DM; 30% CC) |
300 |
500 |
|
Units Started in this period / Transferred in |
2.400 |
? |
|
WIP Ending Inventory Filling Department (70% DM; 60% CC) Labeling Department (80% DM; 50% CC) |
400 |
200 |
|
Cost Beginning WIP: From Preceeding Department Direct Materials Direct Labor |
- $6,500 3,400 5,100 |
$12,600 4,300 3,800 3,300 |
|
Cost added during current period: From Preceeding Department Direct Materials Direct Labor Overhead |
- $46,700 37,300 42,500 |
? $51,400 26,800 24,800 |
REQUESTED:
- Mention the characteristics of a company that uses process costing!
- Make a Cost of Production Report for the Filling of the Department and Labeling Department in October 2020 using the Average Method!
Journal entries made in the Labeling department are related to the information above!
Process costing:
Process costing is the method of cost accounting under which the direct cost of the production gets accumulated while the indirect cost is allocated to the production process. Cost are allocated to the batch of production i.e. entire month production.
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