Middelton Company manufactures a product that passes through two processes: Fabrication and Assembly. The following information was obtained for the Fabrication Department for October: All materials are added at the beginning of the process. Beginning work in process had 125,000 units, 40 percent complete with respect to conversion costs. Ending work in process had 25,000 units, 20 percent complete with respect to conversion costs. Started in process, 175,000 units. Question: Suppose that the cost of direct materials in beginning work in process is $560,000 and that the direct materials cost incurred for October is $700,000. With these changes, answer the following: What is the unit materials cost for the units in BWIP? What is the unit materials cost for units produced in October? Which method, weighted average or FIFO, should be used to answer this question? Explain why the unit materials cost is not the same for weighted average and FIFO. As part of your explanation, show that the weighted average unit cost for materials is the blend of the September unit materials cost and the October unit materials cost.
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.
Middelton Company manufactures a product that passes through two processes: Fabrication and Assembly. The following information was obtained for the Fabrication Department for October:
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All materials are added at the beginning of the process.
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Beginning work in process had 125,000 units, 40 percent complete with respect to conversion costs.
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Ending work in process had 25,000 units, 20 percent complete with respect to conversion costs.
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Started in process, 175,000 units.
Question: Suppose that the cost of direct materials in beginning work in process is $560,000 and that the direct materials cost incurred for October is $700,000. With these changes, answer the following:
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What is the unit materials cost for the units in BWIP?
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What is the unit materials cost for units produced in October? Which method, weighted average or FIFO, should be used to answer this question? Explain why the unit materials cost is not the same for weighted average and FIFO. As part of your explanation, show that the weighted average unit cost for materials is the blend of the September unit materials cost and the October unit materials cost.
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