P & J Distilleries makes one of its products by way of three separate stages. Details of production for the month ending 31st January were as follows: Processs Fermenting Distilling Bottling Input material: 65,000 litres $780,000 Material added $89,000 Direct Labour cost $114,600 $153,500 $225,600 Manufacturing Overhead $122,000 $126,000 $193,100 Normal losses 8% 5% 5% Output 55,000 litres 53,000 litres 48,000 litres Scrap value of losses - $18.00/litre $30.00/litre The nature of the process requires equipment to be cleaned at the end of each month; hence there is no opening or closing stock of product in process. Required: i) The process account for each process: and ii) The abnormal loss/gain account(s) showing P & J's true loss/gain.
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.
P & J Distilleries makes one of its products by way of three separate stages. Details of production for the month ending 31st January were as follows:
Processs
| Fermenting | Distilling | Bottling | |
| Input material: 65,000 litres | $780,000 | ||
| Material added | $89,000 | ||
| Direct Labour cost | $114,600 | $153,500 | $225,600 |
| Manufacturing |
$122,000 | $126,000 | $193,100 |
| Normal losses | 8% | 5% | 5% |
| Output | 55,000 litres | 53,000 litres | 48,000 litres |
| Scrap value of losses | - | $18.00/litre | $30.00/litre |
The nature of the process requires equipment to be cleaned at the end of each month; hence there is no opening or closing stock of product in process.
Required:
i) The process account for each process: and ii) The abnormal loss/gain account(s) showing P & J's true loss/gain.
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