Problem 2: ABC Company produces a single product. All materials are added at the beginning of production. On January 1, 2021, 10,000 units of the product were in process in the Refining Department, the first department. During the month of January, 75,000 units were placed into production and 73,000 units were transferred out to the Toning Department, the second department. On January 31, 12,000 units were still in process in the Refining Department. The ending inventory is estimated to be complete as to materials and two-thirds complete as to labor and overhead. Cost data for the month of January are presented below: Beginning work in process inventory Added during January Materials P 64,000 616,000 Labor P 25,500 266,080 Overhead P 14,400 134,640
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.
Prepare a cost of production report for the Refining department for the month of January 2021.
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