Problem 4: ABC Company received an order to make school uniforms and uses the job order costing system. The following transaction occurred during 2021 relating to Job U-101: 1. Purchased raw materials at a cost of P2,000,000 2. Direct materials used for 1,400,000 3. Raw materials were used as indirect materials, P200,000 4. Direct labor hours consumed for P1,500,000 on the job, which was fully paid. 5. Indirect labor hours used costing P500,000 6. Other indirect costs accrued were $1,250,000 7. Manufacturing overhead equal to 100% of direct labor was charged. 8. The cost of U-101 of 24,400,000 (direct materials of P1,400,000 + direct labor cost of P1,500,000 + applied overhead of P1,500,000) was transferred to finished goods on completion. 9. Revenue is recorded at P5,720,000 (P4,400,000 x 130%) 10. Actual manufacturing overheads were P1,950,000 (indirect materials costing P200.000+ indirect labor costing P500.000 and other overheads of P1.250.000).
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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