Process costing can be performed with estimated cost and production data and actual cost and production data. A company estimated total manufacturing costs to be €4 million and estimated equivalent units to be 20,000; therefore, the estimated cost per equivalent unit was €200. Inventory costs were adjusted for completed units based on this €200 estimated cost per equivalent unit. At the end of the year, the actual manufacturing costs were €5 million and the equivalent units produced were actually 22,000. How would you determine and account for the under-absorbed overhead?
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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