Sarah produces a product that passes through two processes, Process 1 and Process 2. Details of activities for the month of December, 2020 is as follows; Process 1 Process 2 Material introduced (4,000 units) @GH₵200.00 - Material added - GH₵25,000.00 Labour Costs (@GH₵400 per hour) 200hrs 600hrs Output in units 3,500units 3,150units Scrap value of normal loss GH₵20 per unit GH₵40 per unit Note; i. Overhead is absorbed at 80% of labour costs. ii. Normal loss is estimated at 10% for both process. iii. No opening and closing stocks a. You are required to prepare the relevant accounts b. You are required to prepare the relevant Accounts With practical example, differentiate between cost assignment and cost apportionment; product cost and period costs; direct cost and indirect 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.
Sarah produces a product that passes through two processes, Process 1 and
Process 2. Details of activities for the month of December, 2020 is as follows;
Process 1 Process 2
Material introduced (4,000 units) @GH₵200.00 -
Material added - GH₵25,000.00
Labour Costs (@GH₵400 per hour) 200hrs 600hrs
Output in units 3,500units 3,150units
Scrap value of normal loss GH₵20 per unit GH₵40 per unit
Note;
i.
ii. Normal loss is estimated at 10% for both process.
iii. No opening and closing stocks
a. You are required to prepare the relevant accounts
b. You are required to prepare the relevant Accounts With practical example, differentiate
between cost assignment and cost apportionment; product cost and period costs; direct
cost and indirect cost.
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