Satish & Shamoon Ltd manufactures a single product. The product is processed in three departments. During February 2021, the costs incurred and units processed in department 2 (Assembling Department) were as follows: Units Rs. Units received from department 1 55,000 2,057,500 Cost added by department 2 Material 988,000 Direct labor 488,000 Production overheads 244,000 Units transferred to department 3 50,000 Closing work in process 5,000 Details of percentage of completion of closing work in process are material 70%, labor 50% and production overheads 30%. Required: Prepare process account of department 2 for the month of February 2021 by AVCO method.
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.
Satish & Shamoon Ltd manufactures a single product. The product is processed in three departments.
During February 2021, the costs incurred and units processed in department 2 (Assembling Department) were as follows:
|
|
Units |
Rs. |
|
Units received from department 1 |
55,000 |
2,057,500 |
|
Cost added by department 2 |
|
|
|
Material |
|
988,000 |
|
Direct labor |
|
488,000 |
|
Production |
|
244,000 |
|
Units transferred to department 3 |
50,000 |
|
|
Closing work in process |
5,000 |
|
Details of percentage of completion of closing work in process are material 70%, labor 50% and production overheads 30%.
Required: Prepare process account of department 2 for the month of February 2021 by AVCO method.
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