Tan Corporation manufactures a product in three departments. The first is cut out of lumber in the Cutting Department, then transferred to the Shaping Department where it shaped and certain parts purchased from outside vendors are added to the unit, and finally transferred to the Fin- ishing Department where it is painted and packaged. Since only one prod- uct is manufactured by the company, a company adopted the average cost method to account for its work in pro- cess inventories. Data related to October 2014 operations in the Shaping Department follow: process cost system is used. The Production Data Units in beginning work in process inventory Units received from the Cutting Department this month Units transferred out to Finishing Department this month Units in ending work in process inventory (75% materials, 50% labor and overhead) 3,000 7,500 8,500 2,000 Cost Data: Beginning WIP Inventory Added this Month Costs charged to the department: Costs from the preceding department Materials Labor Overhead P62,000 31,200 12,800 39,900 P253,000 82,800 67,000 159,600
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.
Requirement 1. Prepare an equivalent production computation for the Shaping Department. Requirement 2. Prepare a cost of production report for the Shaping Department for the month of October 2014
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