The Beacon Hills High School entered into a contract with Beacon Printing Services which stipulates that the latter shall produce 10,000 sets of modules to be distributed to learners during the 1st quarter of the school year. The contract further states that Beacon Printing Services shall charge Beacon Hills High School at 20% above cost. Overhead costs are applied at the rate of P 10.00 per hour. After the job was completed, it was found out that 2,000 sets were determined to be spoiled due to significant errors. Fortunately, the 2,000 spoiled sets can be sold to a scrap buyer for P 3.00 per set. Direct costs charged to the job are: Materials – P 300,000 and Direct Labor (P15.00 per hour) – P 60,000. Only 8,000 sets were delivered to Beacon Hills High School. FIND: How much should be charged to Work In Process to record production cost? How much should be charged to Spoiled Good Inventory? What is the total cost of the finished goods inventory assuming that spoilage is to be charged to specific job (due to customer’s specifications)?
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.
The Beacon Hills High School entered into a contract with Beacon Printing Services which stipulates that the latter shall produce 10,000 sets of modules to be distributed to learners during the 1st quarter of the school year. The contract further states that Beacon Printing Services shall charge Beacon Hills High School at 20% above cost.
Fortunately, the 2,000 spoiled sets can be sold to a scrap buyer for P 3.00 per set. Direct costs charged to the job are:
Materials – P 300,000 and Direct Labor (P15.00 per hour) – P 60,000. Only 8,000 sets were delivered to Beacon Hills High School.
FIND:
- How much should be charged to Work In Process to record production cost?
- How much should be charged to Spoiled Good Inventory?
- What is the total cost of the finished goods inventory assuming that spoilage is to be charged to specific job (due to customer’s specifications)?
- What is the total cost of the finished good inventory assuming that spoilage is to be charged to all jobs (due to internal failure)?
- How much should Beacon Hills High School pay for each set assuming that spoilage is to be charged to all jobs?
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