The following details are provided for a company operating a process costing system: - Process 1 Opening work in process (WIP) Nil Units introduced into the process 15,000 Units completed and transferred to next Process 2 10,000 Closing WIP (50% complete) 5,000 Materials cost (introduced at start of process) 70,000 Conversion cost 50,000 Process 2 Opening WIP Nil Units transferred from Process 1 10,000 Closing WIP (50% complete) 1,000 Completed units transferred to finished goods stock 9,000 Previous process cost 95,000 Conversion costs 55,000 Materials (introduced at the end of the process) 35,000 Required: (a) Compute the equivalent units and cost per equivalent unit for the month for Processes 1 and 2. (b) Prepare the cost allocation for Processes 1 and 2.
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 following details are provided for a company operating a
Process 1
Opening work in process (WIP) Nil
Units introduced into the process 15,000
Units completed and transferred to next Process 2 10,000
Closing WIP (50% complete) 5,000
Materials cost (introduced at start of process) 70,000
Conversion cost 50,000
Process 2
Opening WIP Nil
Units transferred from Process 1 10,000
Closing WIP (50% complete) 1,000
Completed units transferred to finished goods stock 9,000
Previous process cost 95,000
Conversion costs 55,000
Materials (introduced at the end of the process) 35,000
Required:
(a) Compute the equivalent units and cost per equivalent unit for the month for Processes 1 and 2.
(b) Prepare the cost allocation for Processes 1 and 2.
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