The normal capacity of an entity is 350 000 units per annum. The raw material cost is R220 per unit and direct labour is R250 per unit. Variable production overheads are R60 per unit and fixed production overheads incurred amounts to R5 250 000. The closing balance of finished goods is 9 500 units (assume there is no opening balance). Which amount is the correct cost of sales figure if the actual production was 280 000 units for the year?
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 normal capacity of an entity is 350 000 units per annum. The raw material cost is
R220 per unit and direct labour is R250 per unit.
Variable production overheads are R60 per unit and fixed production overheads incurred
amounts to R5 250 000. The closing balance of finished goods is 9 500 units (assume
there is no opening balance).
Which amount is the correct cost of sales figure if the actual production was 280 000 units
for the year?
1. R145 000 000
2. R146 500 000
3. R147 422 500
4. R148 472 500
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