The Techno Chemicals Inc. uses a process costing system. During October, 2nd Department received 28,000 units from 1st Department at a total cost of $280,000. The costs added by 2nd Department during the month are: Conversion cost: $180,000 Materials: $24,000 During October, 2nd Department completed 16,000 units and transferred the same to finished goods store room. 10,000 units were still in process in 2nd Department at the end of the month. These units were estimated to be 60% complete with respect to conversion costs. Materials are added at the end of the process and identification of loss which take place at the end of process. Normal spoilage is expected to be only 5% of Units completed. Any spoilage more than 5% is considered as abnormal and is charged to factory overhead. Required: Prepare a cost of production report of 2nd Department of Techno Chemicals Inc.
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.
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