Tokyo manufacturing company produce a product in two manufacturing department Moulding and finishing department. The product is moulded out of plastic in the Moulding Department and then transferred to finishing department, where parts are added to the moulded plastic unit. Because only one product is manufactured by the company, a process cost system is used with FIFO cost assumption. Data related to August operation in the moulding department are: Beginning inventory Added this period Costs are charge to department: Material 4120 39,980 Labour 522 12638 Factory overhead 961 18,779 During the period 9200 units were transferred from the moulding department to the finishing department. The moulding department had 1000 unit still in the process in at the end of the july; they were 100% as to material and 40% complete as to conversion cost. The moulding department had 800 units still in process at the end of the August; they were 75% complete as to material and 25% complete as to conversion cost. Required: Please justify how the changes from average cost method to FIFO method can affect the cost of production report.
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.
Tokyo manufacturing company produce a product in two manufacturing department Moulding and
finishing department. The product is moulded out of plastic in the Moulding Department and then
transferred to finishing department, where parts are added to the moulded plastic unit. Because only one
product is manufactured by the company, a
Data related to August operation in the moulding department are:
Beginning inventory Added this period
Costs are charge to department:
Material 4120 39,980
Labour 522 12638
Factory
During the period 9200 units were transferred from the moulding department to the finishing
department. The moulding department had 1000 unit still in the process in at the end of the july; they
were 100% as to material and 40% complete as to conversion cost. The moulding department had 800
units still in process at the end of the August; they were 75% complete as to material and 25% complete
as to conversion cost.
Required:
Please justify how the changes from average cost method to FIFO method can affect the cost of
production report.
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