TT Sisters Limited assembles and sells motor vehicles. It uses an actual costing system, in which unit costs are calculated on a monthly basis. The selling price per motor vehicle is ¢22,000. Data relating to January, February and March of 2020 are: January February March Unit data: Production (units) 500 500 450 Sales (units) 450 520 470 Variable-cost data: Manufacturing costs per unit produced ¢8,000 ¢8,000 ¢8,000 Selling and Admin costs per unit sold 4,000 4,000 4,000 Fixed-cost data Manufacturing costs ¢1,200,000 ¢1,200,000 ¢1,200,000 Selling and Admin costs 800,000 800,000 800,000 Required: Compute the product cost per unit under both variable and absorption costing methods Present income statements for Kantanka Motors in January, February and March of 2020 under Variable costing Absorption costing. Reconcile and explain the differences in operating profits under both costing methods.
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.
TT Sisters Limited assembles and sells motor vehicles. It uses an actual costing system, in which unit costs are calculated on a monthly basis. The selling price per motor vehicle is ¢22,000. Data relating to January, February and March of 2020 are:
|
|
January |
February |
March |
|
Unit data: |
|
|
|
|
Production (units) |
500 |
500 |
450 |
|
Sales (units) |
450 |
520 |
470 |
|
|
|
|
|
|
Variable-cost data: |
|
|
|
|
Manufacturing costs per unit produced |
¢8,000 |
¢8,000 |
¢8,000 |
|
Selling and Admin costs per unit sold |
4,000 |
4,000 |
4,000 |
|
|
|
|
|
|
Fixed-cost data |
|
|
|
|
Manufacturing costs |
¢1,200,000 |
¢1,200,000 |
¢1,200,000 |
|
Selling and Admin costs |
800,000 |
800,000 |
800,000 |
Required:
- Compute the product cost per unit under both variable and absorption costing methods
- Present income statements for Kantanka Motors in January, February and March of 2020 under
- Variable costing
- Absorption costing.
- Reconcile and explain the differences in operating profits under both costing methods.
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