Within a department of a factory there are two processes which produce the finished product of that department. Raw materials are introduced initially at the commencement of Process I and further raw materials are added at the end of Process II. Conversion costs (direct labour plus factory overhead) accrue uniformly throughout both the processes. The flow of the product is continuous, the completed output of Process I passes immediately into Process II and the completed output of Process II passes immediately into the Finished Goods Warehouse. Using the table on the next page, use the FIFO method and state:
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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