Rent $ 1,800 Hamburger meat Buns, lettuce, pickles, and onions Frozen potato strips Wrappers, bags, and condiment packages Other ingredients Part-time employees' wages John Peterson's salary $ 4,500 Depreciation, cooking cquipment and fixturcs 800 600 1,250 Advertising Janitor's wages Janitorial supplics Accounting fees 500 600 520 150 660 1,500 7,250 Taxes 4,250 3,000 Utilities 1,500 Manufacturing Overhead Selling and Administrative Direct Direct Cost Materials Labor Hamburger meat $4,500 Totals
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.
Manufacturing, Cost Classification, Product Costs and Selling and Administrative Costs, Income Statement Pop’s Drive-Thru Burger Heaven produces and sells quarter-pound hamburgers. Each burger is wrapped and put in a “burger bag,” which also includes a serving of fries and a
soft drink. The price for the burger bag is $3.50. During December, 10,000 burger bags were sold. The restaurant employs college students part time to cook and fill orders. There is one supervisor (the owner, John Peterson). Pop’s maintains a pool of part-time employees so that the number of employees scheduled can be adjusted to the changes in demand. Demand varies on a weekly as well as a monthly basis. A janitor is hired to clean the building early each morning. Cleaning supplies are used by the janitor, as well as the staff, to wipe counters, wash cooking equipment, and so on. The
building is leased from a local real estate company; it has no seating capacity. All orders are filled on a drive-thru basis. The supervisor schedules work, opens the building, counts the cash, advertises, and is responsible for hiring and firing. The following costs were incurred during December:
Pop’s accountant, Elena DeMarco, does the bookkeeping, handles payroll, and files all necessary taxes. She noted that there were no beginning or ending inventories of materials. To simplify accounting for costs, Elena assumed that all part-time employees are production employees and that John Peterson’s salary is selling and administrative expense. She further assumed that all rent and
fixtures are part of product cost. Finally, she decided to put all taxes into one category, taxes, and to treat them as administrative expense. Required:
1. Classify each of the costs for Pop’s December operations using the table format given below. Be sure to total the amounts in each column.
Example: Hamburger meat, $4,500.
2. Prepare an income statement for the month of December.
3. CONCEPTUAL CONNECTION Elena made some simplifying assumptions. Were those reasonable? Suppose a good case could be made that the portion of the employees’ time spent selling the burger bags was really a part of sales. In that case, would it be better to divide their time between production and selling? Should John Peterson’s time be divided between marketing and administrative duties? What difference (if any) would that make on the income statement?
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