Lotus Manufacturing Ltd manufactures toy boats. Materials are added at the beginning of the production process and conversion costs are incurred uniformly.
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.
Lotus Manufacturing Ltd manufactures toy boats. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2020 are as follows:
|
Production Data – Toy Boats |
Units |
Percentage Complete |
|
Work in process units, July 1 |
600 |
40% |
|
Units started into production |
1,000 |
|
|
Work in process units, July 31 |
500 |
60% |
|
|
|
|
|
Cost Data – Toy Boats |
|
|
|
Work in process, July 1 |
|
|
|
Materials $800 |
|
|
|
Conversion costs 680 |
$1 480 |
|
|
Direct materials |
2,400 |
|
|
Direct labor |
1,580 |
|
|
Manufacturing overhead |
1,240 |
|
Using the weighted average method -
- Calculate the equivalent units of production for materials and conversion costs
- Calculate the unit costs of production for materials and conversion costs
- Calculate the assignment of costs to units transferred out and in process at the end of the accounting
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