Sarina is a cost controller in a manufacturing company that produces ceramic products. The production of the products will go through two processing departments that are the molding and finishing department. The company uses weighted average process costing method in determining the unit cost of its products. She is reviewing the monthly production report of the finishing department that was prepared by her newly hired assistant cost controller. She gets confused with the figures in the report. It is not only the format of the report, but Sarina also concerns on the RM25.71 cost per unit which she felt is higher than their normal unit cost. The production and cost information extracted from report are shown below: Finishing Department Costs: Cost Incurred Work in process inventory, 1 October, RM8,208 450 units; materials 100% complete; conversion Consist of: 60% complete (i) transferred in cost RM4,068 (ii) materials cost RM1,980 (iii) conversion cost RM2,160 Costs transferred in during the month from the preceding department, 1,950 units RM17,940 Material costs added during the month RM6,210 Conversion cost incurred during the month RM13,920 Total cost for the department RM46,278 31 October, Finishing department costs assigned to: Unit completed and transferred out; 1,800 units RM25.71 per unit Work in process inventory; 600 units – materials 0% complete; conversion 35% complete RM0 Total departmental cost assigned to all units RM46,278 REQUIRED: Calculate the equivalent unit for Finishing Department based on the data provided in the report. Calculate the cost per equivalent units for Finishing Department. Determine the cost of ending work in process inventory and cost of units completed and transferred out of the Finishing Department. Explain why the unit cost on the new assistant cost controller’s report is higher than the unit cost determined in (a).
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.
Sarina is a cost controller in a manufacturing company that produces ceramic products. The production of the products will go through two processing departments that are the molding and finishing department. The company uses weighted average
Finishing Department Costs: Cost Incurred Work in process inventory, 1 October, RM8,208
450 units; materials 100% complete; conversion Consist of:
60% complete
(i) transferred in cost RM4,068
(ii) materials cost RM1,980
(iii) conversion cost RM2,160
|
Costs transferred in during the month from the preceding department, 1,950 units |
RM17,940 |
|
Material costs added during the month |
RM6,210 |
|
Conversion cost incurred during the month |
RM13,920 |
|
Total cost for the department |
RM46,278 |
|
31 October, Finishing department costs assigned to: |
|
|
Unit completed and transferred out; 1,800 units |
RM25.71 per unit |
|
Work in process inventory; 600 units – materials 0% complete; conversion 35% complete |
RM0 |
|
Total departmental cost assigned to all units |
RM46,278 |
REQUIRED:
- Calculate the equivalent unit for Finishing Department based on the data provided in the report.
- Calculate the cost per equivalent units for Finishing Department.
- Determine the cost of ending work in process inventory and cost of units completed and transferred out of the Finishing Department.
- Explain why the unit cost on the new assistant cost controller’s report is higher than the unit cost determined in (a).
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