Jack Company's production report for Job #901 showed that 5 vehicle parts out of 100 vehicle parts are spoiled. Costs assigned prior to the inspection point are P10,000 per part. When the spoilage is detected, the spoiled goods were valued at P2,000 per part, the net disposal value. Required: Compute the following: (1) Jack determined that the spoilage is caused by the specifications of a particular job. What amount should be debited to factory overhead? (2) Based on your answers to (1), how much is the cost per good unit? (3) If the spoilage is a normal characteristic of the production process, what amount should be debited to factory overhead? (4) If the spoilage is abnormal, how much is the cost per good unit?
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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