i. Calculate the full cost for each product. ii. What will be the selling price each to make a profit of 40% on cost?
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.
Two products were produced for a customer, Product A and Product B.
|
|
Product A GHS |
Product B GHS |
|
Direct material costs |
300,000 |
350,000 |
|
Direct labour costs |
400,000 |
270,000 |
|
Direct labour hours: Assembly Department Welding Department Finishing Department |
Hrs 1,000 1,500 750 |
Hrs 950 800 1,000 |
Required:
i. Calculate the full cost for each product.
ii. What will be the selling price each to make a profit of 40% on cost?
Product cost:
- The product cost relates to the manufacturing costs such as direct material, direct labor and manufacturing cost.
- Product costs are the required and integral part of producing the finished products.
- Product costs are recorded by the companies only when they are incurred as an inventory.
- Inventory costs are not treated as an expense until the company sells its finished goods inventory. Till then these expenses are recorded as cost of goods sold.
Requirement i)
Calculate the full cost for each product:
Step by step
Solved in 3 steps with 2 images
