KK Ltd makes and sells one product, which has the following standard production cost. GHC Direct Labour (3hrs @ GH¢6 per hour) Direct materials (4kg @ GH¢7 per kg) 18 28 Production overheads: Variable Fixed 20 69 Standard Cost per unit Normal output is 16,000 units per annum. Variable selling, distribution and administration costs are 20 percent of sales value. Fixed selling, distribution and administration costs are GH¢180,000 per annum. There are no units in finished goods inventory at 1 January 2018. The fixed overhead expenditure is spread evenly throughout the year. The selling price per unit is GHg140. Production and sales budgets are as follows: Jan - June 2018 Jul - Dec 2018 Production (units) Sales (units) Required: 1. Prepare Income statement for the 2 periods using 8,500 7,000 8,000 7,000 Marginal Costing and Absorption costing Reconcile the Marginal Costing Profits with Absorption costing profits а. b. 2.
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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