Cost Accounting: Job Costing, Equivalent Units, And Joint Cost Allocation

Answer to Question 1: Job costing

Part A

Raw Material Account
Particular	Amount	Particular Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Amount
Opening balance	$ 16,755.00	Work-in-progress	$ 2,010.00
Raw material	$ 5,255.00	Closing Stock of Raw material	$ 20,000.00
Total	$ 22,010.00	Total	$ 22,010.00

Work-in Process Account
Particular	Amount	Particular	Amount
Opening balance	$ 6,700.00	Cost of goods manufactured	$ 30,110.00
Raw material	$ 2,010.00
Direct Labor	$ 14,800.00
Manufacturing OH	$ 14,800.00	Closing balance	$ 8,200.00
Total	$ 38,310.00	Total	$ 38,310.00

Accounts payable
Particular	Amount	Particular	Amount
Bank account	$ 6,700.00	Opening balance	$ 2,345.00
Closing balance	$ 900.00	Raw Materials purchased	$ 5,255.00
Total	$ 7,600.00	Total	$ 7,600.00

Finished Goods
Particular	Amount	Particular	Amount
Op balance	$ 8,790.00	Cost of goods sold	$ 30,000.00
Cost of goods manufactured	$ 30,110.00	closing balance	$ 8,900.00
Total	$ 38,900.00	Total	$ 38,900.00
Cost of goods sold
Particular	Amount	Particular	Amount
Finished Goods	$ 30,000.00	Cost of sales	$ 30,000.00


Total	$ 30,000.00	Total	$ 30,000.00

Calculation of Closing WIP
Particulars	Amount
Material	$ 7,000.00
labour	$ 1,200.00
Closing WIP	$ 8,200.00

calculation of Overhead absorption rate
Particulars	Amount
Overhead (Budgeted)	$ 12,000.00
Budgeted Labor hours	3000
Overhead Absorption rate	$ 4.00

calculation of Labor hour rate
Particulars	Amount
Labor amount	$ 1,200.00
Labor hours	300
Labor hour Rate	4.00

Part B

It can be inferred that the excel spreadsheet was created first, than the manual sheet. This is mainly because, with the excel spreadsheet, balances can be cross checked and closing balances can be matched automatically.

Part C

Job costing	Process Costing	Operating costing
The job costing process involves total accumulation of costs of labor, material in terms of specific jobs.	In this method, production is done based on different processes and costs are calculated based on different units of processes.	Operating costing method can be considered as a mixture of both job costing and process costing
It is applicable in software industry	It is applicable in manufacturing industry	It is applicable in customized programs.

Table: Difference between three costing systems

(Source: Liu & Kuang, 2014).

Calculation of Equivalent Units
Particulars	Direct Material	Direct Labor	Overhead	physical units
Units Completed	20000	20000	20000	20000
Closing WIP	10000	4000	4000	10000
Total	30000	24000	24000	30000
Calculation of Costs per equivalent unit
Particulars	Direct Material	Direct Labor	Overhead	Total
Cost in the Beginning	$ 10,000.00	$ 3,750.00	$ 2,250.00	$ 16,000.00
Costs incurred during the year	$ 50,000.00	$ 30,000.00	$ 18,000.00	$ 98,000.00
Total	$ 60,000.00	$ 33,750.00	$ 20,250.00	$ 114,000.00
Cost per equivalent unit	2.00	1.41	0.84	4.25
Statement showing assigning the cost to units transferred
Particulars	Direct Material	Direct Labor	Overhead	Total
Cost of units transferred	$ 40,000.00	$ 28,125.00	$ 16,875.00	$ 85,000.00
Closing WIP	$ 20,000.00	$ 5,625.00	$ 3,375.00	$ 29,000.00
Total	$ 60,000.00	$ 33,750.00	$ 20,250.00	$ 114,000.00
Work in Progress Account
Particulars	Units	Amount	Particulars	Units	Amount
Opening balance	5000	$ 16,000.00	Transfer to next process	20000	$ 85,000.00
Material Introduced	25000	$ 50,000.00
Labor		$ 30,000.00
overhead		$ 18,000.00	Closing balance	10000	$ 29,000.00
Total	30000	$ 114,000.00	Total	30000	$114,000.00

Units to be Accounted
Particulars	Amount
Units at the beginning WIP	5000
Units started during the month	25000
Total Units	30000

a) i)

Calculation of Joint cost per kg
Particulars	Amount
Process 1 Cost	$ 124,000.00
Sales of Sludge	$ (5,600.00)
Net Process cost	$ 118,400.00
Net Output (kg)	16000
Joint cost per kg	$ 7.40

Statement showing profit for Grade A products
Particulars	Amount
Sales of Grade A products	$ 252,000.00
Extra cost in Process 2	$ (72,000.00)
Joint cost	$ (66,600.00)
Packaging cost	$ (9,000.00)
Gross Profit	$ 104,400.00

Statement showing profit for Grade B products
Particulars	Amount
Sales of Grade B Products	$ 168,000.00
Extra Cost for Process 3	$ (48,000.00)
Joint cost	$ (51,800.00)
Packaging costs	$ (7,000.00)
Gross Profit	$ 61,200.00

ii)

Calculation showing allocation of Joint costs
Particulars	Amount
Net Process cost	$ 118,400.00
Sales of Grade A products	$ 252,000.00
Sales of Grade B Products	$ 168,000.00
Total Sales	$ 420,000.00
Joint cost / sales amount	$ 0.28

Statement showing profit for Grade A products
Particulars	Amount
Sales of Grade A products	$ 252,000.00
Extra cost in Process 2	$ (72,000.00)
Joint cost	$ (71,040.00)
Packaging cost	$ (9,000.00)
Gross Profit	$ 99,960.00

Statement showing profit for Grade B products
Particulars	Amount
Sales of Grade B Products	$ 168,000.00
Extra Cost for Process 3	$ (48,000.00)
Joint cost	$ (47,360.00)
Packaging costs	$ (7,000.00)
Gross Profit	$ 65,640.00

Workings:

Particulars	Amount
Process 1 Cost	$ 124,000.00
Process 1 Output Kg	17600
Sludge sold to road builders (kg)	1600
Net Output (kg)	16000
Transfer to Process 2 Output (kg)	9000
Extra cost in Process 2	$ 72,000.00
Grade A output from process 2	9000
Selling Price Grade A output	$ 28.00
Transfer to Process 3 (kg)	7000
Extra Cost for Process 3	$ 48,000.00
Grade B output from Process 3 (kg)	7000
Selling Price Grade B output	$ 24.00
Sludge sells (per kg)	$ 3.50
Packaging cost	$ 1.00

From the above table, it can be inferred that revenue of byproduct is being deducted from process 1. Therefore, cost of process 1 has decreased which in turn has increased the total profit of the firm. On the other hand, revenue has being treated as a separate income. From this, it can be inferred that revenue and expenditure has been adjusted.

Answer to 4A 1.

Calculation showing actual hours worked
Particulars	Amount
Standard Direct Labor Rate	$ 12.00
Actual Direct labor rate	$ 14.00
Standard Direct labor hour	12000
Direct Labor Usage Variance (A)	$ 11,000.00
Standard Cost (B)	$ 144,000.00
Standard cost of Actual Hours (A+B)	$ 155,000.00
Actual Hours Worked	12917

Statement showing calculation of Actual Purchase Price
Particulars	Amount
Standard unit price of material	$ 5.00
Actual Quantity purchased and used	2000
Standard Quantity allowed for actual production	1800
Material Purchase price variance (favorable) (A)	$ 4,000.00
Standard Costs of actual quantity (B)	$ 10,000.00
Actual Costs (B-A)	$ 6,000.00
Actual Purchase price	$ 3.00

Needles, Powers & Crosson, (2013) opine that there are several reasons for calculation of variances. Variances can be considered as very useful in case of planning of production for the different organizations. With the help of measurement of variances, costs can be appropriately controlled.

Material price variance is the difference between standard price and actual price of material. If actual price of the variance is more, then, it can be considered as unfavorable condition for the organization. Due to this reason, material price variance can be considered as useful for the organizations (Henri, Boiral & Roy, 2016).

Overhead variance analysis helps to calculate the total variance of indirect expenses over the budgeted one. It helps to control indirect expenses in an effective manner (Liu & Kuang, 2014).

Conclusion

It can be concluded that variance analysis can be considered as extremely useful for the organizations. In addition to this, variance analysis helps to control costs and improve efficiency and productivity of the organization

5A.

Calculation of Budget
Particulars	Mar-31	Jun-30	Sep-30	Total
Opening inventory	47890	42000	42000	131890
Purchase	64610	72873.6	71673.6	209157.2
Closing Inventory	42000	42000	42000	126000
Cost of goods sold	70500	72873.6	71673.6	215047.2
Sales( Cash + Credit)	117500	121456	119456	358412
Gross Profit	47000	48582.4	47782.4	143364.8

Budgeting can be considered as non-technical process. It helps to estimating total amount of expenses for a particular period of time in future. The process of budgeting can be considered as a blue print of the organization in order to make maximum efficiency for the organization. In addition to this, it can be inferred that the role of budgetary analysis is extremely pivotal for the success of the organization. In addition to this, budgetary method helps to integrate different management activities through different types of technical aspects. On the other hand, it can be also inferred that, budgetary process can also be considered as a political process. This is mainly because, Governments also get involved into budgetary analysis by abiding by different revenue and fiscal policies for the different economies. However, it can be also inferred that most of the modern organizations considers the process of budgeting to accomplish their short term and long term goals and objectives. For this reason, the role of budgeting plays a pivotal role for most of the organizations (Drury, 2013).

The above cartoon image shows the process of budget in a humorous manner. The management of the organization is about to plan for the budget throughout the night in order to plan effectively. This has been shown in this manner.

References

Drury, C. M. (2013). Management and cost accounting. Springer.

Henri, J. F., Boiral, O., & Roy, M. J. (2016). Strategic cost management and performance: The case of environmental costs. The British Accounting Review, 48(2), 269-282

Liu, Y., & Kuang, Y. (2014). The Establishment of Management Accounting System in Administrative Institutions. Journal of Accounting and Economics, 2, 003.

Melnyk, S.A., Bititci, U., Platts, K., Tobias, J. & Andersen, B., (2014). Is performance measurement and management fit for the future?. Management Accounting Research, 25(2), pp.173-186

Needles, B. E., Powers, M., & Crosson, S. V. (2013). Financial and managerial accounting. Nelson Education.

Turn in your highest-quality paper
Get a qualified writer to help you with

“ Cost Accounting: Job Costing, Equivalent Units, And Joint Cost Allocation ”

Get high-quality paper

NEW! AI matching with writer