Job Order Costing Examples, Practical Problems and Solutions

Problem No. 1: (Job Order Costing Cycle) The Excellent Company had the following inventories on April 1, 2019: $ Raw Material 50,000 Finished Goods 28,000 WIP – Material 2,000 WIP – Labour 30,000 WIP – FOH 12,000 During the month the cost of material purchased was $120,000, direct labor cost incurred was $160,000 and factory …

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Essential Details You Need To Know About Cost Accounting

Cost accounting is a method of accounting that helps to calculate the cost of different functions of a company, such as production, fixed price along with depreciation of capital equipment. At first, it measures and records these costs individually and then compares the input outcome with the actual result to assist the management of a …

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Difference Between Process Costing and Job Costing

A comparative study of process and job costing will help in understanding both systems in a better way. Difference Process Costing Job Costing 1. Costs are calculated process-wise and per unit cost is the average cost ascertained by dividing the total cost of the process by the number of units produced. 1. Costs are separately …

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Job Costing – Examples, Practical Problems and Solutions

Example (Problem) No. 1 A job No. 58 passes through three departments namely X, Y and Z. The following information is given to you regarding this job: Required: You are required to calculate the cost of job No. 58 from the above figures. Solution Note: Calculation of overhead chargeable to Job No. 58 has been …

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Characteristics of an Ideal System of Cost Accounting

A good system of cost accounting is that which achieves the objects of costing in the best possible way and brings to the business. An ideal system of costing should possess the following characteristics: 1. Simplicity Costing system should be simple to operate and easy to understand. The facts, figures and other information revealed by …

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Essential Factors to be Considered for Designing a Cost Accounting System

For ensuring the efficient and successful operation of the cost accounting system, certain factors are to be given due consideration while designing such a system. These factors may be given as follows: (i) Technical Details of the Business: All the technical details of the business concern, its organizational structure, manufacturing procedure and process, selling and …

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Advantages of Cost Accounting

Cost accounting system renders invaluable services to the manufacturers, management, employees, investors, consumers and Government. These services or advantages may be summarized as follows: (A) Advantages to manufacturers and management The main advantages of a sound cost accounting system to the manufacturers and management are: 1. Ascertainment of cost: The principal object of cost accounting …

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Similarities and Differences Between Cost Accounts and Financial Accounts

Similarities Cost accounts and Financial accounts which are kept quite separate in a business concern, are similar in certain respects while in some other respects these differ from each other. The various  similarities between cost accounts and financial accounts may be given as follows: (i) Both cost accounts and financial accounts are maintained on the …

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Comparison between Cost Accounting and Financial Accounting

Cost accounting is very closely related to financial accounting. It is generally said that the cost accounting system is complementary to the financial accounting system. According to L. W. Hawkins—”the ordinary trading account is a locked warehouse of most valuable information, to which the cost system is the key.” The Trading and Profit and Loss …

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Costing, Estimating and Pricing

Sometimes there may arise confusion as regards the exact meaning of the terms ‘Costing‘, ‘Estimating‘ and ‘Pricing‘, which are used in connection with cost accounts. The exact meaning of these terms should be understood at this stage. Costing meanings and definition ‘Costing’ means ascertaining the actual cost. It can be defined as ascertaining the actual …

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Costing

Definition The Institute of Cost and Management Accountants (ICMA) defines costing as “the techniques and process of ascertaining costs“. This simply speaks of technique and process. To elaborate it can be said that costing is a systematic process of determining the unit cost of output produced or service rendered, It analyses the expenditure incurred on …

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Cost Accounting Cycle

Cost Accounting Cycle embraces activities connected with verification and preparation of source documents, their journalizing, then posting to control accounts and subsidiary ledgers, closing of accounts and presenting results of operations of accounting period in the form of the income statement. Period Covered By Cost Accounting Cycle Accounting period means the time period covered by an …

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What is cost accounting?

Definition of Cost Accounting Cost accounting is the collection, processing and evaluation of operating data e.g., cost of products, operations, processes, jobs, quantities of materials consumed, labor time used etc. for internal planning and control as well as for external reporting. How does cost accounting help In better control over cost? Cost accounting helps in attaining …

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Difference between cost and expense

In manufacturing accounting, it is very much important to have a clear difference between cost and expense, though in general two terms are considered interchangeable. What is Cost Cost? The amount of cash paid or liability incurred for a commodity or service is referred to as the cost of that item. The commodity or service …

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Cost accounting formulas

The following formulas can be used to find out different costs. Prime cost = Direct material consumed + Direct labour Conversion Cost = Direct material + Factory overhead Factory cost = Direct material + Direct labour + Factory overhead Cost of Goods Manufactured = Direct material consumed + Direct labour + Factory overhead + Opening …

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Equivalent units of production

Definition of Equivalent units of production A department’s output is always stated in terms of equivalent units of production. Equivalent units can be defined as the number of units that could have produced given the total amount of manufacturing effort expended for the period under consideration. Explanation The problem of work-in-progress in process industries is …

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