In entities mass production involving, it is difficult to calculate on base of individual units, so to make issues simple costs are accounted making processes or departments as base. Let suppose a product is transformed in final shape after passing three departments A,B,C. materials , labor and FOH are will be accounted for department A, …
Contract Costing Easy to understand “ job order costing on larger scale”. For construction of building and other large scale wok which take considerable period of time to complete ,it is not possible to account for by job costing method so contract costing is used. CONTRACT A/C XXX Material issued from …
BATCH COSTING Batch costing is similar to job order costing ,the only difference is that costing focus moves from job orders to batches. It is practiced in industries producing similar components in form of batches e.g footwear industry ,so it is easy to account for whole batch of similar footwear collectively. Batch cost is calculated …
Marginal and Absorption Costing Methods The main difference between marginal costing and absorption costing is that Under Marginal costing all the fixed cost is treated as period cost whereas under Absorption costing the fixed cost is treated as product cost. Marginal Costing Absorption Costing Direct Material + Direct Labor + Variable FOH …
Allocation of overheads (OH) Apportionment of overheads (OH) Charging to overhead to specific department If OH relate to more than one department then they are apportioned on suitable basis Apportionment is made on reasonable basis like area, number of employees SECONDARY …
ABSORPTION COSTING Method of costing in which overheads are absorbed in relevant cost centers on appropriate rates known as overhead absorption rate (OAR). This rate is calculated on suitable basis like machine hour ,labour hour depending upon nature of activity OAR= total of production overhead / suitable absorption base Blanket Factory OH Rate …
TIME WORK SYSTEM In this system labor is paid on base of time worked. Total labour remuneration is sum of basic pay and overtime premium given. Basic pay is charged as direct labour and overtime is charged as indirect labour Basic pay(Hrs Worked * Rate Per Hr) = XX Overtime …
ABC Plan ABC Plan is used to control the inventory by applying security measures or controls on each category. Through this technique management is able to apply measures according to the value of item i-e high or tight security measures on high value items and vice versa. ABC Plan is also known as Material Control …
Entity needs to maintain inventory at appropriate level keeping balance in contrasting factors inventory levels e.g if large amount of inventory is ordered ordering cost is reduced but opportunity cost is much increased , money tied could be used for other profitable investments. So keeping all factors in mind entity needs appropriate models to be …
Small businesses maintain accounts for individual job orders .Due to lack of huge manufacturing orders they find ease to maintain for cost accounts on basis of separate orders .this senarios is the main theme behind job order costing. Accounts for job orders help SMEz to trace separate material , labor and other costs and certain …