Question

Assignment Question(s):​​​​​​(Marks5)

Q1.In managerial accounting, costs can be classified by behavior, traceability decision-making, external reporting , prime costs vs conversion costs and Function Wise Classification. Discuss all the above cost classifications and explain the importance of each classification. (2.0 marks)

Answer:

Q2. Compare Job Order Costing versus Process costing (one marks)

Answer:

Q3. ABC Company had the following inventories on May 1, 2019(amounts in SR) (two marks)

Raw Material​30,000

Finished Goods​40,000

WIP – Material​20,000

WIP – Labor​20,000

WIP – Manufacturing overhead​15,000

During the month, the cost of material purchased was 130,000 direct labor cost incurred was 140,000 and factory overhead applicable to production was 70,000, on May 31, inventories were:

Raw Material​40,000

Finished Goods​50,000

WIP – Material​15,000

WIP – Labor​25,000

WIP Manufacturing overhead​10,000

Required:

Prepare Journal entries on May 31, to show the flow of cost through the proper summary T accounts. Assume that sales values were 500,000 on credit

Answer:

2

Answer 1

1. Classification by behavior - fixed cost - Which do not change with the level of production, Variable - costs remails per constant per unit however varies with total production and semivariable costs -remains constant upto certain limit of volume and increases with each unit of production

Classification by traceability decision-making,

Classification by external reporting Product cost- Directly identifiable with the product and period cost directly identifiable with time.

Classification by prime costs vs conversion costs - Prime cost are aggregate of Direct material, Direct labour and Direct Expenses. When Factory OH are added to prime cost become conversion cost

Function Wise - Production cost, Administrationcst, Selling and Distribution cost and R& D cost.

2. Compare Job Order Costing - is method of costing where all the costs incurred for the particular job is allocated. versus Process costing - where product flows fromone process to another process and costs are calculated for each process separately. Finished goods of each process become the raw material of subsequent process.