Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: On July 1: Beginning inventories 850 units, 60% complete Direct materials cost $5,000 Conversion costs $4,000 During July: Number of units started 15,000 Direct materials added $155,000 Conversion costs added $83,520 On July 31: Ending inventories 1,600 units, 40% complete Using the FIFO method, the cost per equivalent unit for materials used during July was a.$10.78 b.$10.33 c.$10.65 d.$9.78
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.
| On July 1: | |
| Beginning inventories | 850 units, 60% complete |
| Direct materials cost | $5,000 |
| Conversion costs | $4,000 |
| During July: | |
| Number of units started | 15,000 |
| Direct materials added | $155,000 |
| Conversion costs added | $83,520 |
| On July 31: | |
| Ending inventories | 1,600 units, 40% complete |
Using the FIFO method, the cost per equivalent unit for materials used during July was
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