Question

All-win Engineering limited uses Process Costing system. Following data is available for Department:-1 for the month of May, 2020:
Quantitative data:
Beginning work in process inventory ……………………………………            5,000 units
Units put into process during the month …………………………………          55,000 units
Units completed and transferred to department: 2 during the month …….         52,000 units
Units in work in process closing inventory at month end ……………….            5,000 units
Cost data:
 Units in beginning work-in-process inventory contains Cost, as follows:
Direct materials.........................................................................................             Rs 36,000
Direct labor...............................................................................................                   38,000
Factory overhead.......................................................................................                  42,000

 Costs added during the month are as follows:
Direct materials consumed ………………………………………………          Rs280,400             
Direct labor incurred …………………………………………………….               321,125
Factory overhead applied ……………………………………………….               339,225
Other statistical data:
 Work in process opening inventory is completed 75% as per direct material and 60% as per conversion cost.
 Work in process closing inventory is completed 80% as per direct material and 65% as per conversion cost.
 All losses are normal and occurred at the beginning of the month.

Required:
i).Prepare the Cost of Production Report for Department: 1 for the month of May, 2020, if company uses “Weighted Average costing system”.
                                                                                                                                                                   Marks: 8
ii). Distinguish between process costing and job order costing, and give at least three examples for each one.

Answer 1

Job costing is used where products are manufactured according to customers order. As such each job is different from another one. Process costing is used in industries where products are made for store and sell later.

Differences between Process costing and Job order costing

1. Job costing is used for non standard products where as process costing is used for standard products.

2. Job costing is used for very small production . Process costing is used for big production

3. In Process costing average is taken and in job costing specific costs are calculated.

4. Processes costing the production is continuous where as in job costing is used in specific products or services.

5. In Processes costing the output of one proess will be the input of next process where as in job costing is used in specific products or services.

6. In Processes costing different processse may be required to get the final product where as in job costing is used where he production is made at the same time.

Job costing used in:

Building design for specific house, printing press and workshop for repairs.

Process costing used in:

Chemical industries, production of bricks and production of cement.