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BUS 535 WU Wk 2 Managerial Accounting Process Costing Example

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WEEK 2 DQ
Rushikesh Ajay Ambildhok
Managerial Accounting BUS 535
5/8/2021
Dr, Yvan Nezerwe
Westcliff University
1. Explain the process costing income statement and provide a hypothetical example of process
costing income statement in a manufacturing enterprise. Explain how unit product cost is
evaluated in this format. Provide in-text citations and explain your example in detail.
Solution:
A process costing system is the accounting method of cost-measurement where individual costs based
on various operations, processes, and departments are accumulated together (Soin, Seal, & Cullen,
2002). This process is highly effective for organizations where continuous production processes are
involved such as assembling mobile phones of the same model, or production of Wai-Wai noodles
where both are examples of identical mass-produced final goods.
Let us suppose that the entire manufacturing process of CG produced Wai-Wai noodles is based on
two processes which are production and packaging. Firstly, the noodles will be produced, then it will
be passed onto other department for packaging.
Table 1 presenting the statement for production department.
CG
Production Process
Unites Produced
15000
Costs
Direct Materials
100,000
Direct Labor
80,000
Overhead
10,000
Total
190,000
Loss (@16.67%)
2500
Unit Cost
15.2
It is assumed that a 16.67% loss is incurred during the production process, and only 12,500 units are
sent over for packaging.

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Table 2 presenting the statement for packaging department.
CG
Packaging Process
Unites Produced
12500
Production Costs
190,000
Costs
Direct Materials
35,000
Direct Labor
10,000
Overhead
500
Total
235,500
Loss (@5%)
625
Cost per Unit
19.8315789
The tables above provide the cost break-down of the entire production processes fragmented into
two different process. It has been seen that certain percentage of loss is incurred during both the
processes which are natural during manufacturing processes. During the production process, each
unit of the noodles cost around Rs. 15.2 to produce, whereas the cost went up to Rs. 19.83 after the
packaging process. Based on these cost-accountings, a hypothetical income statement has been
created and presented for CG below.
Table 3 presenting hypothetical process costing income statement for Wai-Wai noodles.
Selling Price per Unit
30
Units Sold
11875
Sales
356250
COGS
-235,500
Gross Profit
120,750
Variable Costs
-35,000

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WEEK 2 DQ Rushikesh Ajay Ambildhok Managerial Accounting – BUS 535 5/8/2021 Dr, Yvan Nezerwe Westcliff University 1. Explain the process costing income statement and provide a hypothetical example of process costing income statement in a manufacturing enterprise. Explain how unit product cost is evaluated in this format. Provide in-text citations and explain your example in detail. Solution: A process costing system is the accounting method of cost-measurement where individual costs based on various operations, processes, and departments are accumulated together (Soin, Seal, & Cullen, 2002). This process is highly effective for organizations where continuous production processes are involved such as assembling mobile phones of the same model, or production of Wai-Wai noodles where both are examples of identical mass-produced final goods. Let us suppose that the entire manufacturing process of CG produced Wai-Wai noodles is based on two processes which are production and packaging. Firstly, the noodles will be produced, then it will be passed onto other department for packaging. Table 1 presenting the statement for production department. CG Production Process Unites Produced 15 ...
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