Job Costing, Work-in Process Account, Material And Labour Cost

Work-in Process Account

1. a)

Job Costing

Raw Material Account
Particular	Amount	Particular	Amount
Opening balance	=+F8-D7	Work-in-progress	=+D16
Purchase of Raw material	=+F24	Closing Stock of Raw material	20000
Total	=D6+D7	Total	=F6+F7

Work-in Process Account
Particular	Amount	Particular	Amount
Op balance	6700	Cost of goods manufactured	=+J7
Raw material	=+F19-D15-D17-D18
Direct Labour	=+J33*3700
Manufacturing OH	=3700*D33	Closing balance	=+J26
Total	=SUM(D15:D18)	Total	=SUM(F15:F18)

Finished Goods
Particular	Amount	Particular	Amount
Op balance	8790	Cost of goods sold	=+J17
Cost of goods manufactured	=+L8-J6	closing balance	8900
Total	=+J6+J7	Total	=+L6+L7

Accounts payable
Particular	Amount	Particular	Amount
Bank account	6700	Op balance	2345
Closing balance	900	Raw Materila purchased	=+D25-F23
Total	=+D23+D24	Total	=+F23+F24

 Cost of Goods Sold:

Cost of goods sold
Particular	Amount	Particular	Amount
Finished Goods	=+L17	Cost of sales	=+(48000/160)*100
Total	=+J17	Total	=+L17+L18

 b) The manual solution was initially created since it involved large number of computations ranging from Raw Materials Account, Work-In-Progress,Finished Goods, Accounts payableandCost of Goods Sold. All the heads were opened first and then data relevant to each heads were entered. Later on the manual solution was then entered into the excel spreadsheet.

c) 

Basis of comparison	Job costing	Process Costing	Operational Costing
Meaning	Job costing can be defined as the computation of cost of a special contract or work where the work is executed according to the instruction of customers.	Process costing refers to the method where cost, which are charged to numerous procedure and operations, are determined.	Under operational costing products may be of homogeneous in nature but are different in terms of materials
Assignment of cost	Computing cost of each job	Initially cost is ascertained for each process and then it is spread over units manufactured.	Operational costing represents the differences in the components of parts that are used to produce a product.
Suited industry	Job costing is mainly suitable for industries produces products according to the order of customers	Process costing is suitable for industries where production is carried out in large number or in mass	It is mainly suited for industries that produces goods of homogeneous in nature with little difference
Examples	An example of job costing involves salaries for labours working in particular process	An example of process costing includes cost of manufactured goods undertaken by different departments.	For instance laptop computers have inbuilt screens however the size of screens are different from each other.

2. a)

Calculation of Equivalent Units
Particulars	Direct Material	Direct Labor	Overhead	physical units
Units Completed	20000	20000	20000	20000
Closing WIP	=+M8-D5	=+D6*0.4	=+D6*0.4	=+D6
Total	=+D5+D6	=+E5+E6	=+F5+F6	=+G5+G6

Calculation of Costs per equivalent unit
Particulars	Direct Material	Direct Labor	Overhead	Total
Cost in the Beginning	10000	=+(6000/160)*100	=+(6000/160)*60	=SUM(D12:F12)
Costs incurred during the year	50000	30000	=+E13*0.6	=SUM(D13:F13)
Total	=+D12+D13	=+E12+E13	=+F12+F13	=+G12+G13
Cost per equivalent unit	=+D14/D7	=+E14/E7	=+F14/F7	=+D15+E15+F15

Statement showing assigning the cost to units transferred
Particulars	Direct Material	Direct Labor	Overhead	Total
Cost of units transferred	=+D15*D5	=+E15*E5	=+F15*F5	=SUM(D21:F21)
Closing WIP	=+D15*D6	=+E15*E6	=+F15*F6	=SUM(D22:F22)
Total	=+D21+D22	=+E21+E22	=+F21+F22	=+G21+G22

b)

Work in Process Account
Particulars	Units	Amount	Particulars	Units	Amount
Opening  balance	=+M6	=+G12	Transfer to next process	=+G5	=+G21
Material Introduced	=+M7	=+D13
Labour		=+E13
overhead		=+F13	Closing balance	=+G6	=+G22
Total	=SUM(D29:D32)	=SUM(E29:E32)	Total	=SUM(G29:G32)	=SUM(H29:H32)

3. a) Particulars                                           Amount

Process 1 Cost                                            $1,24,000.00

Process 1 Output Kg                                            17600

Sludge sold to road builders (kg)                          1600

Net Output (kg)                                                   16000

Transfer to Process 2 Output (kg)      =                  9000

Extra cost in Process 2                       =         $72,000.00

Grade A out put from process 2       =                   9000

Selling Price Grade A output = $28.00

Transfer to Process 3 (kg)       = 7000

Extra Cost fot Process 3         = $48,000.00

Grade B output from Process 3 (kg) = 7000

Selling Price Grade B output  =  $24.00

Sludge sells (per kg)   $3.50

Packaging cost            $1.00

Particulars	Amount
Process 1 Cost	124000
Process 1 Output Kg	17600
Sludge sold to road builders (kg)	1600
Net Output (kg)	=+D5-D6
Transfer to Process 2 Output (kg)	9000
Extra cost in Process 2	72000
Grade A out put from process 2	=+D8
Selling Price Grade A output	28
Transfer to Process 3 (kg)	=+D7-D8
Extra Cost fot Process 3	48000
Grade B output from Process 3 (kg)	=+D12
Selling Price Grade B output	24
Sludge sells (per kg)	3.5
Packaging cost	1

Calculations using physical unit approach:

Calculation of Joint cost per kg         

Particulars                    Amount

Process 1 Cost =          $1,24,000.00

Sales of Sludge =        $(5,600.00)

Net Process cost =      $1,18,400.00

Net Output (kg) =       16000

Joint cost per kg =       $7.40 

Calculation of Joint cost per kg
Particulars	Amount
=+C4	=+D4
Sales of Sludge	=-D6*D16
Net Process cost	=+D23+D24
=+C7	=+D7
Joint cost per kg	=+D25/D26

 Statement showing profit for Grade A products       

Particulars                                     Amount

Sales of Grade A products      = $2,52,000.00

Extra cost in Process 2            =  $(72,000.00)

Joint cost                                =  $(66,600.00)

Cost of Goods Sold

Packaging cost                       =  $(9,000.00)

Gross Profit                            =  $1,04,400.00

Statement showing profit for Grade A products
=+C22	=+D22
Sales of Grade A products	=+D10*D11
Extra cost in Process 2	=+-D9
Joint cost	=-D27*D8
=+C17	=-D17*D10
Gross Profit	=+SUM(D33:D36)

Statement showing profit for Grade B products        

Particulars                                   Amount

Sales of Grade B Products      =  $1,68,000.00

Extra Cost fot Process 3         = $(48,000.00)

Joint cost                               =  $(51,800.00)

Packaging costs                     =  $(7,000.00)

Gross Profit                           =  $61,200.00

Statement showing profit for Grade B products
=+C32	=+D32
Sales of Grade B Products	=+D14*D15
=+C13	=-D13
=+C35	=-D27*D14
Packaging costs	=-D17*D14
Gross Profit	=+SUM(D42:D45)

Calculation using Net Realisable value approach

Calculation showing allocation of Joint costs

Particulars                                         Amount

Net Process cost                     =  $1,18,400.00

Sales of Grade A products      =  $2,52,000.00

Sales of Grade B Products      =  $1,68,000.00

Total Sales                               =  $4,20,000.00

Joint cost / sales amount        =  $0.28

Calculation showing allocation of Joint costs
Particulars	Amount
=+C25	=+D25
=+C33	=+D33
=+C42	=+D42
Total Sales	=+J24+J25
Joint cost / sales amount	=+J23/J26

Statement showing profit for Grade A products       

Particulars                                    Amount

Sales of Grade A products      =  $2,52,000.00

Extra cost in Process 2            =  $(72,000.00)

Joint cost                                =  $(71,040.00)

Packaging cost                       =  $(9,000.00)

Gross Profit                            =  $99,960.00

Statement showing profit for Grade A products
=+I22	=+J22
=+C33	=+D33
=+C34	=+D34
=+C35	=-J27*J33
=+C36	=+D36
Gross Profit	=+SUM(J33:J36)

Statement showing profit for Grade B products        

Particulars                                Amount

Sales of Grade B Products =   $1,68,000.00

Extra Cost for Process 3    =     $(48,000.00)

Joint cost                          =      $(47,360.00)

Packaging costs                =      $(7,000.00)

Gross Profit                      =       $65,640.00

Statement showing profit for Grade B products
=+I32	=+J32
=+C42	=+D42
=+C43	=+D43
=+C44	=-J27*J42
=+C45	=+D45
Gross Profit	=+SUM(J42:J45)

b) By product, costing methods are used by the business when it has the production process from which the final products are split off at the later phase of production. There can be numerous split off points at each split off points products can be clearly recognised and the product is physically split away from the production procedure in order to further refine the product (Salako, & Yusuf 2016). One of the method of dealing the product by product is that in the question if the organisation incurs any cost following the split off point the cost will be probably associated with the specific product and this will possibly help in question “A” to more readily assigned to them. Therefore, if an organisation incus more than one by product cost before the split off point it could have been allocated to the products under the guidelines of GAAP or IFRS standards. 

Physical Unit Approach

4. a)

Calculation showing actual hours worked
Particulars	Amount
Standard Direct Labor Rate	12
Actual Direct labor rate	14
Standard Direct labor hour	12000
Direct Labor Usage Variannce (A)	11000
Standard Cost (B)	=+D8*D6
Standard cost of Actual Hours (A+B)	=+D10+D9
Actual Hours Worked	=+D11/D6

Statement showing calcuation of Actual Purchase Price
Particulars	Amount
Standard unit price of material	5
Actual Quantity purchased and used	2000
Standard Quantity allowed for actual production	1800
Material Purchase price variance (favourable) (A)	4000
Standard Costs of actual quanity (B)	=+D18*D19
Actual Costs (B-A)	=+D22-D21
Actual Purchasse price	=+D23/D19

b) The material price variance is referred as the product of real amount of direct material used and the difference amid the standard price and real price of the product per unit of direct material. Material price variance is computed on the purchase price in order to establish the competence of purchase department in getting the direct material at lower cost.

Purchase price variance are considered to be mandatory in the environment of manufacturing where the raw materials are bought from the suppliers and are delivered to the business as and when necessary (Kaplan & Atkinson, 2015). There are numerous reasons of computing the purchase price variance, which are as follows;

Issue of Layering: The cost of the product is taken into the consideration from the scheme of layering of inventory in the form of first in first out. Due to this, the outcome of the real cost differs by a significant amount from the current market value.

Deficiency of materials: The deficiency of materials tends to increase the cost the products

Assumptions of amounts: The cost of product is generated based on the procurement quantity than the sum on which an organisations purchases. 

Purchase price variance can help the management in measuring the efficiency of the organisation on product expenditure. If an organisation it involved in the business of commodity, selling it must take on the standards of purchasing materials. Once the purchase department have formulated the price of the purchased materials and have received consent for the budget from the administration, the purchase department can inform the price in the form of standard price of those materials during the commencement of the fiscal year (Salako, & Yusuf 2016). This will enable the purchase department to identify the purchase price variance when they commence the procedure of receiving inventory in the warehouse.

Purchase price variance plays a vital role in regulating the cost of materials and creates force for better resources of improved quality. The purchase department is able to measure the purchase price variance while making the purchase of raw materials. If there is any major amount of price variance, the purchase departments reclassifies the same into the inventory of the raw materials inventory of work in process, the cost of products and inventory of the finished products. Therefore, the process of reclassification of the purchase price variance is also referred as allocation of variance.

Net Realisable Value Approach

5. a) 

Calcualtion of Budget
Particulars	11383	11110	11202	Total
Opening inventory	47890	=+E13	=+F13	=SUM(E11:G11)
Purchase	=+E14+E13-E11	=+F14+F13-F11	=+G14+G13-G11	=SUM(E12:G12)
Closing Inventory	=35000*120%	=35000*120%	=35000*120%	=SUM(E13:G13)
Cost of goods sold	=0.6*E15	=0.6*F15	=0.6*G15	=SUM(E14:G14)
Sales( Cash+Credit)	117500	121456	119456	=SUM(E15:G15)
Gross Profit	=+E15-E14	=+F15-F14	=+G15-G14	=SUM(E16:G16)

b) Usually, the government budget states the plan, which lays down the programs, goals and objectives that is required to be achieved during the given period. It consist of the monetary value of the projected revenues and expenses, which will be incurred at a future date. Budgeting as the non-technical process for government forms the lawful document once the legislations approves it. At federal level, the budget is influenced by the fiscal, social, administrative and economic policies having collective impacts on the economy.

There are different disciplines and perspective are involved in the government budgeting. The perspective of accountant centres around the responsibility and the variance between the proposed and the actual resources expanding on the programs and public policy (Kaplan & Atkinson, 2015). Notwithstanding the views the government budgeting considered as more political instead of being considered as the technical. The technical feature of the government budget consist of the preparation of budget in line together with the application of laws, rules and administration standards. These consists of the reformation, instrumentalism of the interested group of determinants, procedure and policymaking. Initially reformist holds the opinion that budgetary decisions must be made in accordance with efficiency, which is opposed to politics.

The actions along with the political decision of the government are greatly influenced by the political considerations. On instrumental basis, budgetary decisions should be made based on the bargaining and consensus amongst the shareholders. It is noteworthy to denote that branches of government have asserted for the control of budgetary power in order to influence the power for processing the desired outcomes and political gains (Salako, & Yusuf 2016). The role of budgeting is often debatedwith the objective of policy development and support. Debates relating to policy is generally debated among the competitive stakeholders with the viewpoint of sorting out differences at the time of budget. Budgeting as a non-technical procedure consist of negotiating and interacting among the political actors and stakeholders that is the politicians and bureaucrats.

During the planning stage of the budget cycle, the public, interest groups, officials and the institutional stakeholders influence the executives to set the priorities for budget programs. The legislature together with the help of executive branch of government bargain in order to reach the required direction and focus on the budget. Therefore, decisions involving on reaching the budget are executed with the help of strategies, contracts and programs through negotiations and consensus (Kaplan & Atkinson, 2015). Hence, the budgetary procedure and system is regarded as more political than technical. It is necessary for the public administrations and higher management of public institutions to have a good understanding relating to the dynamics of government budgeting. Thus, this would help in political environmental negotiations towards formulating and budget for the betterment of the community. 

Product by Product Costing

c) 

The above stated picture represents the animated look at the budget where a cartoon character is glued on the data of monthly expenditure and analyses the way of cutting down the expenditure.

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