Comprehensive Analysis of Job Costing, Process Costing, and Budgeting

This assignment provides a comprehensive analysis of job costing and process costing, including the preparation of production cost reports, WIP accounts, and the calculation of gross profit using different cost allocation methods. It explores the application of the IF function for variance analysis, the preparation of a business report, and the preparation of a budget showing purchases, COGS, and inventory. The assignment also includes explanations of budgeting as a non-technical process and the treatment of by-product revenue. The student demonstrates an understanding of key financial concepts by completing tables, calculations, and providing examples. The solution also includes a discussion on the advantages of using spreadsheets over manual calculations. Finally, the assignment provides a budget report and explains budgeting as a non-technical process.

JOB COSTING PROCESS
COSTING

Table of Contents
QUESTION 1...................................................................................................................................1
a) Complete the table and calculate opening balance of the Direct materials control account...1
b) Did you create the manual solution or the spreadsheet solution first? Why?.........................2
c) Give your own examples of job costing, process costing and operations costing..................2
QUESTION 2...................................................................................................................................2
a) Prepare a production cost report for May, showing allocation of costs to closing WIP and
production transferred to next department..................................................................................2
b) Prepare WIP account for first production department for May..............................................3
QUESTION 3...................................................................................................................................3
a) Calculate gross profit for products..........................................................................................3
1. Physical units approach to allocate joint costs........................................................................3
2. Net realisable value approach to allocate joint costs..............................................................4
b) Explain the reasons for your treatment of the by-product revenue and Describe one other
way in which the by-product could have been deal with............................................................5
QUESTION 4...................................................................................................................................5
a) Apply IF function to determine favourable or unfavourable variances..................................5
b) Prepare business report...........................................................................................................5
QUESTION 5...................................................................................................................................6
a) Prepare budget showing purchases, COGS and inventory for nine months...........................6
b) Describe budgeting as non-technical process.........................................................................6
c) Find a humorous cartoon image relevant to budgeting on the web........................................7

QUESTION 1
a) Complete the table and calculate opening balance of the Direct materials control account
Direct material account
Particulars Amount Particulars Amount
To balance B/d 105645 By WIP 62900
To Account payable 5255 By factory overhead 48000
110900 110900
WIP account
Particulars Amount Particulars Amount
To balance B/d 6700
To direct labour 1200
To direct material 7000
To overhead 48000 By balance B/d 62900
62900 62900
Finished goods account
Particulars Amount Particulars Amount
To balance B/d 8790 By COGS 89380
To balance B/d 8790
To completed jobs 62900
By balance c/d 8900
89380 89380
Accounts payable account
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Particulars Amount Particulars Amount
To bank 6700 By balance B/d 2345
To balance B/d 900 By Direct material 5255
7600 7600
COGS account
Particulars Amount Particulars Amount
To direct material 5255 By inventories 94635
To Finished goods 89380
94635 94635
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b) Did you create the manual solution or the spreadsheet solution first? Why?
The above calculation swill be performed by an individual in excel spreadsheets s it helps
an entity in order to perform all the calculations in quick way as this will facilitate an individual
in generating higher business outcomes for their own betterment. The main reason of adopting
the spreadsheet rather than manual solution is that it helps me to present the solution in a
graphical format. Therefore, it reduced the wastage time in calculating the data figures as it
facilitates me to just put the formula to made the solution in most effective manner. Therefore, in
the manual spreadsheet there is not any kind of facility to calculating the complex problem into
the paper. The main advantages is that it allow me to modify the solution by just putting or
updating the values in the formula cell.
c) Give your own examples of job costing, process costing and operations costing
Examples of job costing includes assigning various costs to al he jobs included I the
business such as medicines, chemical products. Job costing includes a detailed information
regards to production cost accumulation to the units group. For instance if there is a design of a
custom piece of furniture than it would be taken as a job costing system. Therefore, it includes
all the labour cost for a particular specific item of a furniture then it will be compiled into the
cost sheet. Process costing includes manufacturing of products in which costs of all the business
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processes that are will be included. Furthermore, it also involved all the accumulated cost for the
long production process. It is used for the standardized products and job costing method are used
for the unique goods. Operations costing involve setting process of hotels and transportation
services offered by an entity order to attract variety of users in the external business
environment. It is applicable into the complex manufacturing environment and it is a mixture of
both types of costing are job costing method and process costing method that needed to produce
various type of production process for the purpose of produce a final product.
QUESTION 2
a) Prepare a production cost report for May, showing allocation of costs to closing WIP and
production transferred to next department
Units account for Units
Opening WIP 5000
Started during 25000
Total units accounts for 30000
Equivalent units
Units account for Units Material Conversion costs
Transferred out 20000 20000 6000
Closing WIP 10000 10000 4000
30000 30000 10000
Particulars costs
Material 60000 60000 48000
Labour 30000
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Total costs 90000
Unit costs 3 2 1.6
b) Prepare WIP account for first production department for May
Costs to account for
Opening WIP 10000
Incurred during period 80000
Total costs to account for 90000
Cost accounted for
Transferred out 60000
Materials 40000
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Conversion costs 16000
Total costs 116000
QUESTION 3
a) Calculate gross profit for products
1. Physical units approach to allocate joint costs.
Particular Amount
Quantity of product
A 9000 kg
B 7000 kg
Total quantity of product 16000 kg
Total quantity production 17600
Total costs
Chemical costs 124000
A grade Liniment costs 72000
B grade liniment costs 48000
Total costs $144,000.00
Cost allocation to joint product= Quantity of product/ Quantity of total production*Total joint
costs
= 16000 kg/17600*144000
= $130909
Particulars A B Total profit
Sales 252000 168000
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-Costs 130909 130909
Profit 121091 37091 158182
2. Net realisable value approach to allocate joint costs
Net realisable value= NRV of product/NRV of total production *Total joint costs
NRV= Estimated sales value- estimated costs to process
Particulars A B Total profit
Quantity 9000 7000
Sale value 252000 168000
Further processing
costs
9000 7000
NRV of product 252000-9000
243000
168000-7000
161000
Total costs 144000 144000
NRV 144000*243000/
(243000+161000)
86613.86
144000*161000/
(243000+161000)
57386.14
Profit 156386.14 110613.86 267000
b) Explain the reasons for your treatment of the by-product revenue and Describe one other way
in which the by-product could have been deal with
It can be said from the above results that the profit incurred in the business while
designing various products such as A and B. It can be said that an entity will incur higher amount
of profits with the help of using net realisable value in which costs will be reduced from the
available sales and the revenue earned by an entity within a particular time period.
Cost allocation is regarded as one of the important approach for a entity in order to
achieve all the desired market aims and targets in improving existing business of an entity.
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Allocation of costs is important aspects of an organisation in which various aspects will be
considered by the firm in order to grab higher market advantages.
QUESTION 4
a) Apply IF function to determine favourable or unfavourable variances
Particulars Amount (in $)
Standard direct labor rate 12
Actual direct labor rate 14
Standard direct labor hours 12000
Direct labor usage variance - unfavorable 11000
Standard unit price of materials 5
Actual quantity purchased and used 2000
Standard quantity allowed for actual production 1800
Material purchase price variance - favorable 400
Actual hours worked 11083
Actual purchase price 4.78
Hours worked variance Unfavourable
Purchase variance Favourable
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Illustration 1: IF function for determining
hours worked variance
Illustration 2: IF function for determining
Variance for material purchase price
b) Prepare business report
To,
Senior management
Date: 3rd May, 2017
It is reported to the higher management teams that material price and labor hour variance is
favorable. Hence, it is positive for the business unit that personnel are performing business
activities according to the budgeted figures. Besides this, it can be stated that there are
several other areas in which variance analysis technique can be used by the firm to assess
the deficiency level. Sales, profit and overhead etc. are the main areas in which variance
analysis technique can be used. On the basis of this aspect, by making comparison of
actual sales and profit figures with the budgeted amount business unit can identify
deficiencies. In this way, by practicing variance analysis technique firm would become
able to assess deviations and t strategic hereby become able to take corrective action within
the suitable time frame. By considering the overall analysis, it is recommended to the
business unit to employ the technique of variance analysis and thereby make improvement
in the performance by taking strategic actions. Variance analysis are used by most of the
organization for the purpose of analysis among the planner behavior and actual . It can be
of two types that are favorable variance when the actual sales profit exceed the expected
sales. Beside this, there is an unfavorable variance when the expected sales are more than
the actual sales. The main benefits from the variance analysis is that it helps the firm able
to control the business function accordingly by make comparison among the actual sales
and expected sales. It also allows the firm to know the fluctuation in the business and
control the cost in most effective manner.
Sincerely
Financial analyst
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QUESTION 5
a) Prepare budget showing purchases, COGS and inventory for nine months
Particula
rs
Quarter ended Nine
month
total
31-3-2017 30-6-2017 30-9-
2017
31-12-
2017
Cash sales 20000 65000 43456 128456
Credit
sales
97500 56456 76000 229956
Total
sales
117500 121456 119456 120000 358412
COGS 70500 72873.6 71673.6 72000 215047.2
Opening
stock
47890 56862.08 56502.08 56600 99514.16
Purchases 34252.08 40490.56 41428.48 84114.16 -80533.04
Closing
stock
56862.08 56502.08 56600 99514.16 35000
GP 47000 48582.4 47782.4 48000 143364.8
b) Describe budgeting as non-technical process
To,
Senior management
Date: 3rd May, 2017
It is reported to the higher authority of business unit that budget is not a technical process.
It that under which through which the government approved the budget. For this the
department of finance prepare the documentation on worksheet that helps them to
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