18. Define cost pool and cost allocation base. Give three examples of a cost all
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Question
18. Define cost pool and cost allocation base. Give three examples of a cost allocation base.
19. Compare and contrast job costing and process costing and give two examples of each. What is the FIFO process-costing method and when would it be used?
FOURTH TIME POSTING MY QUESTION. Please help.
18. Define cost pool and cost allocation base. Give three examples of a cost allocation base.
19. Compare and contrast job costing and process costing and give two examples of each. What is the FIFO process-costing method and when would it be used?
FOURTH TIME POSTING MY QUESTION. Please help.
Explanation / Answer
Question 18.
A cost pool can be defined as a temporary account used to total the costs incurred for a specific group of activities.
A cost allocation base is certain quantity of items/services measured in certain units, such as machine hour, Labour hours or square feet area and which are used to allocate the cost to those department using those goods or services.
Question 19.
FIFO costing method means issue of the goods or services must be in the order of received. More clearly the goods received early must be sold first or used first.
In relating to the process costing, if cost are calculated using the same flow of process, it is called FIFO method of process costing.
Use of FIFO costing: When costs are increasing significantly due to inflation which lead to increase the product cost from one period to another FIFO costing methods are used.
Job costing Process Costing 1 Used for costing of individual Job. A job may consist of single unit or a group. Process costing is used when production is continuous. 2 Jobs are not identical or even products are not identical Identical products are manufactured 3 Production process ends with the production of a particular jobs Production process is continuous. 4 Cost are directly assigned to each job. And then averaged to find out cost of individual product Cost of equivalent production are determined to calculate the product cost. 5 Product costing can be carried out while Job is under process. Costing can be carried out once product passes through all the process. 6 Final value of the product can be calculated beforehand. Final value can be calculated only at the end of the final process. 7 Job costing is used mostly for customized products Process Costing method is used by the industries that are involved in mass production of homogenous products.Related Questions
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