Question
In Job Costing, we accumulate costs in the debit side of the WIP account. Jobs are either finished or not finished. That means that those
In Job Costing, we accumulate costs in the debit side of the WIP account. Jobs are either finished or not finished. That means that those same costs end up going to either: the ending WIP balance, or the credit side of the WIP account. How might this be similar to cost allocation that we just studied?
When all is said and done, in what ways is this SIMILAR to job costing?
In what ways is it different?
- Lets pretend we are making glasses of water. Basically, our materials consist of water and the glasses. The conversion is pouring. Got it? Great.
Lets also assume that for the period, my materials cost $100 and the conversion costs were $300.
I start with no inventory. We manufacture POUR 100 glasses of water.
Whats the cost of a glass of water? What is the CGM (total) for the period?
- Now lets take the same cost information, but instead, you started pouring 100 glasses of water, but only got each one 60% filled. That is, we ended with 100 physical glasses, but each one was on filled 60% of the way up.
What was the CGM for the period? How many physical glasses of water did we start? How many did we finish?
If, instead of filling the cups all together, we filled them one by one; that is, when we finished filling glass #1, we then moved on to glass #1. How many would we have finished.
Same question. What was the cost per cup?
- Another example. Lets take #2 above. Its the next period. The first thing we do is finish the glasses from #2. Okay, that was easy. Now we start another batch. Again, we are filling them all at once. We start another batch of 50 glasses. We finish all of those. Then we start another batch of 20, which are 20% filled at the end of the period.
How many units did we actually produce? In other words, how many WHOLE GLASSES OF WATER were poured.
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