Question

structions Carefully read each question and answer in the spaces provides Q4. XYZ Company reported the following costs Company reported the following costs and expenses for May 2018: (12 marks) Direct materials ... Direct labor.... Manufacturing overhead .... Selling expenses..... Administrative expenses... $70,000 $25,000 $14,000 $12.000 $26,000 Required: Calculate the following (Show formula and solutions). 1. Total amount of period costs: (3marks) 2. Total amount of conversion costs? (3marks) Total amount of prime costs? (3marks) END OF SECTION ONE

Answer 1

PERIOD COST Period cost refers to all those costs which are not related or tied with the production process of the company i.e., they are not assigned with any of the particular product of the company and are thus shown in the financial statement of the company for the accounting period in which they are incurred. Period costs do not relate steps in the manufacturing process. Instead, these expenses are attributed to selling and general administrative activities. PERIOD EXPENSES = SELLING EXPENSES + ADMINISTRATIVE EXPENSES = 12000+26000 =$ 38000 CONVERSION COST Conversion costs is a term used in cost accounting that represents the combination of direct labour costs and manufacturing overhead. In other words conversion costs are a manufacturer's product or production costs other than the cost of a products"s direct materials.These are the manufacturing or production costs necessary to convert raw materials into products. CONVERSION COSTS = DIRECT LABOUR + MANUFACTURING OVERHEAD =25000+14000 =$39000 PRIME COST Prime cost is the direcr cost incurred in the process of manufacturing a product and typically includes the direct production cost of goods including the raw material and direct labour costs.It is essential part of total manufacturing expenses as costing and effective pricing of the goods are primarily determined on its basis. PRIME COSTS = DIRECT MATERIAL + DIRECT LABOUR =70000+25000 =$95000