Goods in transit

What is meant by goods in transit? Definition Goods in transit are goods that have been purchased but have not yet been received by the purchaser. These goods can be easily overlooked when counting the ending inventory because they are not physically located at either the seller’s or the purchaser’s warehouse. Accounting Treatment of goods … Read more

Periodic Inventory System

What is a Periodic Inventory System? Periodic inventory system does not keep continuous track of ending inventories and cost of goods sold. Instead, these items are determined only periodically, at the end of each quarter, each year, or other accounting period. Although this method may be easier to use for record-keeping purposes, it results in … Read more

Factory Overhead Practical Problems and Solutions

Factory Overhead Application Methods Problem No. 1 The IQIZ Company estimated its factory overhead of the next period at $160,000. It is estimated that 40,000 units will be produced at a materials cost of $200,000. Production will require 40,000 man-hours at an estimated wage cost of $80,000. The machines will run about 25,000 hours. Required: … Read more

Important techniques of labour costing

In this article, we are trying to explain some important techniques and formulas to calculate labour cost, payroll and incentive wages. 1. Measurement of Labour Turnover (a). Separation method: Labour Turnover = (No. of separations in a period / Average No. of Workers) x 100 LT = (NS / ANW) x 100 (b). Replacement Method … Read more

Labour Costing Practical Questions with Answers

Question No. 1 Calculate total monthly remuneration of three workers: A, B and C. (a). Standard production per month per worker 1,000 units. (b). Actual production during the month: A: 850 units B: 750 units C: 950 units (c). Piece work rate is 10 cents per unit (actual production) (d). Additional production bonus is $10 … Read more

Predetermined Overhead Rate

What is predetermined overhead rate? – Definition: A predetermined overhead rate is an allocation rate that is given for indirect manufacturing costs that are involved in the production of a product or various products. It is used to estimate the manufacturing costs that will take place. The estimation takes place at the beginning of an … Read more

Cost of production report (CPR) questions and answers

Question No. 1 The MST Manufacturing Company produces one product that passes through just one process in a manufacturing cycle lasting approximately 18 days. Therefore, there will generally be some work in process inventories at the end of each month. After MST started its manufacturing operations on 1st January, the costs of production for the rest of … Read more

Incentive Plans

What are Incentive Plans? – definition Incentive Plans are the techniques in which an organization keeps its employees motivated to perform their specific tasks with more effort and efficiency and pay several incentives to complete those tasks. Advantages of Incentives Generally, the following advantages result from the introduction of incentive plans in a factory: Rate … Read more