Costs of conversion of finished goods
In 01, entity E started the production of product P. The production of P required direct materials of CU 100 and 10,000 hours in the cost unit “manufacturing” in 01. The following additional information is given (in CU):
|
Material cost center |
Production cost center |
|
|
Direct materials |
1,000 |
|
|
Direct labor |
1,250 |
|
|
Various overheads |
600 |
2,500 |
60% of the costs presented as “various overheads” in the table above represent fixed costs and 40% of them represent variable costs. Normal capacity of the production cost center is 100,000 hours p.a.
Posting status:
The costs mentioned above have been recognized as “cost of sales.”
Required
Prepare any necessary entries in E”s financial statements as at Dec 31, 01. Assume that the actual level of production in the production cost center in 01 is (a) 125,000 hours and (b) 75,000 hours.
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