Answer to Question #126189 in Accounting for Geofrey

Question

An investor would like to invest in orange juice production and he would like to know how much it will cost to produce a box of orange juice. He has shared a YOUTUBE clip of another orange juice production company to help with this activity. https://www.youtube.com/watch?v=T8KJGtMGMSY REQUIRED: From the clip and do the following: - a. Define and identify the cost object b. Identify and discuss all cost elements of orange juice production c. From (b) above, classify all elements of cost into direct and indirect cost and justify your answer. For example, Testers testing the quality of orange juice are direct labours because they are directly involved in the ensuring the quality of orange juice. d. Which product-costing system best describe orange juice production, justify your answer.

Answer 1

a.

the object of costs is a box of 1 liter juice

b.

in the production of orange juice, all cost elements are used:

 - raw materials and materials - oranges minus returnable waste, auxiliary materials purchased from the fuel, purchased energy of all kinds for production)

 - labor costs: core staff, support staff, management staff

 - deductions for social needs

 - depreciation of fixed assets

 - other fixed costs: payment for third-party services, utility bills, training costs, administration and management expenses

 - other expenses: representative expenses, travel expenses, property tax, land tax

c.

n the production of orange juice, all cost elements are used:

 - raw materials and supplies - oranges minus returnable waste, auxiliary materials purchased from fuel, purchased energy of all kinds for production) - direct

 - labor costs: core staff - direct, support staff, management staff - indirect

 - deductions for social needs - direct and indirect personnel accordingly

 - depreciation of fixed assets: production fixed assets - direct, other fixed assets - indirect

 - other fixed costs: payment for third-party services, utility bills, training costs, administration and management expenses - indirect

 - other expenses: representative expenses, travel expenses, property tax, land tax - indirect

d.

Process calculation method

The process-based calculation method is used in processing industries with the simplest production cycle, such as the production of orange juice

All of the above is characterized by a mass type of production, a short production cycle, a limited range of products (services), a single unit of measurement and calculation, a complete absence or insignificant size of work in progress. As a result, the manufactured products (the provided service) are both objects of cost accounting and an object of calculation.

        In the process-based method, costs are taken into account according to established costing items for the entire production process or, in addition, for individual stages of the production process. At the end of the reporting period, the total costs of the production process are divided by the number of units of output and calculate the cost of one costing unit.

Orange juice is a mass production, stock is limited in this case, there is practically no incompletion. You can calculate the cost of the stages — the cultivation of oranges and the processing of oranges into juice, but then divide all the costs by the number of liters obtained.