. Prepare a schedule of cost of goods manufactured. b. Was the overhead underapplied or overapplied? By how much? c. Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Baab Corporation is a manufacturing firm that uses
| Beginning Balance | Ending Balance | |||
| Raw materials | $ | 14,400 | $ | 22,400 |
| Work in process | $ | 27,400 | $ | 9,400 |
| Finished Goods | $ | 62,400 | $ | 77,400 |
The company applies
- Raw materials were purchased, $315,400.
- Raw materials were requisitioned for use in production, $307,400 ($280,600 direct and $26,800 indirect).
- The following employee costs were incurred: direct labor, $377,400; indirect labor, $96,400; and administrative salaries, $172,400.
- Selling costs, $147,400.
Factory utility costs , $10,400.Depreciation for the year was $151,000 of which $135,000 is related to factory operations and $16,000 is related to selling, general, and administrative activities.- Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,080 machine-hours.
- Sales for the year totaled $1,269,000.
Required:
a. Prepare a schedule of cost of goods manufactured.
b. Was the overhead underapplied or overapplied? By how much?
c. Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold.
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