1. Calculate the production cost value for all orders (L101 to L105) as of April 30, 2020 2. Determine whether the manufacturing overhead allocated is too high or too low relative to actual costs. Make a journal to cover the over / underapplied to Cost of Goods Sold (COGS) 3. Based on points 1 and 2, calculate the amount of work in progress (WIP), Finished Goods Inventory (FG), and Cost of Goods Sold (COGS) after adjustments on April 30, 2020 4. Make a transaction journal to record order No. L104 during April 2020
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.
LeMercs Inc produces various merchandise such as t-shirts, mugs, key chains, and others according to customer requests. Thus, companies use job order costing to record the cost of each order. The following is information regarding the cost of orders carried out by LeMerch on April 1, 2020:
The transactions that occurred during April 2020 regarding production at LeMerch were:
1. There are new orders during April 2020, namely L104 and L105.
2. The use of raw materials is as follows:
| No. Orders | Amount |
| L102 | 700,000 |
| L103 | 1,000,000 |
| L104 | 2,800,000 |
| L105 | 3,300,000 |
| Indirect Raw Materials | 2,000,000 |
3. Payment for production labor consists of:
| No. Orders | Amount |
| L103 | 800,000 |
| L103 | 1,200,000 |
| L104 | 2,000,000 |
| L105 | 1,600,000 |
| Indirect labor | 1,500,000 |
4. Manufacturing
5. Other actual
6. The status for each order on April 30, 2020 is as follows:
| No. Orders | Order Status | Selling price |
| L101 | Sold | 15,750,000 |
| L102 | Done, but not yet sold | N/A |
| L103 | Work In Process | N/A |
| L104 | Sold | 13,650,000 |
| L105 | Done, but not yet sold | N/A |
Questions:
1. Calculate the production cost value for all orders (L101 to L105) as of April 30, 2020
2. Determine whether the manufacturing overhead allocated is too high or too low relative to actual costs. Make a journal to cover the over / underapplied to Cost of Goods Sold (COGS)
3. Based on points 1 and 2, calculate the amount of work in progress (WIP), Finished Goods Inventory (FG), and Cost of Goods Sold (COGS) after adjustments on April 30, 2020
4. Make a transaction journal to record order No. L104 during April 2020
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