Analyzing Manufacturing Cost Accounts Fire Rock Company manufactures designer paddle boards in a wide variety of sizes and styles. The following incomplete ledger accounts refer to transactions that are summarized for June: Materials June 1 Balance 28,600 June 30 Requisitions (A) June 30 Purchases 115,000 Work in Process June 1 Balance (B) June 30 Completed jobs (F) June 30 Materials (C) June 30 Direct labor (D) June 30 Factory overhead applied (E) Finished Goods June 1 Balance 0 June 30 Cost of goods sold (G) June 30 Completed jobs (F) Wages Payable June 30 Wages incurred 122,500 Factory Overhead June 1 Balance 22,500 June 30 Factory overhead applied (E) June 30 Indirect labor (H) June 30 Indirect materials 15,300 June 30 Other overhead 108,500 In addition, the following information is available: a. Materials and direct labor were applied to six jobs in July: Job No. Style Quantity Direct Materials Direct Labor 201 T100 230 $21,330 $17,000 202 T200 400 31,100 26,000 203 T400 180 12,960 7,000 204 S200 310 34,410 31,000 205 T300 150 15,600 14,000 206 S100 100 6,900 3,000 Total 1,370 $122,300 $98,000 b. Factory overhead is applied to each job at a rate of 170% of direct labor cost. c. The June 1 Work in Process balance consisted of two jobs, as follows: Job No. Style Work in Process, June 1 201 T100 $6,600 202 T200 15,900 Total $22,500 d. Customer jobs completed and units sold in July were as follows: Job No. Style Completed in July Units Sold in July 201 T100 X 184 202 T200 X 320 203 T400 0 204 S200 X 260 205 T300 X 125 206 S100 0 1. Determine the missing amounts associated with each letter and complete the following table. If required, round amounts to the nearest dollar. If an answer is zero, enter in "0". Enter all amounts as positive numbers. Job No. Quantity June 1 Work in Process Direct Materials Direct Labor Factory Overhead Total Cost Unit Cost Units Sold Cost of Goods Sold No. 201 fill in the blank 1 $ 6,600 $ 21,330 $ 17,000 $fill in the blank 2 $fill in the blank 3 $fill in the blank 4 fill in the blank 5 $fill in the blank 6 No. 202 fill in the blank 7 15,900 31,100 26,000 fill in the blank 8 fill in the blank 9 fill in the blank 10 fill in the blank 11 fill in the blank 12 No. 203 fill in the blank 13 12,960 7,000 fill in the blank 14 fill in the blank 15 fill in the blank 16 fill in the blank 17 No. 204 fill in the blank 18 34,410 31,000 fill in the blank 19 fill in the blank 20 fill in the blank 21 fill in the blank 22 fill in the blank 23 No. 205 fill in the blank 24 15,600 14,000 fill in the blank 25 fill in the blank 26 fill in the blank 27 fill in the blank 28 fill in the blank 29 No. 206 fill in the blank 30 6,900 3,000 fill in the blank 31 fill in the blank 32 fill in the blank 33 fill in the blank 34 Total fill in the blank 35 $22,500 122,300 98,000 $fill in the blank 36 $fill in the blank 37 $fill in the blank 38 a. Materials Requisitions $fill in the blank 39 b. Work in Process Beginning Balance $fill in the blank 40 c. Direct Materials $fill in the blank 41 d. Direct Labor $fill in the blank 42 e. Factory overhead applied $fill in the blank 43 f. Completed jobs $fill in the blank 44 g. Cost of goods sold $fill in the blank 45 h. Indirect labor $fill in the blank 46 2. Determine the June 30 balances for each of the inventory accounts and factory overhead. Use the minus sign to indicate any credit balances. Materials: $fill in the blank 47 Work in Process: $fill in the blank 48 Finished Goods: $fill in the blank 49 Factory Overhead: $fill in the blank 50 Feedback 1 a & c. Direct and Indirect materials are requisitioned. Direct materials are recorded in Work in Process and Indirect materials are recorded in Factory overhead. b. The beginning work in process information is given. d, e & h. Direct labor cost information is given. Overhead is applied based on direct labor cost. f & g. Beginning Work in Process balances plus all current period manufacturing costs are included in the cost of completed jobs and jobs sold. 2. Insert your amounts calculated in (1) into the T accounts. Then determine the ending balances.
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.
Analyzing Manufacturing Cost Accounts
Fire Rock Company manufactures designer paddle boards in a wide variety of sizes and styles. The following incomplete ledger accounts refer to transactions that are summarized for June:
| Materials | |||||
|---|---|---|---|---|---|
| June 1 | Balance | 28,600 | June 30 | Requisitions | (A) |
| June 30 | Purchases | 115,000 |
| Work in Process | |||||
|---|---|---|---|---|---|
| June 1 | Balance | (B) | June 30 | Completed jobs | (F) |
| June 30 | Materials | (C) | |||
| June 30 | Direct labor | (D) | |||
| June 30 | Factory |
(E) |
| Finished Goods | |||||
|---|---|---|---|---|---|
| June 1 | Balance | 0 | June 30 | Cost of goods sold | (G) |
| June 30 | Completed jobs | (F) |
| Wages Payable | |||||
|---|---|---|---|---|---|
| June 30 | Wages incurred | 122,500 | |||
| Factory Overhead | |||||
|---|---|---|---|---|---|
| June 1 | Balance | 22,500 | June 30 | Factory overhead applied | (E) |
| June 30 | Indirect labor | (H) | |||
| June 30 | Indirect materials | 15,300 | |||
| June 30 | Other overhead | 108,500 |
In addition, the following information is available:
a. Materials and direct labor were applied to six jobs in July:
| Job No. | Style | Quantity | Direct Materials | Direct Labor | ||||||||
| 201 | T100 | 230 | $21,330 | $17,000 | ||||||||
| 202 | T200 | 400 | 31,100 | 26,000 | ||||||||
| 203 | T400 | 180 | 12,960 | 7,000 | ||||||||
| 204 | S200 | 310 | 34,410 | 31,000 | ||||||||
| 205 | T300 | 150 | 15,600 | 14,000 | ||||||||
| 206 | S100 | 100 | 6,900 | 3,000 | ||||||||
| Total | 1,370 | $122,300 | $98,000 |
b. Factory overhead is applied to each job at a rate of 170% of direct labor cost.
c. The June 1 Work in Process balance consisted of two jobs, as follows:
| Job No. | Style | Work in Process, June 1 | |||
| 201 | T100 | $6,600 | |||
| 202 | T200 | 15,900 | |||
| Total | $22,500 |
d. Customer jobs completed and units sold in July were as follows:
| Job No. | Style | Completed in July | Units Sold in July | |
| 201 | T100 | X | 184 | |
| 202 | T200 | X | 320 | |
| 203 | T400 | 0 | ||
| 204 | S200 | X | 260 | |
| 205 | T300 | X | 125 | |
| 206 | S100 | 0 |
1. Determine the missing amounts associated with each letter and complete the following table. If required, round amounts to the nearest dollar. If an answer is zero, enter in "0". Enter all amounts as positive numbers.
| Job No. | Quantity | June 1 Work in Process |
Direct Materials |
Direct Labor |
Factory Overhead |
Total Cost | Unit Cost | Units Sold | Cost of Goods Sold | ||||||||
| No. 201 | fill in the blank 1 | $ 6,600 | $ 21,330 | $ 17,000 | $fill in the blank 2 | $fill in the blank 3 | $fill in the blank 4 | fill in the blank 5 | $fill in the blank 6 | ||||||||
| No. 202 | fill in the blank 7 | 15,900 | 31,100 | 26,000 | fill in the blank 8 | fill in the blank 9 | fill in the blank 10 | fill in the blank 11 | fill in the blank 12 | ||||||||
| No. 203 | fill in the blank 13 | 12,960 | 7,000 | fill in the blank 14 | fill in the blank 15 | fill in the blank 16 | fill in the blank 17 | ||||||||||
| No. 204 | fill in the blank 18 | 34,410 | 31,000 | fill in the blank 19 | fill in the blank 20 | fill in the blank 21 | fill in the blank 22 | fill in the blank 23 | |||||||||
| No. 205 | fill in the blank 24 | 15,600 | 14,000 | fill in the blank 25 | fill in the blank 26 | fill in the blank 27 | fill in the blank 28 | fill in the blank 29 | |||||||||
| No. 206 | fill in the blank 30 | 6,900 | 3,000 | fill in the blank 31 | fill in the blank 32 | fill in the blank 33 | fill in the blank 34 | ||||||||||
| Total | fill in the blank 35 | $22,500 | 122,300 | 98,000 | $fill in the blank 36 | $fill in the blank 37 | $fill in the blank 38 |
a. Materials Requisitions $fill in the blank 39
b. Work in Process Beginning Balance $fill in the blank 40
c. Direct Materials $fill in the blank 41
d. Direct Labor $fill in the blank 42
e. Factory overhead applied $fill in the blank 43
f. Completed jobs $fill in the blank 44
g. Cost of goods sold $fill in the blank 45
h. Indirect labor $fill in the blank 46
2. Determine the June 30 balances for each of the inventory accounts and factory overhead. Use the minus sign to indicate any credit balances.
| Materials: | $fill in the blank 47 |
| Work in Process: | $fill in the blank 48 |
| Finished Goods: | $fill in the blank 49 |
| Factory Overhead: | $fill in the blank 50 |
1
a & c. Direct and Indirect materials are requisitioned. Direct materials are recorded in Work in Process and Indirect materials are recorded in Factory overhead.
b. The beginning work in process information is given.
d, e & h. Direct labor cost information is given. Overhead is applied based on direct labor cost.
f & g. Beginning Work in Process balances plus all current period
2. Insert your amounts calculated in (1) into the T accounts. Then determine the ending balances.
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