Application of Overhead The following information applies to the O’Donnell Company forMarch production. There are only two jobs (X and Y) in production in March.a. Purchased direct materials and indirect materials with the following summary of receiving reports:[LO 4-3, 4-4, 4-5]Material A $16,000Material B 12,000Indirect materials 3,000Total $31,000Job X Job Y TotalMaterial A $ 8,000 $16,000 $24,000Material B 3,000 8,000 11,000Subtotal $11,000 $24,000 $35,000Indirect materials 39,000Total $74,000b. Issued direct materials and indirect materials with this summary of requisitions:c. Factory labor incurred is summarized by these time tickets:Utilities $ 3,000Depreciation 18,000Insurance 2,500Total $23,500Job X $22,000Job Y 15,000Indirect labor 28,000Total $65,000d. Factory utilities, factory depreciation, and factory insurance incurred is summarized as follows:e. Factory overhead costs were applied to jobs at the predetermined rate of $46 per machine hour.Job X incurred 1,100 machine hours; Job Y used 800 machine hours.f. Job X was completed; Job Y was still in process at the end of March.The company closed the overapplied or underapplied overhead to the Cost of Goods Sold accountat the end of March.Required1. Calculate the total manufacturing cost for Job X and Job Y for March.2. Calculate the amount of overapplied or underapplied overhead and state whether the Cost of Goods Soldaccount will be increased or decreased by the adjustment.
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.
Application of
March production. There are only two jobs (X and Y) in production in March.
a. Purchased direct materials and indirect materials with the following summary of receiving reports:
[LO 4-3, 4-4, 4-5]
Material A $16,000
Material B 12,000
Indirect materials 3,000
Total $31,000
Job X Job Y Total
Material A $ 8,000 $16,000 $24,000
Material B 3,000 8,000 11,000
Subtotal $11,000 $24,000 $35,000
Indirect materials 39,000
Total $74,000
b. Issued direct materials and indirect materials with this summary of requisitions:
c. Factory labor incurred is summarized by these time tickets:
Utilities $ 3,000
Insurance 2,500
Total $23,500
Job X $22,000
Job Y 15,000
Indirect labor 28,000
Total $65,000
d. Factory utilities, factory depreciation, and factory insurance incurred is summarized as follows:
e.
Job X incurred 1,100 machine hours; Job Y used 800 machine hours.
f. Job X was completed; Job Y was still in process at the end of March.
The company closed the overapplied or underapplied overhead to the Cost of Goods Sold account
at the end of March.
Required
1. Calculate the total manufacturing cost for Job X and Job Y for March.
2. Calculate the amount of overapplied or underapplied overhead and state whether the Cost of Goods Sold
account will be increased or decreased by the adjustment.
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