At the beginning of the year, Custom Mfg. established its predetermined overhead rate by using the following cost predictions: overhead costs, $1,350,000, and direct materials costs, $500,000. At year-end, the company’s records show that actual overhead costs for the year are $1,470,500. Actual direct materials cost had been assigned to jobs as follows. Jobs completed and sold $ 400,000 Jobs in finished goods inventory 82,000 Jobs in work in process inventory 59,000 Total actual direct materials cost $ 541,000 1. Determine the predetermined overhead rate.2&3. Enter the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.4. Prepare the adjusting entry to allocate any over- or underapplied 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.
At the beginning of the year, Custom Mfg. established its predetermined
| Jobs completed and sold | $ | 400,000 | |
| Jobs in finished goods inventory | 82,000 | ||
| Jobs in work in process inventory | 59,000 | ||
| Total actual direct materials cost | $ | 541,000 | |
1. Determine the predetermined overhead rate.
2&3. Enter the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate and determine whether overhead is overapplied or underapplied.
4. Prepare the
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