Bakersville Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: Beginning Balance $14,000 $27,000 S62,000 Ending Balance $22,000 Raw materials Work in process S9,000 $77,000 Finished goods The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 33,000 machine-hours and incur $231,000 in manufacturing overhead cost. The following transactions were recorded for the year: • Raw materials were purchased, S315,000. • Raw materials were requisitioned for use in production, $307,000 (S281,000 direct and $26,000 indirect). • The following employee costs were incurred: direct labor, $377,000; indirect labor, $96,000; and administrative salaries, $172,000. • Selling costs, S$147,600. • Factory utility costs, $10,000. • Depreciation for the year was $127,000 of which $120,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities. • Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,000 machine-hours. • Sales for the year totaled $1,253,000. Required: a. Prepare a schedule of cost of goods manufactured. b. Was the overhead underallocated or overallocated? By how much? c. Prepare an income statement for the year. The company closes any underallocated or overallocated overhead to Cost of Goods Sold.
Bakersville Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: Beginning Balance $14,000 $27,000 S62,000 Ending Balance $22,000 Raw materials Work in process S9,000 $77,000 Finished goods The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 33,000 machine-hours and incur $231,000 in manufacturing overhead cost. The following transactions were recorded for the year: • Raw materials were purchased, S315,000. • Raw materials were requisitioned for use in production, $307,000 (S281,000 direct and $26,000 indirect). • The following employee costs were incurred: direct labor, $377,000; indirect labor, $96,000; and administrative salaries, $172,000. • Selling costs, S$147,600. • Factory utility costs, $10,000. • Depreciation for the year was $127,000 of which $120,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities. • Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,000 machine-hours. • Sales for the year totaled $1,253,000. Required: a. Prepare a schedule of cost of goods manufactured. b. Was the overhead underallocated or overallocated? By how much? c. Prepare an income statement for the year. The company closes any underallocated or overallocated overhead to Cost of Goods Sold.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
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Transcribed Image Text:Bakersville Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year:
Beginning Balance
$14,000
Ending Balance
$22,000
S9,000
$77,000
Raw materials
Work in process
$27,000
S62,000
Finished goods
The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 33,000 machine-hours and incur
$231,000 in manufacturing overhead cost. The following transactions were recorded for the year:
• Raw materials were purchased, $315,000.
• Raw materials were requisitioned for use in production, $307,000 ($281,000 direct and S26,000 indirect).
• The following employee costs were incurred: direct labor, $377,000; indirect labor, $96,000; and administrative salaries, $172,000.
Selling costs, $147,000.
Factory utility costs, $10,000.
Depreciation for the year was S127.000 of which $120,000 is related to factory operations and S7.000 is related to selling, general, and administrative activities.
• Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34,000 machine-hours.
• Sales for the year totaled $1.253,000.
Required:
a. Prepare a schedule of cost of goods manufactured.
b. Was the overhead underallocated or overallocated? By how much?
c. Prepare an income statement for the year. The company closes any underallocated or overallocated overhead to Cost of Goods Sold.
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