Bowen Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a standard cost system. Its predetermined overhead rate includes $1,000,000 of fixed overhead in the numerator and 50,000 direct labor-hours in the denominator. The company purchased (with cash) and used 55,000 yards of raw materials at a cost of $11.50 per yard. Its direct laborers worked 20,850 hours and were paid a total of $291,700. The company started and completed 9,800 units of finished goods during the period. Bowen’s standard cost card for its only product is as follows: Inputs (1) Standard Quantity or Hours (2) Standard Price or Rate Standard Cost (1) × (2) Direct materials 4.7 yards $ 18.50 per yard $ 86.95 Direct labor 4.1 hours $ 14.00 per hour 57.40 Fixed manufacturing overhead 4.1 hours $ 20.00 per hour 82.00 Total standard cost per unit $ 226.35 Required: 1. When recording the raw material purchases: a. The Raw Materials inventory will increase (decrease) by how much? b. The Cash will increase (decrease) by how much? 2. When recording the raw materials used in production: a. The Raw Materials inventory will increase (decrease) by how much? b. The Work in Process inventory will increase (decrease) by how much? 3. When recording the direct labor costs added to production: a. The Work in Process inventory will increase (decrease) by how much? b. The Cash will increase (decrease) by how much?
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.
Bowen Company manufactures one product, it does not maintain any beginning or ending inventories, and its uses a
| Inputs | (1) Standard Quantity or Hours |
(2) Standard Price or Rate |
Standard Cost (1) × (2) |
||||
| Direct materials | 4.7 | yards | $ | 18.50 | per yard | $ | 86.95 |
| Direct labor | 4.1 | hours | $ | 14.00 | per hour | 57.40 | |
| Fixed manufacturing overhead | 4.1 | hours | $ | 20.00 | per hour | 82.00 | |
| Total standard cost per unit | $ | 226.35 | |||||
Required:
1. When recording the raw material purchases:
a. The Raw Materials inventory will increase (decrease) by how much?
b. The Cash will increase (decrease) by how much?
2. When recording the raw materials used in production:
a. The Raw Materials inventory will increase (decrease) by how much?
b. The Work in Process inventory will increase (decrease) by how much?
3. When recording the direct labor costs added to production:
a. The Work in Process inventory will increase (decrease) by how much?
b. The Cash will increase (decrease) by how much?
4. When applying fixed manufacturing overhead to production, the Work in Process inventory will increase (decrease) by how much?
5. When transferring
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