Brooks Corporation uses a job-order costing system to apply manufacturing costs to jobs. The company closes its underapplied or overapplied overhead to cost of goods sold. Its balance sheet on March 1 is as follows: Brooks Corporation Balance Sheet March 1 Assets Cash $ 103,000 Raw materials $ 23,400 Work in process 17,800 Finished goods 27,500 68,700 Prepaid expenses 2,600 Property, plant, and equipment (net) 187,000 Total assets $ 361,300 Liabilities and Stockholders’ Equity Accounts payable $ 17,700 Retained earnings 343,600 Total liabilities and stockholders’ equity $ 361,300 During March the company completed the following transactions: Purchased raw materials for cash, $87,000. Raw materials used in production, $105,100 ($86,200 was direct materials and $18,900 was indirect materials). Paid $221,700 of salaries and wages in cash ($124,500 was direct labor, $30,200 was indirect labor, and $67,000 was related to employees responsible for selling and administration). Various manufacturing overhead costs paid in cash to support production, $42,000. Depreciation recorded on property, plant, and equipment, $37,400 (85% related to manufacturing equipment and 15% related to assets that support selling and administration). Various selling expenses incurred on account, $37,000. Prepaid insurance expired during the month, $650 (60% related to production, and 40% related to selling and administration). Manufacturing overhead applied to production, $119,960. Cost of goods manufactured, $__?__. (Hint: The Work in Process balance on March 31st is $6,300.) Cash sales to customers, $558,000. Cost of goods sold (unadjusted), $__?__. (Hint: The Finished Goods balance at March 31st is $9,400.) Cash payments to creditors, $52,200. Underapplied or overapplied overhead $__?__. Required: 1. Calculate the ending balances that would be reported on the company's balance sheet at March 31st. (Hint: Be sure to calculate the underapplied or overapplied overhead and then account for its affect on the balance sheet.) 2. Prepare Brooks Corporation’s schedule of cost of goods manufactured for the month ended March 31st. 3. Prepare Brooks Corporation’s schedule of cost of goods sold for the month ended March 31st. 4. Prepare Brooks Corporation’s income statement for the month ended March 31st.
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.
Brooks Corporation uses a
| Brooks Corporation | |||||
| Balance Sheet | |||||
| March 1 | |||||
| Assets | |||||
| Cash | $ | 103,000 | |||
| Raw materials | $ | 23,400 | |||
| Work in process | 17,800 | ||||
| Finished goods | 27,500 | 68,700 | |||
| Prepaid expenses | 2,600 | ||||
| Property, plant, and equipment (net) | 187,000 | ||||
| Total assets | $ | 361,300 | |||
| Liabilities and |
|||||
| Accounts payable | $ | 17,700 | |||
| 343,600 | |||||
| Total liabilities and stockholders’ equity | $ | 361,300 | |||
During March the company completed the following transactions:
- Purchased raw materials for cash, $87,000.
- Raw materials used in production, $105,100 ($86,200 was direct materials and $18,900 was indirect materials).
- Paid $221,700 of salaries and wages in cash ($124,500 was direct labor, $30,200 was indirect labor, and $67,000 was related to employees responsible for selling and administration).
- Various manufacturing overhead costs paid in cash to support production, $42,000.
Depreciation recorded on property, plant, and equipment, $37,400 (85% related to manufacturing equipment and 15% related to assets that support selling and administration).- Various selling expenses incurred on account, $37,000.
- Prepaid insurance expired during the month, $650 (60% related to production, and 40% related to selling and administration).
- Manufacturing overhead applied to production, $119,960.
- Cost of goods manufactured, $__?__. (Hint: The Work in Process balance on March 31st is $6,300.)
- Cash sales to customers, $558,000.
- Cost of goods sold (unadjusted), $__?__. (Hint: The Finished Goods balance at March 31st is $9,400.)
- Cash payments to creditors, $52,200.
- Underapplied or overapplied overhead $__?__.
Required:
1. Calculate the ending balances that would be reported on the company's balance sheet at March 31st. (Hint: Be sure to calculate the underapplied or overapplied overhead and then account for its affect on the balance sheet.)
2. Prepare Brooks Corporation’s schedule of cost of goods manufactured for the month ended March 31st.
3. Prepare Brooks Corporation’s schedule of cost of goods sold for the month ended March 31st.
4. Prepare Brooks Corporation’s income statement for the month ended March 31st.
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