Cargo Wings Pvt. Ltd. uses a job-order costing system and applies manufacturing overhead costs to jobs on the basis of direct labor hours. The co. estimated its manufacturing overhead $360,000 and 900 direct labor-hours. Further details during the year are provided as follows: Purchased Raw materials worth $200,000 from BQI int. Which is to be used in production. b . Direct materials of $185,000 were requisitioned by the production department. Utility bills of $70,000 out of which 10% related to selling and administrative activities and the rest is related to factory operations Direct labor cost was $230,000 for 975 hours and a total of $90,000 was paid to indirect labor. Selling and administrative salaries for the period was $110,000 Maintenance costs of $54,000 were incurred in the factory. The co. spent $136,000 on advertising. The rental cost incurred on buildings, $120,000 (15% to selling & admin and the remaining to factory operations). Depreciation for the year was $95,000 (selling & admin equipment 20%, factory equipment 80%). Manufacturing overhead cost applied to the job is to be calculated. It cost $770,000 to manufacture goods this year. The co. sold $1,200,000 worth of goods which cost $800,000 according to their job cost sheets. The opening balances of the year were: Finished Goods . . . . . . . . . . . . . . . . . . . . $60,000 Work in Process . . . . . . . . . . . . . . . . . . . $21,000 Raw Materials . . . . . . . . . . . . . . . . . . . . . $30,000 Required: Prepare a Schedule of Cost of Goods Manufactured & Schedule of cost of goods sold. Prepare an income statement for the year.
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.
Question no 1
Cargo Wings Pvt. Ltd. uses a job-order costing system and applies manufacturing
- Purchased Raw materials worth $200,000 from BQI int. Which is to be used in production.
b . Direct materials of $185,000 were requisitioned by the production department.
- Utility bills of $70,000 out of which 10% related to selling and administrative activities and the rest is related to factory operations
- Direct labor cost was $230,000 for 975 hours and a total of $90,000 was paid to indirect labor. Selling and administrative salaries for the period was $110,000
- Maintenance costs of $54,000 were incurred in the factory.
- The co. spent $136,000 on advertising.
- The rental cost incurred on buildings, $120,000 (15% to selling & admin and the remaining to factory operations).
Depreciation for the year was $95,000 (selling & admin equipment 20%, factory equipment 80%).Manufacturing overhead cost applied to the job is to be calculated.- It cost $770,000 to manufacture goods this year.
- The co. sold $1,200,000 worth of goods which cost $800,000 according to their
job cost sheets.
The opening balances of the year were:
Finished Goods . . . . . . . . . . . . . . . . . . . . $60,000
Work in Process . . . . . . . . . . . . . . . . . . . $21,000
Raw Materials . . . . . . . . . . . . . . . . . . . . . $30,000
Required:
- Prepare a Schedule of Cost of Goods Manufactured & Schedule of cost of goods sold.
- Prepare an income statement for the year.
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