Cost flow through T-accounts (LO 3, 4) Drew Corp. designs and manufactures mascot uniforms for high school, college, and professional sports teams. Since each team's uniform is unique in color and design, Drew uses a job order costing system. On January 1, the T-accounts for some of Drew's primary balance sheet accounts were as follows: Raw Materials Inventory Work in Process Inventory 1/1 15,000 1/1 31,000 Finished Goods Inventory Cash 1/1 22,000 1/1 32,000 Accounts Receivable Accounts Payable 1/1 56,000 42,000 1/1 During the year, the following events occurred: 1.Drew purchased raw materials costing $86,000 on account. 2.Drew used $93,000 of raw materials in production. Of these, 70% were classified as direct materials and 30% as indirect materials. (Drew maintains a single Raw Materials Inventory account.) 3.Drew used 31,200 hours of direct labor. The company's average direct labor rate was $7.50 per hour (credit Wages Payable). 4.The company's only indirect labor cost was the salary of a security guard hired to watch the company's shop after hours. The guard's annual salary was $25,000 (credit Wages Payable). 5.Other manufacturing overhead costs the company incurred on account totaled $70,000. 6.Drew applied $130,000 in manufacturing overhead. 7.The company completed production of goods costing $326,000. 8.The company's Cost of Goods Sold balance was $303,750 before adjusting for over- or underapplied overhead. 9.Sales revenue was $425,000 (all sales were made on account). 10.Drew collected $450,000 from customers. 11.The company paid accounts payable of $100,000. 12.At year-end, all wages earned during the year had been paid. Required a.Record the transactions above in the appropriate T-accounts and calculate ending balances. Create new T-accounts if needed. bCalculate total manufacturing costs for the year. cCalculate cost of goods available for sale during 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.
Cost flow through T-accounts (LO 3, 4) Drew Corp. designs and manufactures mascot uniforms for high school, college, and professional sports teams. Since each team's uniform is unique in color and design, Drew uses a
|
Raw Materials Inventory
|
Work in Process Inventory
|
|||||
| 1/1 |
15,000
|
1/1 | 31,000 | |||
|
Finished Goods Inventory
|
Cash
|
|||||
| 1/1 |
22,000
|
1/1 | 32,000 | |||
|
|
Accounts Payable
|
|||||
| 1/1 |
56,000
|
42,000 1/1 | ||||
During the year, the following events occurred:
1.Drew purchased raw materials costing $86,000 on account.
2.Drew used $93,000 of raw materials in production. Of these, 70% were classified as direct materials and 30% as indirect materials. (Drew maintains a single Raw Materials Inventory account.)
3.Drew used 31,200 hours of direct labor. The company's average direct labor rate was $7.50 per hour (credit Wages Payable).
4.The company's only indirect labor cost was the salary of a security guard hired to watch the company's shop after hours. The guard's annual salary was $25,000 (credit Wages Payable).
5.Other manufacturing
6.Drew applied $130,000 in manufacturing overhead.
7.The company completed production of goods costing $326,000.
8.The company's Cost of Goods Sold balance was $303,750 before adjusting for over- or underapplied overhead.
9.Sales revenue was $425,000 (all sales were made on account).
10.Drew collected $450,000 from customers.
11.The company paid accounts payable of $100,000.
12.At year-end, all wages earned during the year had been paid.
Required
a.Record the transactions above in the appropriate T-accounts and calculate ending balances. Create new T-accounts if needed.
bCalculate total
cCalculate cost of goods available for sale during the year.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
