Cost Flows; Application of Overhead Mooresville Corporation manufactures reproductions ofeighteenth-century, classical-style furniture. It uses a job costing system that applies factory overheadon the basis of direct labor hours. Budgeted factory overhead for the year was $1,261,500, and management budgeted 87,000 direct labor hours. Mooresville had no Materials, Work-in-Process, or FinishedGoods Inventory at the beginning of August. These transactions were recorded during August:a. Purchased 5,000 square feet of oak on account at $26 per square foot.b. Purchased 50 gallons of glue on account at $36 per gallon (indirect material).c. Requisitioned 3,500 square feet of oak and 31 gallons of glue for production.d. Incurred and paid payroll costs of $187,900. Of this amount, $46,000 were indirect labor costs;direct labor personnel earned $22 per hour.e. Paid factory utility bill, $15,230 in cash.f. August’s insurance cost for the manufacturing property and equipment was $3,500. The premiumhad been paid in March.g. Incurred $8,500 depreciation on manufacturing equipment for August.h. Recorded $2,400 depreciation on an administrative asset.i. Paid advertising expenses in cash, $5,500.j. Incurred and paid other factory overhead costs, $13,500.k. Incurred miscellaneous selling and administrative expenses, $13,250.l. Applied factory overhead to production on the basis of direct labor hours.m. Produced completed goods costing $146,000 during the month.n. Sales on account in August were $132,000. The Cost of Goods Sold was $112,000.Required1. Compute the firm’s predetermined factory overhead rate for the year.2. Prepare journal entries to record the August events. Letter your entries from a to n.3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Soldaccount on August 31.4. Prepare a schedule of Cost of Goods Manufactured and Cost of Goods Sold.5. Prepare the income statement for August
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 Flows; Application of
eighteenth-century, classical-style furniture. It uses a
on the basis of direct labor hours. Budgeted factory overhead for the year was $1,261,500, and management budgeted 87,000 direct labor hours. Mooresville had no Materials, Work-in-Process, or Finished
Goods Inventory at the beginning of August. These transactions were recorded during August:
a. Purchased 5,000 square feet of oak on account at $26 per square foot.
b. Purchased 50 gallons of glue on account at $36 per gallon (indirect material).
c. Requisitioned 3,500 square feet of oak and 31 gallons of glue for production.
d. Incurred and paid payroll costs of $187,900. Of this amount, $46,000 were indirect labor costs;
direct labor personnel earned $22 per hour.
e. Paid factory utility bill, $15,230 in cash.
f. August’s insurance cost for the manufacturing property and equipment was $3,500. The premium
had been paid in March.
g. Incurred $8,500
h. Recorded $2,400 depreciation on an administrative asset.
i. Paid advertising expenses in cash, $5,500.
j. Incurred and paid other
k. Incurred miscellaneous selling and administrative expenses, $13,250.
l. Applied factory overhead to production on the basis of direct labor hours.
m. Produced completed goods costing $146,000 during the month.
n. Sales on account in August were $132,000. The Cost of Goods Sold was $112,000.
Required
1. Compute the firm’s predetermined factory overhead rate for the year.
2. Prepare
3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold
account on August 31.
4. Prepare a schedule of Cost of Goods Manufactured and Cost of Goods Sold.
5. Prepare the income statement for August
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