Cost Flows; Applying Overhead Erkens Company uses a job costing system with normal costing and applies factory overhead on the basis of machine hours. At the beginning of the year, management estimated that the company would incur $1,980,000 of factory overhead costs and use 66,000machine hours.Erkens Company recorded the following events during the month of April:a. Purchased 180,000 pounds of materials on account; the cost was $5.00 per pound.b. Issued 120,000 pounds of materials to production, of which 15,000 pounds were used as indirectmaterials.c. Incurred direct labor costs of $240,000 and $40,000 of indirect labor costs.d. Recorded depreciation on equipment for the month, $75,700.e. Recorded insurance costs for the manufacturing property, $3,500.f. Paid $8,500 cash for utilities and other miscellaneous items for the manufacturing plant.g. Completed Job H11 costing $7,500 and Job G28 costing $77,000 during the month and transferredthem to the Finished Goods Inventory account.h. Shipped Job G28 to the customer during the month. The job was invoiced at 35% above cost.i. Used 7,700 machine hours during April.Required1. Compute Erkens Company’s predetermined overhead rate for the year.2. Prepare journal entries to record the events that occurred during April.3. Compute the amount of overapplied or underapplied overhead and prepare a journal entry to closeoverapplied or underapplied overhead into Cost of Goods Sold on April 30.
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; Applying
machine hours.
Erkens Company recorded the following events during the month of April:
a. Purchased 180,000 pounds of materials on account; the cost was $5.00 per pound.
b. Issued 120,000 pounds of materials to production, of which 15,000 pounds were used as indirect
materials.
c. Incurred direct labor costs of $240,000 and $40,000 of indirect labor costs.
d. Recorded
e. Recorded insurance costs for the manufacturing property, $3,500.
f. Paid $8,500 cash for utilities and other miscellaneous items for the manufacturing plant.
g. Completed Job H11 costing $7,500 and Job G28 costing $77,000 during the month and transferred
them to the Finished Goods Inventory account.
h. Shipped Job G28 to the customer during the month. The job was invoiced at 35% above cost.
i. Used 7,700 machine hours during April.
Required
1. Compute Erkens Company’s predetermined overhead rate for the year.
2. Prepare journal entries to record the events that occurred during April.
3. Compute the amount of overapplied or underapplied overhead and prepare a
overapplied or underapplied overhead into Cost of Goods Sold on April 30.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 4 images
