Creation Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2014 Creation Co. uses a normal-costing system and allocates overhead to work in process at a rate of $3.20 per direct manufacturing labor dollar. Indirect materials are insignificant so there is no inventory account for indirect materials. Requirements 1. Prepare journal entries to record the transactions for 2014 including an entry to close out over- or underallocated overhead to cost of goods sold. For each journal entry indicate the source document that would be used to authorize each entry. Also note which subsidiary ledger, if any, should be referenced as backup for the entry.
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.
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1.
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Prepare journal entries to record the transactions for
2014 including an entry to close out over- or underallocated overhead to cost of goods sold. For each
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Costs incurred:
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Purchases of direct materials (net) on credit
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$129,000
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Direct
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84,000
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Indirect labor
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54,800
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35,000
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Depreciation, office equipment
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7,400
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Maintenance, factory equipment
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27,000
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Miscellaneous factory overhead
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9,800
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Rent, factory building
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72,000
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Advertising expense
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97,000
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Sales commissions
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31,000
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Inventories:
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January 1, 2014
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December 31, 2014
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Direct materials
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$9,700
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$12,000
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Work in process
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6,000
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26,000
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Finished goods
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60,000
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28,000
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