Deporte Company produces single-colored t-shirts. Materials for the shirts are dyed in large vats. After dying the materials for a given color, the vats must be cleaned and prepared for the next batch of materials to be colored. The following standards for changeover for a given batch have been established: 1 Direct materials (2.8 lbs. @ $0.80) $2.24 2 Direct labor (0.80 hr. @ $7.2) 5.76 3 Standard prime cost $8.00 During the year, 103,700 pounds of material were purchased and used for the changeover activity. There were 34,000 batches produced, with the following actual prime costs: Direct materials $66,622 Direct labor (for 27,143 hrs.) $192,111 Required: 1. Prepare a journal entry on Dec. 31 for the purchase of raw materials. Record the transaction as a compound entry. 2. Prepare a journal entry on Dec. 31 for the issuance of raw materials. Record the transaction as a compound entry. 3. Prepare a journal entry on Dec. 31 for the addition of labor to Work in Process. Record the transaction as a compound 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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Direct materials (2.8 lbs. @ $0.80)
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$2.24
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|
2
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Direct labor (0.80 hr. @ $7.2)
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5.76
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3
|
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$8.00
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| Direct materials | $66,622 |
| Direct labor (for 27,143 hrs.) | $192,111 |
| Required: | |
| 1. | Prepare a |
| 2. | Prepare a journal entry on Dec. 31 for the issuance of raw materials. Record the transaction as a compound entry. |
| 3. | Prepare a journal entry on Dec. 31 for the addition of labor to Work in Process. Record the transaction as a compound entry. |
| 4. | Prepare a journal entry on Dec. 31 for the closing of variances to Cost of Goods Sold. Record the transaction as a compound entry. |
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