Ervin Equipment, a manufacturer of exercise and workout equipment for sale to institutions, uses job costing. The following transactions occurred in January: Purchased $79,000 of materials. Paid $84,000 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing shop. Issued $5,900 of supplies from the materials inventory. Issued $87,000 in direct materials to the production department. Incurred direct labor costs of $77,000, which were credited to Wages Payable. Paid for the materials purchased in transaction (1). Incurred $14,000 in indirect labor costs, which were credited to Wages Payable. Applied overhead on the basis of 155 percent of direct labor costs. Recognized depreciation on manufacturing property, plant, and equipment of $18,100. Returned $1,220 of the materials in transaction (3) to inventory. Paid the for the wages incurred in transaction (5). The following balances appeared in the accounts of Ervin Equipment for January: Beginning Ending Materials Inventory $ 29,500 ? Work-in-Process Inventory 51,000 ? Finished Goods Inventory 180,400 $ 116,000 Cost of Goods Sold 246,800 Required: Prepare journal entries to record the transactions. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.
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.
Ervin Equipment, a manufacturer of exercise and workout equipment for sale to institutions, uses
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Purchased $79,000 of materials.
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Paid $84,000 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing shop.
-
Issued $5,900 of supplies from the materials inventory.
-
Issued $87,000 in direct materials to the production department.
-
Incurred direct labor costs of $77,000, which were credited to Wages Payable.
-
Paid for the materials purchased in transaction (1).
-
Incurred $14,000 in indirect labor costs, which were credited to Wages Payable.
-
Applied
overhead on the basis of 155 percent of direct labor costs. -
Recognized
depreciation on manufacturing property, plant, and equipment of $18,100. -
Returned $1,220 of the materials in transaction (3) to inventory.
-
Paid the for the wages incurred in transaction (5).
The following balances appeared in the accounts of Ervin Equipment for January:
| Beginning | Ending | |
|---|---|---|
| Materials Inventory | $ 29,500 | ? |
| Work-in-Process Inventory | 51,000 | ? |
| Finished Goods Inventory | 180,400 | $ 116,000 |
| Cost of Goods Sold | 246,800 |
Required:
-
Prepare
journal entries to record the transactions. -
Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.
Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.
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