Exercise 15-19 (Algo) Analyzing costs assigned to work in process LO P3 Lorenzo Company applies overhead to jobs on the basis of direct materials cost. At year-end, the Work in Process Inventory account shows the following. Debit Beginning Direct materials used Direct labor used Overhead applied Ending Work in Process Inventory 0 1,900,000 250,000 741,000 76,000 Credit 2,815,000 Cost of goods manufactured 1. Determine the predetermined overhead rate used (based on direct materials cost). 2. Only one job remains in work in process inventory at year-end. Its direct materials cost is $21,000. How much direct labor cost and applied overhead are assigned to this job?
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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