Forest Components makes aircraft parts. The following transactions occurred in July. Purchased $16,800 of materials on account. Issued $16,740 in direct materials to the production department. Issued $1,280 of supplies from the materials inventory. Paid for the materials purchased in transaction (1) using cash. Returned $2,170 of the materials issued to production in (2) to the materials inventory. Direct labor employees earned $31,300, which was paid in cash. Purchased miscellaneous items for the manufacturing plant for $17,310 on account. Recognized depreciation on manufacturing plant of $36,800. Applied manufacturing overhead for the month. Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $435,800. Estimated overhead for the year was $427,084. The following balances appeared in the inventory accounts of Forest Components for July. Beginning Ending Materials Inventory ? $12,550 Work-in-Process Inventory ? 10,560 Finished Goods Inventory $2,740 7,020 Cost of Goods Sold ? 73,900 Required: a. Prepare journal entries to record these transactions. b. 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.
Forest Components makes aircraft parts. The following transactions occurred in July.
-
Purchased $16,800 of materials on account.
-
Issued $16,740 in direct materials to the production department.
-
Issued $1,280 of supplies from the materials inventory.
-
Paid for the materials purchased in transaction (1) using cash.
-
Returned $2,170 of the materials issued to production in (2) to the materials inventory.
-
Direct labor employees earned $31,300, which was paid in cash.
-
Purchased miscellaneous items for the manufacturing plant for $17,310 on account.
-
Recognized
depreciation on manufacturing plant of $36,800. -
Applied manufacturing
overhead for the month.
Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $435,800. Estimated overhead for the year was $427,084.
The following balances appeared in the inventory accounts of Forest Components for July.
| Beginning | Ending | ||||
| Materials Inventory | ? | $12,550 | |||
| Work-in-Process Inventory | ? | 10,560 | |||
| Finished Goods Inventory | $2,740 | 7,020 | |||
| Cost of Goods Sold | ? | 73,900 | |||
Required:
a. Prepare
b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.
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