Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies manufacturing overhead cost to jobs on the basis of direct labor-hours. Its predetermined overhead rate was based on a cost formula that estimated $399,000 of manufacturing overhead for an estimated allocation base of 1,050 direct labor-hours. The following transactions took place during the year: Raw materials purchased on account, $280,000. Raw materials used in production (all direct materials), $265,000. Utility bills incurred on account, $75,000 (80% related to factory operations, and the remainder related to selling and administrative activities). Accrued salary and wage costs: Direct labor (1,100 hours) $ 310,000 Indirect labor $ 106,000 Selling and administrative salaries $ 190,000 Maintenance costs incurred on account in the factory, $70,000 Advertising costs incurred on account, $152,000. Depreciation was recorded for the year, $88,000 (85% related to factory equipment, and the remainder related to selling and administrative equipment). Rental cost incurred on account, $113,000 (90% related to factory facilities, and the remainder related to selling and administrative facilities). Manufacturing overhead cost was applied to jobs, $ ? . Cost of goods manufactured for the year, $930,000. Sales for the year (all on account) totaled $2,000,000. These goods cost $960,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw Materials $ 46,000 Work in Process $ 37,000 Finished Goods $ 76,000 Required: 1. Prepare journal entries to record the preceding transactions. 2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.) 3. Prepare a schedule of cost of goods manufactured. 4A. Prepare a journal entry to close any balance in the Manufacturing Overhead account to Cost of Goods Sold. 4B. Prepare a schedule of cost of goods sold. 5. Prepare an income statement for the year.
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.
Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. The company uses a job-order costing system that applies
- Raw materials purchased on account, $280,000.
- Raw materials used in production (all direct materials), $265,000.
- Utility bills incurred on account, $75,000 (80% related to factory operations, and the remainder related to selling and administrative activities).
- Accrued salary and wage costs:
| Direct labor (1,100 hours) | $ | 310,000 |
| Indirect labor | $ | 106,000 |
| Selling and administrative salaries | $ |
190,000 |
- Maintenance costs incurred on account in the factory, $70,000
- Advertising costs incurred on account, $152,000.
Depreciation was recorded for the year, $88,000 (85% related to factory equipment, and the remainder related to selling and administrative equipment).- Rental cost incurred on account, $113,000 (90% related to factory facilities, and the remainder related to selling and administrative facilities).
- Manufacturing overhead cost was applied to jobs, $ ? .
- Cost of goods manufactured for the year, $930,000.
- Sales for the year (all on account) totaled $2,000,000. These goods cost $960,000 according to their
job cost sheets.
The balances in the inventory accounts at the beginning of the year were:
| Raw Materials | $ | 46,000 |
| Work in Process | $ | 37,000 |
| Finished Goods | $ | 76,000 |
Required:
1. Prepare journal entries to record the preceding transactions.
2.
3. Prepare a schedule of cost of goods manufactured.
4A. Prepare a
4B. Prepare a schedule of cost of goods sold.
5. Prepare an income statement for the year.
Trending now
This is a popular solution!
Step by step
Solved in 7 steps with 3 images
