Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy equipment for use in North Sea oil fields. (The Norwegian currency is the krone, which is denoted by Nkr.) The company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of direct labor-hours. At the beginning of the year, the following estimates were made for the purpose of computing the predetermined overhead rate: manufacturing overhead cost, Nkr360,000; and direct labor-hours, 900. The following transactions took place during the year (all purchases and services were acquired on account): a. Raw materials were purchased for use in production, Nkr200,000. b. Raw materials were requisitioned for use in production (all direct materials), Nkr185,000. c. Utility bills were incurred, Nkr70,000 (90% related to factory operations, and the remainder related to selling and administrative activities). d. Salary and wage costs were incurred: Direct labor (975 hours) . . . . . . . . . . . . . . . . . Nkr230,000 Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . Nkr90,000 Selling and administrative salaries . . . . . . . . . Nkr110,000 e. Maintenance costs were incurred in the factory, Nkr54,000. f. Advertising costs were incurred, Nkr136,000. g. Depreciation was recorded for the year, Nkr95,000 (80% related to factory equipment, and the remainder related to selling and administrative equipment). h. Rental cost incurred on buildings, Nkr120,000 (85% related to factory operations, and the remainder related to selling and administrative facilities). i. Manufacturing overhead cost was applied to jobs, Nkr ? . j. Cost of goods manufactured for the year, Nkr770,000. k. Sales for the year (all on account) totaled Nkr1,200,000. These goods cost Nkr800,000 according to their job cost sheets. The balances in the inventory accounts at the beginning of the year were: Raw Materials . . . . . . . . . . . . . . . . . . . Nkr30,000 Work in Process . . . . . . . . . . . . . . . . . . Nkr21,000 Finished Goods . . . . . . . . . . . . . . . . . . Nkr60,000 Required: 1. Prepare journal entries to record the preceding data. 2. Post your entries to T-accounts. (Don’t forget to enter the beginning inventory balances above.) Determine the ending balances in the inventory accounts and in the Manufacturing Overhead account. 3. Prepare a schedule of cost of goods manufactured.
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 Norwegian currency is the krone, which is denoted by Nkr.) The company uses a job-order costing system and applies
The following transactions took place during the year (all purchases and services were acquired on account):
a. Raw materials were purchased for use in production, Nkr200,000.
b. Raw materials were requisitioned for use in production (all direct materials), Nkr185,000.
c. Utility bills were incurred, Nkr70,000 (90% related to factory operations, and the remainder related to selling and administrative activities). d. Salary and wage costs were incurred:
Direct labor (975 hours) . . . . . . . . . . . . . . . . . Nkr230,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . Nkr90,000
Selling and administrative salaries . . . . . . . . . Nkr110,000
e. Maintenance costs were incurred in the factory, Nkr54,000.
f. Advertising costs were incurred, Nkr136,000.
g.
h. Rental cost incurred on buildings, Nkr120,000 (85% related to factory operations, and the remainder related to selling and administrative facilities).
i. Manufacturing overhead cost was applied to jobs, Nkr ? .
j. Cost of goods manufactured for the year, Nkr770,000.
k. Sales for the year (all on account) totaled Nkr1,200,000. These goods cost Nkr800,000 according to their
Raw Materials . . . . . . . . . . . . . . . . . . . Nkr30,000
Work in Process . . . . . . . . . . . . . . . . . . Nkr21,000
Finished Goods . . . . . . . . . . . . . . . . . . Nkr60,000
Required:
1. Prepare journal entries to record the preceding data.
2.
3. Prepare a schedule of cost of goods manufactured.
4. Prepare a
5. Prepare an income statement for the year.
6. Job 412 was one of the many jobs started and completed during the year. The job required Nkr8,000 in direct materials and 39 hours of direct labor time at a total direct labor cost of Nkr9,200. The job contained only four units. If the company bills at a price 60% above the unit product cost on the job cost sheet, what price per unit would have been charged to the customer?
Step by step
Solved in 5 steps
