Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended: Items Budgeted manufacturing overhead Actual manufacturing overhead Budgeted direct-labor cost (based on practical capacity) Actual direct-labor cost Budgeted machine hours (based on practical capacity) Actual machine hours The data that follow pertain to job number 775, the only job in production at year-end. Assembly Department $ 6,700 $ 58,500 150 Items Direct material Direct labor Machine hours Machining Department Machining Department $ 4,000,000 4,260,000 1,500,000 1,450,000 $ 24,500 $ 27,900 350 Selling and administrative expense amounted to $2,500,000. 400,000 425,000 Assembly Department $ 3,080,000 3,040,000 5,600,000 5,780,000 100,000 110,000
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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![1. Assuming the use of normal costing, determine the predetermined overhead rates used in the Machining Department and the
Assembly Department.
Predetermined overhead rate
Machining department
per machine hour
Assembly department
% of direct-labor cost
2. Compute the cost of the company's year-end work-in-process inventory.
Total cost
3. Determine whether overhead was under-or overapplied during the year in the Machining Department.
Overapplied overhead
Underapplied overhead
4. Determine whether overhead was under- or overapplied during the year in the Assembly Department.
Overapplied overhead
Underapplied overhead
5. If the company disposes of under- or overapplied overhead as an adjustment to Cost of Goods Sold, would the company's Cost of
Goods Sold account increase or decrease?
Would the company's Cost of Goods Sold account increase or decrease?
Decrease
Increase
6. How much overhead would have been charged to the company's Work-in-Process account during the year?
Overhead charged to Work-in-Process account
7. Comment on the appropriateness of the company's cost drivers (.e., the use of machine hours in Machining and direct-labor cost in
Assembly).
Comment on the appropriateness of the company's cost drivers](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F385d8622-8ad1-4a88-ab83-8f7dc3683b93%2F443681a9-9e9a-4304-8158-3fc36c3ffb03%2Fxjx2jkw_processed.png&w=3840&q=75)
![PR 3-48 (Algo) Job-Order Costing; Focus on Overhead and Cost Drivers (LO 3-2, 3-4, 3-5, 3-7)
[The following information applies to the questions displayed below.]
Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the
Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the
Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead
using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following
information relates to the year just ended:
Items
Budgeted manufacturing overhead
Actual manufacturing overhead
Budgeted direct-labor cost (based on practical capacity)
Actual direct-labor cost
Budgeted machine hours (based on practical capacity)
Actual machine hours
The data that follow pertain to job number 775, the only job in production at year-end.
Assembly
Department
Items
Direct material
Direct labor
Machine hours
Machining
Department
$ 24,500
$ 27,900
350
$ 6,700
$ 58,500
150
Machining
Department
Selling and administrative expense amounted to $2,500,000.
$ 4,000,000
4,260,000
1,500,000
1,450,000
400,000
425,000
Assembly
Department
$ 3,080,000
3,040,000
5,600,000
5,780,000
100,000
110,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F385d8622-8ad1-4a88-ab83-8f7dc3683b93%2F443681a9-9e9a-4304-8158-3fc36c3ffb03%2F45nhjxu_processed.png&w=3840&q=75)
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