Len, Inc., which uses a job-costing system, began business on January 1, 20XX and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20XX: • Budgeted direct labor and manufacturing overhead were anticipated to be P200,000 and P250,000, respectively. • Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor: Job No. Direct Materials Direct Labor 1 P145,000 P35,000 2 320,000 65,000 3 55,000 80,000 • Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production. • Actual manufacturing overhead by year-end totaled P233,000. Len adjusts all under- and overapplied overhead to cost of goods sold. Required: A. Compute the company's predetermined overhead application rate. B. Compute the company's ending work-in-process inventory. C. Determine the company's sales revenue. D. Was manufacturing overhead under- or overapplied during 20XX? By how much? E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end.
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.
2. Len, Inc., which uses a
manufacturing
to 20XX:
• Budgeted direct labor and manufacturing overhead were anticipated to be P200,000 and
P250,000, respectively.
• Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material
and direct labor:
Job No. Direct Materials Direct Labor
1 P145,000 P35,000
2 320,000 65,000
3 55,000 80,000
• Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of
cost. Job no. 3 remained in production.
• Actual manufacturing overhead by year-end totaled P233,000. Len adjusts all under- and
overapplied overhead to cost of goods sold.
Required:
A. Compute the company's predetermined overhead application rate.
B. Compute the company's ending work-in-process inventory.
C. Determine the company's sales revenue.
D. Was manufacturing overhead under- or overapplied during 20XX? By how much?
E. Present the necessary
overhead at year-end.
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D. Was manufacturing
E. Present the necessary
overhead at year-end.
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