lmeda Products, Inc. uses a job order costing system. Inventory balances on April 1 were raw materials, $32,000; work in process, $20,000; and finished goods, $48.000 Additional information are as follows: Raw materials purchased $170,000. Raw materials issued from storeroom to production $180,000; 80% direct and 20% indirect. Direct labor $200,000; indirect labor $82,000; and selling and administrative salaries $90,000. Utility costs incurred in the factory, $65,000. Advertising costs $100,000 Insurance Expense $20,000; 90% factory related and 10% selling and administrative related. Depreciation Expense $180,000; 85% for factory assets and 15% for selling and administrative assets Predetermined overhead rate is 175% of direct labor cost. Cost of goods manufactured was $700,000 Sales for the year, $1,000,000; cost of the goods sold, $720,000. Required: 1. Compute for the under- or over-applied overhead for the year. Is it under-applied or over-applied? Compute for the ending balance of raw materials, work in process and finished goods. The company under- or over-applied overhead to cost of goods sold. Prepare an income statement.
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.
Almeda Products, Inc. uses a job order costing system. Inventory balances on April 1 were raw materials, $32,000; work in process, $20,000; and finished goods, $48.000
Additional information are as follows:
- Raw materials purchased $170,000.
- Raw materials issued from storeroom to production $180,000; 80% direct and 20% indirect.
- Direct labor $200,000; indirect labor $82,000; and selling and administrative salaries $90,000.
- Utility costs incurred in the factory, $65,000. Advertising costs $100,000
- Insurance Expense $20,000; 90% factory related and 10% selling and administrative related.
Depreciation Expense $180,000; 85% for factory assets and 15% for selling and administrative assets- Predetermined
overhead rate is 175% of direct labor cost. Cost of goods manufactured was $700,000 - Sales for the year, $1,000,000; cost of the goods sold, $720,000.
Required: 1. Compute for the under- or over-applied overhead for the year. Is it under-applied or over-applied?
- Compute for the ending balance of raw materials, work in process and finished goods.
- The company under- or over-applied overhead to cost of goods sold. Prepare an income statement.
Problem #4:
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased.) In computing a predetermined overhead rate at the beginning of the year, the company’s estimates were:
|
|
Beginning |
Ending |
|
Raw materials |
$20,000 |
$80,000 |
|
Work in Process |
150,000 |
70,000 |
|
Finished Goods |
260,000 |
400,000 |
|
The following actual costs were incurred during the year: |
|
|
|
|
Purchase of direct raw materials |
$510,000 |
|
|
Direct labor cost |
90,000 |
|
|
Manufacturing overhead costs: |
|
|
|
Indirect labor |
170,000 |
|
|
Property taxes |
48,000 |
|
|
Depreciation- equipment |
260,000 |
|
|
Maintenance |
95,000 |
|
|
Insurance |
7,000 |
|
|
Rent - Building |
180,000 |
Required:
- Compute the predetermined overhead rate for the year
- Compute the amount of under- or over-applied overhead for the year.
- Prepare the statement of cost of goods manufactured for the year.
- Compute the Cost of Goods Sold for the year. (Do not include the under- or over-applied overhead in the cost of goods sold.) What options are available for disposing of under- or over-applied overhead?
- Job 215 was started and completed during the year. What price would have been charged to customer if the job required $8,500 in direct materials and $2,700 in direct labor cost and the company priced its jobs at 25% above the
job’s cost to absorb period cost as well as provide for profit? - If direct materials made up $24,000 of the ending work in process inventory balance. How much is the direct labor cost and the manufacturing overhead?
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