Manor Painting is a commercial interior and exterior painting contractor specializing in commercial buildings. An Inventory of materials and equipment is on hand at all times, so work can start as quickly as possible. Special equipment is ordered as required. On August 1, the Materials Inventory account had a balance of $54,000. The Work-in-Process Inventory account is maintained to record costs of work not yet complete. There were two such jobs on August 1 with the following costs: Job 87 $ 78,800 Materials and equipment Direct labor 39,400 Overhead (applied) 15,760 Overhead has been applied at 40 percent of the costs of direct labor using an annual rate. During August, Manor Painting started two new jobs. Additional work was carried out on Jobs 84 and 87. Job 87 was completed and billed to the customer. Details on the costs incurred on jobs during August follow: Materials and equipment Direct labor (wages payable) Other August Events Job 84 $ 23,100 20,300 8,120 Property taxes Storage area rental Truck and delivery cost Advertising and promotion campaign Inspections Job 84 $ 4,500 7,800 Job 87 Job 88 $ 6,900 8,900 $ 7,200 10,100 1. Purchased materials and equipment for $14,100. 2. Billed $195,000 to the customer for Job 87 and received payment for $115,000 of that amount. 3. Received $18,600 payment on Job 82 delivered to customer in July. 4. Determined that payroll for indirect labor personnel totaled $2,100. 5. Issued supplies and incidental materials for current jobs costing $750. 6. Recorded overhead and advertising costs for the operation as follows (all cash except equipment depreciation): Job 90 $ 4,400 2,400 $ 900 1,050 1,630 1,200 900 680 2,720 Telephone and other miscellaneous Equipment depreciation Required: a. Prepare journal entries to record the flow of costs for operations during August. b. Calculate the amount of over- or underapplied overhead for the month. This amount is debited or credited to Cost of Goods Sold. c. Determine Inventory balances for Materials and Equipment Inventory and Work-In-Process Inventory.
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.
The cost of operations contains the value of direct material, labor, and related indirect expenses incurred in support of operations. These indirect expenses become part of overheads as they support the business operations but cannot be directly associated with the product/job.
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