Mooresville Corporation manufactures reproductions of eighteenth-century, classical-style furniture. It uses a job costing system that applies factory overhead on the basis of direct labor hours. Budgeted factory overhead for the year was $1,375,600, and management budgeted 90,500 direct labor hours. Mooresville had no Materials, Work-in-Process, or Finished Goods Inventory at the beginning of August. These transactions were recorded during August: Purchased 5,700 square feet of oak on account at $26 per square foot. Purchased 120 gallons of glue on account at $36 per gallon (indirect material). Requisitioned 3,990 square feet of oak and 38 gallons of glue for production. Incurred and paid payroll costs of $202,600. Of this amount, $53,000 were indirect labor costs; direct labor personnel earned $22 per hour. Paid factory utility bill, $16,420 in cash. August’s insurance cost for the manufacturing property and equipment was $3,850. The premium had been paid in March. Incurred $8,955 depreciation on manufacturing equipment for August. Recorded $2,575 depreciation on an administrative asset. Paid advertising expenses in cash, $5,815. Incurred and paid other factory overhead costs, $14,200. Incurred and paid miscellaneous selling and administrative expenses, $13,775. Applied factory overhead to production on the basis of direct labor hours. Produced completed goods costing $149,500 during the month. Sales on account in August were $135,500. The Cost of Goods Sold was $115,500. Required: 1. Compute the firm’s predetermined factory overhead rate for the year. 2. Prepare journal entries to record the August events. 3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on August 31.
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.
Mooresville Corporation manufactures reproductions of eighteenth-century, classical-style furniture. It uses a
- Purchased 5,700 square feet of oak on account at $26 per square foot.
- Purchased 120 gallons of glue on account at $36 per gallon (indirect material).
- Requisitioned 3,990 square feet of oak and 38 gallons of glue for production.
- Incurred and paid payroll costs of $202,600. Of this amount, $53,000 were indirect labor costs; direct labor personnel earned $22 per hour.
- Paid factory utility bill, $16,420 in cash.
- August’s insurance cost for the manufacturing property and equipment was $3,850. The premium had been paid in March.
- Incurred $8,955
depreciation on manufacturing equipment for August. - Recorded $2,575 depreciation on an administrative asset.
- Paid advertising expenses in cash, $5,815.
- Incurred and paid other
factory overhead costs , $14,200. - Incurred and paid miscellaneous selling and administrative expenses, $13,775.
- Applied factory overhead to production on the basis of direct labor hours.
- Produced completed goods costing $149,500 during the month.
- Sales on account in August were $135,500. The Cost of Goods Sold was $115,500.
Required:
1. Compute the firm’s predetermined factory overhead rate for the year.
2. Prepare
3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on August 31.
4. Prepare a schedule of Cost of Goods Manufactured and Cost of Goods Sold.
5. Prepare the income statement for August.
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