Morrison Company uses a job-order costing system to assign manufacturing costs to jobs. Its balance sheet on January 1 is as follows: Morrison Company Balance Sheet January 1 Assets Cash $ 33,150 Raw materials $ 17,700 Work in process 4,750 Finished goods 31,200 53,650 Prepaid expenses 2,825 Property, plant, and equipment (net) 128,000 Total assets $ 217,625 Liabilities and Stockholders’ Equity Accounts payable $ 16,800 Retained earnings 200,825 Total liabilities and stockholders’ equity $ 217,625 During January the company completed the following transactions: Purchased raw materials on account, $89,600. Raw materials used in production, $97,800 ($84,600 was direct materials and $13,200 was indirect materials). Paid $190,450 of salaries and wages in cash ($95,200 was direct labor, $45,000 was indirect labor, and $50,250 was related to employees responsible for selling and administration). Various manufacturing overhead costs incurred (on account) to support production, $37,050. Depreciation recorded on property, plant, and equipment, $65,200 (70% related to manufacturing equipment and 30% related to assets that support selling and administration). Various selling expenses paid in cash, $40,250. Prepaid insurance expired during the month, $1,750 (80% related to production, and 20% related to selling and administration). Manufacturing overhead applied to production, $140,400. Cost of goods manufactured, $297,300. Cash sales to customers, $406,480. Cost of goods sold (unadjusted), $293,200. Cash payments to creditors, $78,400. Underapplied or overapplied overhead $? . Required: 1. Calculate the ending balances that would be reported on the company's balance sheet on January 31. (Hint: Be sure to calculate the underapplied or overapplied overhead and then account for its affect on the balance sheet.) 2. What is Morrison Company’s net operating income for the month of January?
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.
Morrison Company uses a
| Morrison Company | |||||
| Balance Sheet | |||||
| January 1 | |||||
| Assets | |||||
| Cash | $ | 33,150 | |||
| Raw materials | $ | 17,700 | |||
| Work in process | 4,750 | ||||
| Finished goods | 31,200 | 53,650 | |||
| Prepaid expenses | 2,825 | ||||
| Property, plant, and equipment (net) | 128,000 | ||||
| Total assets | $ | 217,625 | |||
| Liabilities and |
|||||
| Accounts payable | $ | 16,800 | |||
| 200,825 | |||||
| Total liabilities and stockholders’ equity | $ | 217,625 | |||
During January the company completed the following transactions:
- Purchased raw materials on account, $89,600.
- Raw materials used in production, $97,800 ($84,600 was direct materials and $13,200 was indirect materials).
- Paid $190,450 of salaries and wages in cash ($95,200 was direct labor, $45,000 was indirect labor, and $50,250 was related to employees responsible for selling and administration).
- Various manufacturing
overhead costs incurred (on account) to support production, $37,050. Depreciation recorded on property, plant, and equipment, $65,200 (70% related to manufacturing equipment and 30% related to assets that support selling and administration).- Various selling expenses paid in cash, $40,250.
- Prepaid insurance expired during the month, $1,750 (80% related to production, and 20% related to selling and administration).
- Manufacturing overhead applied to production, $140,400.
- Cost of goods manufactured, $297,300.
- Cash sales to customers, $406,480.
- Cost of goods sold (unadjusted), $293,200.
- Cash payments to creditors, $78,400.
- Underapplied or overapplied overhead $? .
Required:
1. Calculate the ending balances that would be reported on the company's balance sheet on January 31. (Hint: Be sure to calculate the underapplied or overapplied overhead and then account for its affect on the balance sheet.)
2. What is Morrison Company’s net operating income for the month of January?
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