Problem #1 Gold Nest Company uses job order costing system in which overhead is applied to jobs on the basis of direct labor cost. Estimated total direct labor cost for the year would be $200,000 and total manufacturing overhead cost would be $330,000. Inventory balance at the beginning of the year were Raw materials at $25,000, work in process at $10,000 and finished goods at $40,000. During the year, the following transactions were completed: a. Raw materials purchased for cash, $275,000 b. Raw materials requisitioned for use in production, $280,000. Materials charged directly to jobs, $220,000, the remaining materials were indirect. c. Cost of employee services were direct labor, $180,000; indirect labor, $72,000; sales commissions, $63,000, and administrative salaries, $90,000. d. Rent for the year was $18,000 of which $13,000 is related to factory operations and the rest to selling and administrative activities. e. Factory utility costs incurred, $57,000. Advertising costs, $140,000. f. Depreciation recorded on equipment, $100,000, out of which $88,000 was for factory equipment and the kemaining was on equipment used in selling and administrative activities. . Based on the job order cost sheets, goods manufactured and completed during the year cost $675,000 h. Sales for the year, $1,250,000. Cost to manufacture these goods according to their job cost sheets was $700,000. Required: 1. Compute the total manufacturing overhead (MOH) applied to jobs for the year. Is the MOH under-applied or over-applied? Close the balance to cost of goods sold and prepare statement of cost of goods manufactured and income statement for the year. Problem #1 Manufacturing overhead applied per unit MOH applied for the year Actual Manufacturing overhead: Indirect Materials Indirect Labor Rent Expense-Factory Utility Expense - Factory Depreciation - Factory equipment Total Over-applied MOH $ $ Raw Materials used Direct Labor $ /$ Gold Nest Company Statement of Cost of Goods Manufactured For the Year Ended December 31, 20xx $ Manufacturing Overhead applied Total Manufacturing costs Add: Work in Process, Jan. 1 Total cost of goods in process Less: Work in Process, Dec. 31 Cost of Goods Manufactured x $ $ $ $ - $ -$ $ $
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.
![Problem #1
Gold Nest Company uses job order costing system in which overhead is applied to jobs on the basis of direct
labor cost. Estimated total direct labor cost for the year would be $200,000 and total manufacturing overhead
cost would be $330,000. Inventory balance at the beginning of the year were Raw materials at $25,000, work in
process at $10,000 and finished goods at $40,000. During the year, the following transactions were completed:
a. Raw materials purchased for cash, $275,000
b. Raw materials requisitioned for use in production, $280,000. Materials charged directly to jobs,
$220,000, the remaining materials were indirect.
c. Cost of employee services were direct labor, $180,000; indirect labor, $72,000; sales commissions,
$63,000, and administrative salaries, $90,000.
d.
Rent for the year was $18,000 of which $13,000 is related to factory operations and the rest to selling and
administrative activities.
e. Factory utility costs incurred, $57,000. Advertising costs, $140,000.
f. Depreciation recorded on equipment, $100,000, out of which $88,000 was for factory equipment and the
kemaining was on equipment used in selling and administrative activities.
2. Based on the job order cost sheets, goods manufactured and completed during the year cost $675,000
h. Sales for the year, $1,250,000. Cost to manufacture these goods according to their job cost sheets was
$700,000.
Required: 1. Compute the total manufacturing overhead (MOH) applied to jobs for the year. Is the MOH
under-applied or over-applied? Close the balance to cost of goods sold and prepare statement of cost of
goods manufactured and income statement for the year.
Problem #1
Manufacturing overhead applied per unit $
$
MOH applied for the year
Actual Manufacturing overhead:
Indirect Materials
Indirect Labor
Rent Expense-Factory
Utility Expense - Factory
Depreciation - Factory equipment
Total
Over-applied MOH
$
Raw Materials used
Direct Labor
/ $
Gold Nest Company
Statement of Cost of Goods Manufactured
For the Year Ended December 31, 20xx
$
Manufacturing Overhead applied
Total Manufacturing costs
Add: Work in Process, Jan. 1
Total cost of goods in process
Less: Work in Process, Dec. 31
Cost of Goods Manufactured
x $
$
$
$
= $
= $
$
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8039beaf-f946-4529-ad0c-3ec392aacfa7%2Fd256a811-0405-4ae5-bd87-0d5af421b7e7%2F7zjo5iq_processed.jpeg&w=3840&q=75)
![Gold Nest Company
Income Statement
For the Year Ended December 31, 20xx
Sales
Less cost of goods sold ($
Gross margin.
Less selling and administrative expenses:
Advertising expense.
Administrative salaries.
Sales commissions
Rent expense
Depreciation expense.
Net operating income.
- $
).......
$
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8039beaf-f946-4529-ad0c-3ec392aacfa7%2Fd256a811-0405-4ae5-bd87-0d5af421b7e7%2F8dzernj_processed.jpeg&w=3840&q=75)
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