Problem 7-65 (Algo) Tracing Costs in a Job Company (LO 7-2, 3) Edwin Parts, a job shop, recorded the following transactions in May. 1. Purchased $87,460 in materials on account. 2. Issued $3,780 in supplies from the materials inventory to the production department. 3. Issued $43,860 in direct materials to the production department. 4. Paid for the materials purchased in transaction (1). 5. Incurred wage costs of $68,240, which were debited to Payroll, a temporary account. Of this amount, $22,560 was withheld for payroll taxes and credited to Payroll Taxes Payable. The remaining $45,160 was paid in cash to the employees. See transactions (6) and (7) for additional information about Payroll. 6. Recognized $34,960 in fringe benefit costs, incurred as a result of the wages paid in (5). This $34,960 was debited to Payroll and credited to Fringe Benefits Payable. 7. Analyzed the Payroll account and determined that 65 percent represented direct labor; 15 percent, Indirect manufacturing labor, and 20 percent, administrative and marketing costs. 8. Applied overhead on the basis of 140 percent of direct labor costs. 9. Paid for utilities, power, equipment maintenance, and other miscellaneous Items for the manufacturing plant totaling $41,560. 10. Recognized depreciation of $26,560 on manufacturing property, plant, and equipment. Required: a. Prepare journal entries to record these transactions. b. The balances that appeared in the accounts of Edwin Parts are shown as follows. Beginning $ 90,160 Ending 25,660 102,860 2 2 Materials Inventory Work-in-Process Inventory Finished Goods Inventory Cost of Goods Sold Prepare T-accounts to show the flow of costs during the period. $ 93,460 157,400
Problem 7-65 (Algo) Tracing Costs in a Job Company (LO 7-2, 3) Edwin Parts, a job shop, recorded the following transactions in May. 1. Purchased $87,460 in materials on account. 2. Issued $3,780 in supplies from the materials inventory to the production department. 3. Issued $43,860 in direct materials to the production department. 4. Paid for the materials purchased in transaction (1). 5. Incurred wage costs of $68,240, which were debited to Payroll, a temporary account. Of this amount, $22,560 was withheld for payroll taxes and credited to Payroll Taxes Payable. The remaining $45,160 was paid in cash to the employees. See transactions (6) and (7) for additional information about Payroll. 6. Recognized $34,960 in fringe benefit costs, incurred as a result of the wages paid in (5). This $34,960 was debited to Payroll and credited to Fringe Benefits Payable. 7. Analyzed the Payroll account and determined that 65 percent represented direct labor; 15 percent, Indirect manufacturing labor, and 20 percent, administrative and marketing costs. 8. Applied overhead on the basis of 140 percent of direct labor costs. 9. Paid for utilities, power, equipment maintenance, and other miscellaneous Items for the manufacturing plant totaling $41,560. 10. Recognized depreciation of $26,560 on manufacturing property, plant, and equipment. Required: a. Prepare journal entries to record these transactions. b. The balances that appeared in the accounts of Edwin Parts are shown as follows. Beginning $ 90,160 Ending 25,660 102,860 2 2 Materials Inventory Work-in-Process Inventory Finished Goods Inventory Cost of Goods Sold Prepare T-accounts to show the flow of costs during the period. $ 93,460 157,400
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text:Problem 7-65 (Algo) Tracing Costs in a Job Company (LO 7-2, 3)
Edwin Parts, a job shop, recorded the following transactions in May.
1. Purchased $87,460 in materials on account.
2. Issued $3,780 in supplies from the materials inventory to the production department.
3. Issued $43,860 in direct materials to the production department.
4. Paid for the materials purchased in transaction (1).
5. Incurred wage costs of $68,240, which were debited to Payroll, a temporary account. Of this amount, $22,560 was withheld for
payroll taxes and credited to Payroll Taxes Payable. The remaining $45,160 was paid in cash to the employees. See transactions (6)
and (7) for additional information about Payroll.
6. Recognized $34,960 in fringe benefit costs, incurred as a result of the wages paid in (5). This $34,960 was debited to Payroll and
credited to Fringe Benefits Payable.
7. Analyzed the Payroll account and determined that 65 percent represented direct labor; 15 percent, indirect manufacturing labor;
and 20 percent, administrative and marketing costs.
8. Applied overhead on the basis of 140 percent of direct labor costs.
9. Paid for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing plant totaling $41,560.
10. Recognized depreciation of $26,560 on manufacturing property, plant, and equipment.
Required:
a. Prepare journal entries to record these transactions.
b. The balances that appeared in the accounts of Edwin Parts are shown as follows.
Beginning
$ 90,160
Ending
Materials Inventory
Work-in-Process Inventory.
Finished Goods Inventory
Cost of Goods Sold
Prepare T-accounts to show the flow of costs during the period.
25,660
102,860
2
$ 93,460
157,400
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