Problem:1 (JOB ORDER COSTING) The Collins Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the predetermined overhead rate for the year: Manufacturing overhead cost: $200,000 Direct materials cost: $160,000 The following transactions took place during the year (all purchases and services were acquired on account): a.) Raw materials purchased: $86,000. b.) Raw materials requisitioned for use in production (all direct materials): $98,000. c.) Utility costs incurred in the factory: $15,000. d.) Salaries and wages incurred as follows: Direct labour: $175,000 Indirect labour: $70,000 Selling and administrative salaries: $125,000 e.) Maintenance costs incurred in the factory: $15,000. f.) Advertising costs incurred: $89,000. g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets and the remainder relates to selling and administrative assets. h.) Rental cost incurred on buildings: $70,000 (75% of the space is occupied by the factory, and 25% is occupied by sales and administration). i.) Miscellaneous selling and administrative costs incurred: $11,000. j.) Manufacturing overhead cost was applied to jobs as per company policy. k.) Cost of goods manufactured for the year: $500,000. 1.) Sales for the year (all on account): $1,000,000. These goods cost $600,000 to manufacture. Required: Prepare statement of cost of goods manufactured and net income.
Problem:1 (JOB ORDER COSTING) The Collins Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of materials used in production. At the beginning of the most recent year, the following estimates were made as a basis for computing the predetermined overhead rate for the year: Manufacturing overhead cost: $200,000 Direct materials cost: $160,000 The following transactions took place during the year (all purchases and services were acquired on account): a.) Raw materials purchased: $86,000. b.) Raw materials requisitioned for use in production (all direct materials): $98,000. c.) Utility costs incurred in the factory: $15,000. d.) Salaries and wages incurred as follows: Direct labour: $175,000 Indirect labour: $70,000 Selling and administrative salaries: $125,000 e.) Maintenance costs incurred in the factory: $15,000. f.) Advertising costs incurred: $89,000. g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets and the remainder relates to selling and administrative assets. h.) Rental cost incurred on buildings: $70,000 (75% of the space is occupied by the factory, and 25% is occupied by sales and administration). i.) Miscellaneous selling and administrative costs incurred: $11,000. j.) Manufacturing overhead cost was applied to jobs as per company policy. k.) Cost of goods manufactured for the year: $500,000. 1.) Sales for the year (all on account): $1,000,000. These goods cost $600,000 to manufacture. Required: Prepare statement of cost of goods manufactured and net income.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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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Problem:1 (JOB ORDER COSTING)
The Collins Company uses a job-order costing system and applies manufacturing
overhead cost to jobs on the basis of the cost of materials used in production. At the
beginning of the most recent year, the following estimates were made as a basis for
computing the predetermined overhead rate for the year:
Manufacturing overhead cost: $200,000
Direct materials cost:
$160,000
The following transactions took place during the year (all purchases and services were
acquired on account):
a.) Raw materials purchased: $86,000.
b.) Raw materials requisitioned for use in production (all direct materials): $98,000.
c.) Utility costs incurred in the factory: $15,000.
d.) Salaries and wages incurred as follows:
Direct labour:
$175,000
Indirect labour:
$70,000
Selling and administrative salaries: $125,000
e.) Maintenance costs incurred in the factory: $15,000.
f.) Advertising costs incurred: $89,000.
g.) Depreciation recorded for the year: $80,000, of which 80% relates to factory assets
and the remainder relates to selling and administrative assets.
h.) Rental cost incurred on buildings: $70,000 (75% of the space is occupied by the
factory, and 25% is occupied by sales and administration).
i.) Miscellaneous selling and administrative costs incurred: $11,000.
j.) Manufacturing overhead cost was applied to jobs as per company policy.
k.) Cost of goods manufactured for the year: $500,000.
1.) Sales for the year (all on account): $1,000,000. These goods cost $600,000 to
manufacture.
Required:
Prepare statement of cost of goods manufactured and net income.
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