Q4. The following transactions are related to a particular job. You are required to make the necessary journal entries. The materials storeroom receives a shipment of direct and indirect materials that cost SAR 50,000. Materials are sent to the stamping and assembly areas. The cost of the direct materials is SAR 5,600 and the cost of the indirect materials is SAR 3,200. Wages totaling SAR 7,000 are accrued; 60% of these costs are direct labor and 40% are indirect labor. Overhead costs are allocated to work in process using an allocation rate of 250% of direct labor costs. Job no. 25, with a total cost of SAR 8,500 is completed. Job no. 25 is shipped to the customer, who is billed for SAR 15,000.
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.
Q4. The following transactions are related to a particular job. You are required to make the necessary
- The materials storeroom receives a shipment of direct and indirect materials that cost SAR 50,000.
- Materials are sent to the stamping and assembly areas. The cost of the direct materials is SAR 5,600 and the cost of the indirect materials is SAR 3,200.
- Wages totaling SAR 7,000 are accrued; 60% of these costs are direct labor and 40% are indirect labor.
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Overhead costs are allocated to work in process using an allocation rate of 250% of direct labor costs. - Job no. 25, with a total cost of SAR 8,500 is completed.
- Job no. 25 is shipped to the customer, who is billed for SAR 15,000.
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