REQUIRED Prepare T-accounts for Raw Materials, Work in process, Finished Goods, Manufacturing Overhead and Cost of Goods Sold. Post the appropriate parts of your journal entries to these T-accounts. Compute the ending balance in each account. ( Do not forget to enter the opening balances in the inventory accounts). Is manufacturing over-applied or under-applied for the year? Prepare a journal entry to close this balance to Cost of Goods Sold. Job 42 was one of the many jobs started and completed during the year. The job required $8,000 in direct materials and 39 hours of direct labour time at a total direct labour cost of $9,200. The job contained four units. If the company bills at a price 60% above the unit cost on the job cost sheet, calculating the selling price per unit charged to the customer.
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.
Ryu and Friends Manufacturing company, a manufacturer of custom-made drones, uses a job order cost system to accumulate costs in its manufacturing plant. The company allocates manufacturing
| Raw Materials | $ 32,000 |
| Work in process | 20,000 |
| Finished Goods | 48,000 |
During the year, the following transactions were completed:
- Raw materials were purchased on account, $ 170,000.
- Raw materials were issued from the storeroom for use in production, $ 180,000 ( 80% direct and 20% indirect).
- Employee salaries and wages were accrued as follows: direct labour, $ 200,000; indirect labour, $ 82,000; and selling and administrative salaries, $ 90,000.
- Utility costs were incurred in the factory, $ 65,000.
- Advertising costs were incurred, $ 100,000.
- Prepaid insurance expired during the year, $ 20,000 ( 90% related to factory operations, and 10% to selling and administration activities).
Depreciation was recorded, $ 180,000 ( 85% related to factory assets, and 15% related to selling and administrative assets).- Overhead cost was applied to production at the predetermined overhead rate calculated in Part 1
- Goods costing $ 700,000 to complete were transferred to the finished goods warehouse.
- Sales for the year (all on account) totalled $ 1,000,000. These goods had cost $ 720,000 to manufacture.
REQUIRED
- Prepare T-accounts for Raw Materials, Work in process, Finished Goods, Manufacturing Overhead and Cost of Goods Sold. Post the appropriate parts of your journal entries to these T-accounts. Compute the ending balance in each account. ( Do not forget to enter the opening balances in the inventory accounts).
- Is manufacturing over-applied or under-applied for the year? Prepare a
journal entry to close this balance to Cost of Goods Sold. - Job 42 was one of the many jobs started and completed during the year. The job required $8,000 in direct materials and 39 hours of direct labour time at a total direct labour cost of $9,200. The job contained four units. If the company bills at a price 60% above the unit cost on the
job cost sheet, calculating the selling price per unit charged to the customer.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
