Required: Prepare the relevant journal entries, without narrations, for (a) to (e). Prepare an income statement for the year. Assume a tax rate of 28%.
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.
Example Ltd manufactures a range of products. On April 1, the beginning of its fiscal year, the inventory balances were as follows:
|
Raw materials |
30,000 |
|
Work in process |
15,000 |
|
Finished goods |
40,000 |
Example Ltd applies
- $380,000 of raw materials were requisitioned for use in production, of which $350,000 were direct materials.
- The following costs were accrued for employee services: direct labour, $70,000; indirect labour, $98,000; and sales commissions, $60,000.
Depreciation for the year was $240,000 (20% relates to office equipment for selling and administrative functions and 80% relates to factory operations).- Manufacturing overhead was applied to production. Due to higher than expected demand, the actual machine hours worked on all jobs during the year was 77,000 hours.
- Products costing $720,000 to manufacture were completed during the year.
Additional information:
- Total sales revenue for the period is $1,500,000.
- Total
manufacturing costs for the period is $720,000. - Total actual manufacturing overhead for the period is $430,000.
- In addition to the expenses stated above, administrative and distribution expenses total $360,000.
- Closing inventory balances are: Raw materials, $40,000; Work in process, $38,000; Finished goods, $50,000.
Required:
- Prepare the relevant
journal entries , without narrations, for (a) to (e). - Prepare an income statement for the year. Assume a tax rate of 28%.
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