Reynolds Manufacturers Inc. has estimated total factory overhead costs of $105,300 and expected direct labor hours of 11,700 for the current fiscal year. If job number 117 incurs 1,410 direct labor hours, Work in Process will be debited and Factory Overhead will be credit for
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.
CONCEPT-
To record a transaction of factory overhead absorbed during a period, the journal entry is following
| Work in progress DR | XXX | |
| To factory overhead | XXX |
To calculate absorbed overhead
=Predetermined rate*Actual level of activity
Where predetermind rate =Estimated overheads÷Estimate level of activity
NOTE- Here in above question level of activity is direct labour hours
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