Sandar Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours Fixed manufacturing overhead cost Variable manufacturing overhead per computer-hour 90,000 $1,278,000 $5.30 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year ended 31 December 2019: Computer-hours 85,000 Purchase of raw materials $7,890,000 Direct labor cost $1,722,000 Manufacturing overhead costs: Insurance, factory ... $ 88,000 Depreciation of equipment 170,000 Indirect material . Indirect labor . 12,000 327,000 Property taxes 85,000 Maintenance. 630,000 Rent, building 360,000 Beginning Ending Raw Materials $1,770,000 $ 900,000 Work in Process 960,000 870,000 Finished Goods 1,110,000 1,860,000
Sandar Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: Computer-hours Fixed manufacturing overhead cost Variable manufacturing overhead per computer-hour 90,000 $1,278,000 $5.30 During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records revealed the following actual cost and operating data for the year ended 31 December 2019: Computer-hours 85,000 Purchase of raw materials $7,890,000 Direct labor cost $1,722,000 Manufacturing overhead costs: Insurance, factory ... $ 88,000 Depreciation of equipment 170,000 Indirect material . Indirect labor . 12,000 327,000 Property taxes 85,000 Maintenance. 630,000 Rent, building 360,000 Beginning Ending Raw Materials $1,770,000 $ 900,000 Work in Process 960,000 870,000 Finished Goods 1,110,000 1,860,000
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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Transcribed Image Text:Sandar Company is highly automated and uses computers to control manufacturing
operations. The company uses a job-order costing system and applies manufacturing
overhead cost to products on the basis of computer-hours. The following estimates
were used in preparing the predetermined overhead rate at the beginning of the year:
Computer-hours
Fixed manufacturing overhead cost
Variable manufacturing overhead per computer-hour
90,000
$1,278,000
$5.30
During the year, a severe economic recession resulted in cutting back production and
a buildup of inventory in the company's warehouse. The company's cost records
revealed the following actual cost and operating data for the year ended 31 December
2019:
Computer-hours
85,000
Purchase of raw materials
$7,890,000
Direct labor cost
$1,722,000
Manufacturing overhead costs:
Insurance, factory ...
$ 88,000
Depreciation of equipment
170,000
Indirect material .
Indirect labor .
12,000
327,000
Property taxes
85,000
Maintenance.
630,000
Rent, building
360,000
Beginning
Ending
Raw Materials
$1,770,000
$ 900,000
Work in Process
960,000
870,000
Finished Goods
1,110,000
1,860,000
Transcribed Image Text:Required:
a. Compute the company's predetermined overhead rate for the year.
b. Compute the underapplied or overapplied overhead for the year.
c. Prepare a schedule of cost of goods manufactured.
d. Prepare a journal entry to close any balance in the Manufacturing Overhead
account to Cost of Goods Sold. Prepare a schedule of cost of goods sold.
e. Prepare an income statement for the year ended 31 December 2019. Additional
information of the Company is given below:
Sales. .
$18,100,000
Selling expenses...
Administrative expense..
$1,070,000
..........
720,000
........
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