Sicily Company reported the following actual cost data for the year: purchase of raw materials (all direct) 266,000 direct labour cost 160,000 manufacturing overhead costs 246,000 change in inventories: decrease in raw materials 10,000 decrease in work in process 8,000 decrease in finish goods 16,000Sicily Company used a 150% predetermined overhead rate based on direct labour cost. The rate was based on annual estimated overhead cost and direct labour cost of $252,000 and $168,000, respectively.Required:A. By how much was manufacturing overhead cost under or overapplied? B. Prepare a summary journal entry to close any under or overapplied manufacturing overhead cost to cost of goods sold. C. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.
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.
Sicily Company reported the following actual cost data for the year:
purchase of raw materials (all direct) 266,000
direct labour cost 160,000
manufacturing
change in inventories:
decrease in raw materials 10,000
decrease in work in process 8,000
decrease in finish goods 16,000
Sicily Company used a 150% predetermined overhead rate based on direct labour cost. The rate was based on annual estimated overhead cost and direct labour cost of $252,000 and $168,000, respectively.
Required:
A. By how much was
B. Prepare a summary
C. Analyze the under or overapplied manufacturing overhead costs calculated in part c above into two separate components: amount due to incorrect estimate of the annual manufacturing overhead costs and an amount due to incorrect estimate of the annual direct labour cost.
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