Sunset Products manufactures skateboards. The following transactions occurred in March. Purchased $25,500 of materials on account. Issued $1,550 of supplies from the materials inventory. Purchased $26,100 of materials on account. Paid for the materials purchased in transaction (1) using cash. Issued $31,100 in direct materials to the production department. Incurred direct labor costs of $30,500, which were credited to Wages Payable. Paid $22,600 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing shop. Applied overhead on the basis of 120 percent of direct labor costs. Recognized depreciation on manufacturing property, plant, and equipment of $6,100. The following balances appeared in the accounts of Sunset Products for March. Beginning Ending Materials Inventory $ 10,650 ? Work-in-Process Inventory 17,600 ? Finished Goods Inventory 66,100 $ 37,600 Cost of Goods Sold 74
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.
Exercise 7-23 (Algo) Assigning Costs to Jobs (LO 7-1, 2)
Sunset Products manufactures skateboards. The following transactions occurred in March.
-
Purchased $25,500 of materials on account.
-
Issued $1,550 of supplies from the materials inventory.
-
Purchased $26,100 of materials on account.
-
Paid for the materials purchased in transaction (1) using cash.
-
Issued $31,100 in direct materials to the production department.
-
Incurred direct labor costs of $30,500, which were credited to Wages Payable.
-
Paid $22,600 cash for utilities, power, equipment maintenance, and other miscellaneous items for the manufacturing shop.
-
Applied
overhead on the basis of 120 percent of direct labor costs. -
Recognized
depreciation on manufacturing property, plant, and equipment of $6,100.
The following balances appeared in the accounts of Sunset Products for March.
| Beginning | Ending | |||||
| Materials Inventory | $ | 10,650 | ? | |||
| Work-in-Process Inventory | 17,600 | ? | ||||
| Finished Goods Inventory | 66,100 | $ | 37,600 | |||
| Cost of Goods Sold | 74,100 | |||||
Required:
a. Prepare
b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.
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