The business manufactures custom patios made of concrete, brick, fiberglass, and lumber- depending upon customer preference. The company's fiscal year is the calendar year. At the beginning of July, selected balances were as follows: Direct Materials Inventory, July 1 $4200 Work-In-Process Inventory, July 1 5540* Manufacturing Overhead Applied to Date 32640 Actual Manufacturing Overhead to Date 31650 *Details for Work in Process Job 85 Job 86 Job 87 Total Direct Materials $600 800 900
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.
The business manufactures custom patios made of concrete, brick, fiberglass, and lumber- depending upon customer preference. The company's fiscal year is the calendar year. At the beginning of July, selected balances were as follows:
| Direct Materials Inventory, July 1 | $4200 |
| Work-In-Process Inventory, July 1 | 5540* |
| Manufacturing |
32640 |
| Actual Manufacturing Overhead to Date | 31650 |
*Details for Work in Process
| Job 85 | Job 86 | Job 87 | Total | ||||
| Direct Materials | $600 | 800 | 900 | ||||
| Direct Labor | 320 | 540 | 580 | ||||
| Manufacturing Overhead | 400 | 675 | 725 | ||||
| = | 1320 | + | 2015 | + | 2205 | = | 5540 |
(the last row are the separate columns added together and then totaled at the end).
During July, total direct materials purchased were $4900. Overhead costs incurred were $3800. Direct materials and direct labor used were as follows:
| Materials Requested Amounts | Labor Time Ticket Amounts | |||
| Job 85 | $1100 | $840 | ||
| Job 86 | 500 | 360 | ||
| Job 87 | 1300 | 1200 | ||
| Job 88 | 2000 | 800 |
The Company uses conventional overhead application with overhead charged to jobs at the rate of $1.25 per dollar of direct labor cost. The patios for Jobs 85 and 87 were completed during July and sold at cost plus a 30 percent markup.
Prepare an Excel Spreadsheet that determines the cost of each job at the end of July. Then program cells that determine end of July balance of direct materials inventory, end of July balance of work in process inventory, end of July balance of finished goods, sales for July, cost of goods sold for July, and gross profit margin for July. On the lower part of the spreadsheet: Prepare a formal cost of goods manufactured schedule for the month of July.
(the company only deals with underapplied or overapplied overhead at the end of December therefore it is not needed in July).
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