The Lofton manufacturing company uses job order costing system. The company uses machine hours to apply overhead cost to jobs. At the beginning of 2020, the company estimated that 31,400 machine hours would be worked and $5,024,000 overhead cost would be incurred during 2020. The following activities took place in the work in process inventory during February: *see attached image* Other transactions incurred: Indirect material issued to production was $40,360 Total manufacturing labour incurred in November was $368,000, 75% of this amount represented direct labour. Other manufacturing overhead costs incurred for November amounted to $340,490. Two jobs were completed with total costs of $384,000 & $270,000 respectively. They were sold on account at a margin of 33 1 ⁄ 3% on sales. Required: Compute Lofton’s predetermined manufacturing overhead rate for 2020. State the journal entries necessary to record the above transactions in the general journal: For direct materials used in November For indirect material issued to production in November For total manufacturing labour incurred in November To assign manufacturing labour to the appropriate accounts For other manufacturing overhead incurred For manufacturing overhead applied to production for November, given that Lofton manufacturing company worked 2,860 machine hours. To move the completed jobs into finished goods inventory To sell the two completed jobs on account
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 Lofton manufacturing company uses job order costing system. The company uses machine hours to apply
The following activities took place in the work in process inventory during February:
*see attached image*
Other transactions incurred:
- Indirect material issued to production was $40,360
- Total manufacturing labour incurred in November was $368,000, 75% of this amount represented direct labour.
- Other
manufacturing overhead costs incurred for November amounted to $340,490. - Two jobs were completed with total costs of $384,000 & $270,000 respectively. They were sold on account at a margin of 33 1 ⁄ 3% on sales.
Required:
- Compute Lofton’s predetermined manufacturing overhead rate for 2020.
- State the
journal entries necessary to record the above transactions in the general journal:
- For direct materials used in November
- For indirect material issued to production in November
- For total manufacturing labour incurred in November
- To assign manufacturing labour to the appropriate accounts
- For other manufacturing overhead incurred
- For manufacturing overhead applied to production for November, given that Lofton manufacturing company worked 2,860 machine hours.
- To move the completed jobs into finished goods inventory
- To sell the two completed jobs on account
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