Utease Corporation has several production plants nationwide. A newly opened plant in Dubuque produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows. Manufacturing costs (per unit based on expected activity of 20,000 units or 44,000 direct labor hours): Direct materials (2.7 pounds at $20) $ 54.00 Direct labor (2.2 hours at $80) 176.00 Variable overhead (2.2 hours at $30) 66.00 Fixed overhead (2.2 hours at $40) 88.00 Standard cost per unit $ 384.00 Budgeted selling and administrative costs: Variable $ 4 per unit Fixed $ 1,800,000 Expected sales activity: 18,000 units at $500 per unit Desired ending inventories: 12% of sales Assume this is the first year of operations for the Dubuque plant. During the year, the company had the following activity. Units produced 19,000 Units sold 17,500 Unit selling price $ 495 Direct labor hours worked 41,300 Direct labor costs $ 3,345,300 Direct materials purchased 55,300 pounds Direct materials costs $ 1,106,000 Direct materials used 55,300 pounds Actual fixed overhead $ 1,300,000 Actual variable overhead $ 1,220,000 Actual selling and administrative costs $ 2,172,000
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.
Utease Corporation has several production plants nationwide. A newly opened plant in Dubuque produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with
| Direct materials (2.7 pounds at $20) | $ | 54.00 | ||
| Direct labor (2.2 hours at $80) | 176.00 | |||
| Variable overhead (2.2 hours at $30) | 66.00 | |||
| Fixed overhead (2.2 hours at $40) | 88.00 | |||
| $ | 384.00 | |||
| Budgeted selling and administrative costs: | ||||
| Variable | $ | 4 | per unit | |
| Fixed | $ | 1,800,000 | ||
Expected sales activity: 18,000 units at $500 per unit
Desired ending inventories: 12% of sales
Assume this is the first year of operations for the Dubuque plant. During the year, the company had the following activity.
| Units produced | 19,000 | |||
| Units sold | 17,500 | |||
| Unit selling price | $ | 495 | ||
| Direct labor hours worked | 41,300 | |||
| Direct labor costs | $ | 3,345,300 | ||
| Direct materials purchased | 55,300 | pounds | ||
| Direct materials costs | $ | 1,106,000 | ||
| Direct materials used | 55,300 | pounds | ||
| Actual fixed overhead | $ | 1,300,000 | ||
| Actual variable overhead | $ | 1,220,000 | ||
| Actual selling and administrative costs | $ | 2,172,000 | ||
In addition, all over- or underapplied overhead and all product cost variances are adjusted to cost of goods sold.
e-1. Find the total over- or underapplied (both fixed and variable) overhead.
e-2. Would cost of goods sold be a larger or smaller expense item after the adjustment for over- or underapplied overhead?
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