Vermont Company uses continuous processing to produce stuffed bears and FIFO process costing to account for its production costs. It uses FIFO because costs are quite unstable due to the volatile price of fine materials it uses in production. The bears are processed through one department. Overhead is applied on the basis of direct labor costs, and the application rate has not changed over the period covered by the problem. The Work-in-Process Inventory account showed the following balances at the start of the current period. Direct materials $ 131,000 Direct labor 260,000 Overhead applied 325,000 These costs were related to 52,000 units that were in process at the start of the period. During the period, 60,000 units were transferred to finished goods inventory. Of the units finished during this period, 80 percent were sold. After units have been transferred to finished goods inventory, no distinction is made between the costs to complete beginning work-in-process inventory and the costs of goods started and completed in work in process this period. The equivalent units for materials this period were 50,000 (using FIFO). Of these, 10,000 were equivalent units with respect to materials in the ending work-in-process inventory. Materials costs incurred during the period totaled $300,400. Conversion costs of $1,287,000 were charged this period for 62,500 equivalent units (using FIFO). The ending inventory consisted of 22,000 equivalent units of conversion costs. The actual manufacturing overhead for the period was $660,000. Required: Prepare T-accounts to show the flow of costs in the system. Any difference between actual and applied overhead for the period should be debited or credited to Cost of Goods Sold. (Do not round intermediate calculations. Round your answers to nearest whole dollar.)
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.
ntegrative Cases 8-69 (Static) Show Cost Flows: FIFO Method, Over- or Underapplied Overhead (LO 8-5)
Vermont Company uses continuous processing to produce stuffed bears and FIFO
Overhead is applied on the basis of direct labor costs, and the application rate has not changed over the period covered by the problem. The Work-in-Process Inventory account showed the following balances at the start of the current period.
| Direct materials | $ | 131,000 | |
| Direct labor | 260,000 | ||
| Overhead applied | 325,000 | ||
These costs were related to 52,000 units that were in process at the start of the period.
During the period, 60,000 units were transferred to finished goods inventory. Of the units finished during this period, 80 percent were sold. After units have been transferred to finished goods inventory, no distinction is made between the costs to complete beginning work-in-process inventory and the costs of goods started and completed in work in process this period.
The equivalent units for materials this period were 50,000 (using FIFO). Of these, 10,000 were equivalent units with respect to materials in the ending work-in-process inventory. Materials costs incurred during the period totaled $300,400.
Conversion costs of $1,287,000 were charged this period for 62,500 equivalent units (using FIFO). The ending inventory consisted of 22,000 equivalent units of conversion costs. The actual manufacturing overhead for the period was $660,000.
Required:
Prepare T-accounts to show the flow of costs in the system. Any difference between actual and applied overhead for the period should be debited or credited to Cost of Goods Sold. (Do not round intermediate calculations. Round your answers to nearest whole dollar.)
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