Wabash Products uses a job costing system and applies overhead based on direct labor cost. Last year, manufacturing overhead was expected to be $2,829,000 and direct labor cost was estimated to be $1,150,000 (40,600 direct-labor hours). Actual manufacturing overhead amounted to $2,958,000 and direct labor cost was $1,250,000 (42,800 direct-labor hours). Wabash allocates an over- or underapplied overhead to the three accounts-Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold-based on those account balances. At the end of the year, the total amount in the three accounts (Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold) was $5.90 million before any allocation. As a part of the process, you learn that Wabash allocated $102,960 to Cost of Goods Sold. Required: What will Wabash report as Cost of Goods Sold for the year? Cost of Goods Sold $ 5,797,040
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.
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