Cornerstone Exercise 6.1 Cost Flows Lamont Company produced 80,000 machine parts for diesel engines. There were no beginning or ending work-in-process inventories in any department. Lamont incurred the following costs for May: Molding Department Grinding Department Finishing Department Direct materials $13,000 $ 5,200 $ 8,000 Direct labor 10,000 17,000 8,800 14,000 12,000 11,000 Applied overhead Required: 1. Calculate the costs transferred out of each department. 2. Prepare the journal entries corresponding to these transfers. Also, prepare the journal entry for Grinding that reflects the costs added to the transferred-in goods received from Molding. 3. What if the Grinding Department had an ending WIP of $12,000? Calculate the cost trans- ferred out and provide the journal entry that would reflect this transfer. What is the effect on finished goods calculated in Requirement 1, assuming the other two departments have no ending WIP?
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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