Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur$4,800,000 in manufacturing overhead cost at an activity level of 240,000 machine-hours.The company spent the entire month of January working on a large order for 16,000 custommade machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:a. Raw materials purchased on account, $325,000.b. Raw materials used in production, $290,000 (80% direct materials and 20% indirect materials).c. Labor cost accrued in the factory, $180,000 (one-third direct labor and two-thirds indirect labor).d. Depreciation recorded on factory equipment, $75,000.e. Other manufacturing overhead costs incurred on account, $62,000.f. Manufacturing overhead cost was applied to production on the basis of 15,000 machine-hours actually worked during the month.g. The completed job for 16,000 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.) Required:1. Prepare journal entries to record items (a) through (f) above [ignore item (g) for the moment].2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts.3. Prepare a journal entry for item (g) above.4. If 10,000 of the custom-made machined parts are shipped to the customer in February, how much of this job’s cost will be included in cost of goods sold for February?
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.
Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur
$4,800,000 in
The company spent the entire month of January working on a large order for 16,000 custommade machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:
a. Raw materials purchased on account, $325,000.
b. Raw materials used in production, $290,000 (80% direct materials and 20% indirect materials).
c. Labor cost accrued in the factory, $180,000 (one-third direct labor and two-thirds indirect labor).
d.
e. Other manufacturing overhead costs incurred on account, $62,000.
f. Manufacturing overhead cost was applied to production on the basis of 15,000 machine-hours actually worked during the month.
g. The completed job for 16,000 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)
Required:
1. Prepare journal entries to record items (a) through (f) above [ignore item (g) for the moment].
2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant items from your journal entries to these T-accounts.
3. Prepare a
4. If 10,000 of the custom-made machined parts are shipped to the customer in February, how much of this
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