Dillon Products manufactures various machined parts to customer specifications. The company uses a joborder costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning ofthe year, it was estimated that the company would work 240,000 machine-hours and incur $4,800,000 inmanufacturing overhead costs.The company spent the entire month of January working on a large order for 16,000 custom mademachined parts. The company had no work in process at the beginning of January. Cost data relating toJanuary follow:a. Raw materials purchased on account, $325,000.b. Raw materials requisitioned for production, $290,000 (80% direct materials and 20% indirect materials).c. Labor cost incurred 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, $62,000 (credit Accounts Payable).f. Manufacturing overhead cost was applied to production on the basis of 15,000 machine-hours actuallyworked during the month.g. The completed job was moved into the finished goods warehouse on January 31 to await delivery tothe customer. (In computing the dollar amount for this entry, remember that the cost of a completedjob 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 fromyour journal entries to these T-accounts.3. Prepare a journal entry for item (g) above.4. Compute the unit product cost that will appear on the job cost sheet
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 joborder costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of
the year, it was estimated that the company would work 240,000 machine-hours and incur $4,800,000 in
manufacturing overhead costs.
The company spent the entire month of January working on a large order for 16,000 custom made
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 requisitioned for production, $290,000 (80% direct materials and 20% indirect materials).
c. Labor cost incurred in the factory, $180,000 (one-third direct labor and two-thirds indirect labor).
d.
e. Other manufacturing overhead costs incurred, $62,000 (credit Accounts Payable).
f.
worked during the month.
g. The completed job 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. Compute the unit product cost that will appear on the
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