Dream Makers is a small manufacturer of gold and platinum jewelry. It uses a job costing system that applies overhead on the basis of direct labor hours. Budgeted factory overhead for the year was $476,100, and management budgeted 34,500 direct labor-hours. The company had no Materials, Work-in-Process, or Finished Goods Inventory at the beginning of April. These transactions were recorded during April: April insurance cost for the manufacturing property and equipment was $1,900. The premium had been paid in January. Recorded $1,095 depreciation on an administrative asset. Purchased 21 pounds of high-grade polishing materials at $16 per pound (indirect materials). The purchase was on credit. Paid factory utility bill, $6,590, in cash. Incurred 4,000 hours and paid payroll costs of $160,000. Of this amount, 1,000 hours and $20,000 were indirect labor costs. Incurred and paid other factory overhead costs, $6,330. Purchased $25,500 of materials. Direct materials included unpolished semiprecious stones and gold. Indirect materials included supplies and polishing materials. The purchase was on credit. Requisitioned $19,500 of direct materials and $1,800 of indirect materials from Materials Inventory. Incurred and paid miscellaneous selling and administrative expenses, $5,940. Incurred $3,715 depreciation on manufacturing equipment for April. Paid advertising expenses in cash, $2,800. Applied factory overhead to production on the basis of direct labor hours. Completed goods costing $65,000 during the month. Made sales on account in April, $58,830. The Cost of Goods Sold was $49,540.
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.
Dream Makers is a small manufacturer of gold and platinum jewelry. It uses a
- April insurance cost for the manufacturing property and equipment was $1,900. The premium had been paid in January.
- Recorded $1,095
depreciation on an administrative asset. - Purchased 21 pounds of high-grade polishing materials at $16 per pound (indirect materials). The purchase was on credit.
- Paid factory utility bill, $6,590, in cash.
- Incurred 4,000 hours and paid payroll costs of $160,000. Of this amount, 1,000 hours and $20,000 were indirect labor costs.
- Incurred and paid other
factory overhead costs , $6,330. - Purchased $25,500 of materials. Direct materials included unpolished semiprecious stones and gold. Indirect materials included supplies and polishing materials. The purchase was on credit.
- Requisitioned $19,500 of direct materials and $1,800 of indirect materials from Materials Inventory.
- Incurred and paid miscellaneous selling and administrative expenses, $5,940.
- Incurred $3,715 depreciation on manufacturing equipment for April.
- Paid advertising expenses in cash, $2,800.
- Applied factory overhead to production on the basis of direct labor hours.
- Completed goods costing $65,000 during the month.
- Made sales on account in April, $58,830. The Cost of Goods Sold was $49,540.
Required:
1. Compute the firm’s predetermined factory overhead rate for the year.
2. Prepare
3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on April 30.
4. Prepare a schedule of Cost of Goods Manufactured and a schedule of Cost of Goods Sold.
5. Prepare the income statement for April.
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