Fabrikker Company is a company that produces heavy equipment used by oil companies. The company uses an order-based cost accumulation system and charges overhead costs for each order based on direct hours worked. In early 2015, the overhead budget was Nkr (read: Krone) 360,000 with 900 hours of direct work (used to calculate predetermined overhead rates). Transactions that occurred during the current year were: Raw materials purchased on credit of Nkr200,000 Direct raw material demand for production of Nkr185,000 Payable utility expense of Nkr70,000 (90% for factory, and the rest for sales and administrative activities) Salary and wages during the year: Direct labor (975 hours) ................... Nkr230,000 Indirect labor ................................. Nkr90,000 Selling & Administrative ............... Nkr110,000 Maintenance expense for plant equipment of Nkr54,000 was paid in cash Advertising expenses of Nkr136,000 are still payable Depreciation of Nkr95,000 (80% for factory equipment, and the rest for sales and administrative activities) Building lease expense for the period amounted to Nkr120,000 (85% for factories and the rest for sales and administrative activities) Overhead costs charged (applied FOH) to orders are based on direct working hours of the current year COGM for the year amounted to Nkr770,000 Sales on account of Nkr1,200,000 with cost of goods sold of Nkr800,000. Inventory account balance at the beginning of the year: Raw materials ......................... Nkr30,000 Work in Process. ................... Nkr21,000 Finished Goods ....................... Nkr60,000 REQUESTED: 1) Prepare a company transaction journal entry using a perpetual recording system! 2) Calculate the ending inventory for raw materials, Work in Process and Finished Goods!
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.
Fabrikker Company is a company that produces heavy equipment used by oil companies. The company uses an order-based cost accumulation system and charges overhead costs for each order based on direct hours worked. In early 2015, the overhead budget was Nkr (read: Krone) 360,000 with 900 hours of direct work (used to calculate predetermined overhead rates).
Transactions that occurred during the current year were:
- Raw materials purchased on credit of Nkr200,000
- Direct raw material demand for production of Nkr185,000
- Payable utility expense of Nkr70,000 (90% for factory, and the rest for sales and administrative activities)
- Salary and wages during the year:
Direct labor (975 hours) ................... Nkr230,000
Indirect labor ................................. Nkr90,000
Selling & Administrative ............... Nkr110,000
- Maintenance expense for plant equipment of Nkr54,000 was paid in cash
- Advertising expenses of Nkr136,000 are still payable
Depreciation of Nkr95,000 (80% for factory equipment, and the rest for sales and administrative activities)- Building lease expense for the period amounted to Nkr120,000 (85% for factories and the rest for sales and administrative activities)
- Overhead costs charged (applied FOH) to orders are based on direct working hours of the current year
- COGM for the year amounted to Nkr770,000
- Sales on account of Nkr1,200,000 with cost of goods sold of Nkr800,000.
Inventory account balance at the beginning of the year:
Raw materials ......................... Nkr30,000
Work in Process. ................... Nkr21,000
Finished Goods ....................... Nkr60,000
REQUESTED:
1) Prepare a company transaction
2) Calculate the ending inventory for raw materials, Work in Process and Finished Goods!
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