Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased.) In computing a predetermined overhead rate at the beginning of the year, the company’s estimates were: manufacturing overhead cost, $800,000; and direct materials to be used in production, $500,000. The company has provided the following data : Beginning Ending Raw materials $20,000 $80,000 Work in Process 150,000 70,000 Finished Goods 260,000 400,000 The following actual costs were incurred during the year: Purchase of direct raw materials $510,000 Direct labor cost 90,000 Manufacturing overhead costs: Indirect labor 170,000 Property taxes 48,000 Depreciation- equipment 260,000 Maintenance 95,000 Insurance 7,000 Rent - Building 180,000 Required: Compute the Cost of Goods Sold for the year. (Do not include the under- or over-applied overhead in the cost of goods sold.) What options are available for disposing of under- or over-applied overhead? Job 215 was started and completed during the year. What price would have been charged to customer if the job required $8,500 in direct materials and $2,700 in direct labor cost and the company priced its jobs at 25% above the job’s cost to absorb period cost as well as provide for profit? If direct materials made up $24,000 of the ending work in process inventory balance. How much is the direct labor cost and the manufacturing overhead?
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.
Problem #4:
Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct materials used in production (not on the basis of raw materials purchased.) In computing a predetermined overhead rate at the beginning of the year, the company’s estimates were: manufacturing overhead cost, $800,000; and direct materials to be used in production, $500,000. The company has provided the following data :
|
|
Beginning |
Ending |
|
Raw materials |
$20,000 |
$80,000 |
|
Work in Process |
150,000 |
70,000 |
|
Finished Goods |
260,000 |
400,000 |
|
The following actual costs were incurred during the year: |
|
|
|
|
Purchase of direct raw materials |
$510,000 |
|
|
Direct labor cost |
90,000 |
|
|
Manufacturing overhead costs: |
|
|
|
Indirect labor |
170,000 |
|
|
Property taxes |
48,000 |
|
|
|
260,000 |
|
|
Maintenance |
95,000 |
|
|
Insurance |
7,000 |
|
|
Rent - Building |
180,000 |
Required:
- Compute the Cost of Goods Sold for the year. (Do not include the under- or over-applied overhead in the cost of goods sold.) What options are available for disposing of under- or over-applied overhead?
- Job 215 was started and completed during the year. What price would have been charged to customer if the job required $8,500 in direct materials and $2,700 in direct labor cost and the company priced its jobs at 25% above the
job’s cost to absorb period cost as well as provide for profit? - If direct materials made up $24,000 of the ending work in process inventory balance. How much is the direct labor cost and the manufacturing overhead?
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