Krazy Kayaks manufactures kayaks. The company has automated production, so it allocates manufacturing overhead based on machine hours. Krazy expects to incur $240,000 of manufacturing overhead costs and to use 4,000 machine hours during 2015. At the end of 2014, Krazy reported the following inventories: Raw Materials Inventory $20,000 Work-in-Process Inventory $17,000 Finished Goods Inventory $11,000 During January 2015, Krazy used 300 machine hours and recorded the following transactions: Purchased materials on account, $31,000 Used direct materials, $39,000 Manufacturing wages incurred totaled $40,000, of which 90% was direct labor and 10% was indirect labor. Used indirect materials, $3,000 Incurred other manufacturing overhead for January 2015, $13,000 Allocated manufacturing overhead for January 2015 Cost of completed motor scooters, $100,000 Sold scooters on account, $175,000; cost of scooters sold, $95,000 Requirements: Compute Krazy Kayak’s predetermined overhead allocation rate for 2015 Journalize the transactions in the general journal. Adjust the Manufacturing overhead for the overallocated or under-allocated 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.
Krazy Kayaks manufactures kayaks. The company has automated production, so it allocates manufacturing overhead based on machine hours. Krazy expects to incur $240,000 of
Raw Materials Inventory $20,000
Work-in-Process Inventory $17,000
Finished Goods Inventory $11,000
During January 2015, Krazy used 300 machine hours and recorded the following transactions:
- Purchased materials on account, $31,000
- Used direct materials, $39,000
- Manufacturing wages incurred totaled $40,000, of which 90% was direct labor and 10% was indirect labor.
- Used indirect materials, $3,000
- Incurred other manufacturing overhead for January 2015, $13,000
- Allocated manufacturing overhead for January 2015
- Cost of completed motor scooters, $100,000
- Sold scooters on account, $175,000; cost of scooters sold, $95,000
Requirements:
Compute Krazy Kayak’s predetermined overhead allocation rate for 2015
Journalize the transactions in the general journal.
Adjust the Manufacturing overhead for the overallocated or under-allocated overhead.
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