The business’s pre-determined overhead application rate for 2018 was computed from the following data:Total estimated factory overheads $4,200,000Total estimated direct labour hours 35,000During the first month of 2018, the business recorded the following transactions. i) Purchased materials on account, $500,000ii) Incurred manufacturing wages of $1,065,000iii) Issued direct materials and used direct labour in manufacturing Direct Materials Direct Labour Direct Labour HoursJob 401 $100,000 $220,000 1,200Job 402 81,000 190,000 1,000Job 403 90,000 205,000 1,100Job 404 150,000 290,250 1,800iv) Issued indirect materials to production, $80,000v) Charged indirect manufacturing wages to production, $159,750 vi) Depreciation expense on factory equipment used on the different jobs, $300,000vii) Other overhead costs incurred on jobs 401 to 404 amounted to $112,750viii) Applied factory overhead to the various jobs using the pre-determined factory overhead rate.ix) Finished Jobs 401 – 403 and transferred to the finished goods inventory accountx) Shipped Job 401 and 402 and billed customers at a margin of 25% on cost.g) Open T-accounts for Work in Process Inventory and Finished Goods Inventory. Post the appropriate entries to these accounts & determine the ending account balances. Assume that the beginning balances were zero
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.
The business’s pre-determined overhead application rate for 2018 was computed from the following data:
Total estimated factory overheads $4,200,000
Total estimated direct labour hours 35,000
During the first month of 2018, the business recorded the following transactions
. i) Purchased materials on account, $500,000
ii) Incurred manufacturing wages of $1,065,000
iii) Issued direct materials and used direct labour in manufacturing
Direct Materials Direct Labour Direct Labour Hours
Job 401 $100,000 $220,000 1,200
Job 402 81,000 190,000 1,000
Job 403 90,000 205,000 1,100
Job 404 150,000 290,250 1,800
iv) Issued indirect materials to production, $80,000
v) Charged indirect manufacturing wages to production, $159,750 vi)
vii) Other overhead costs incurred on jobs 401 to 404 amounted to $112,750
viii) Applied factory overhead to the various jobs using the pre-determined factory overhead rate.
ix) Finished Jobs 401 – 403 and transferred to the finished goods inventory account
x) Shipped Job 401 and 402 and billed customers at a margin of 25% on cost.
g) Open T-accounts for Work in Process Inventory and Finished Goods Inventory.
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