The Fortune Fortune Company uses an order-based costing system for its production costs. During the current period, 1,000 seats were printed and assembled for Order No. 25. The total costs incurred for the order are: Raw material $15,000 Labor (500 hours x $11 per hour) $5,500 Factory Overhead ($22 per Labor hour) $11,000 Total Cost Order No. 25 $ 31,500 Prior to being transferred to Finished Goods Inventory, chairs were inspected and 100 units were found to be defective. Defective chairs cannot be repaired as the defect lies in the plastic but can be sold for $11 per unit. The Company maintains a separate Defectives Inventory account for defects and charges the costs not covered by the sale of the defectives to the Factory Overhead Control account. Requested: Calculate the cost of Order No. 25 transferred to Finished Goods Inventory and Defective Goods Inventory, and make general journal entries to record the costs of the defect and the transfer.
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 Fortune Fortune Company uses an order-based costing system for its production costs. During the current period, 1,000 seats were printed and assembled for Order No. 25. The total costs incurred for the order are:
Raw material $15,000
Labor (500 hours x $11 per hour) $5,500
Factory
Total Cost Order No. 25 $ 31,500
Prior to being transferred to Finished Goods Inventory, chairs were inspected and 100 units were found to be defective. Defective chairs cannot be repaired as the defect lies in the plastic but can be sold for $11 per unit. The Company maintains a separate Defectives Inventory account for defects and charges the costs not covered by the sale of the defectives to the Factory Overhead Control account.
Requested:
Calculate the cost of Order No. 25 transferred to Finished Goods Inventory and Defective Goods Inventory, and make general
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