Chapter 2, Problem 5.1GAP

To determine

(a)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.

To record:

The transactions in Raw Materials Inventoryfor the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Raw Materials Inventory for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Raw Materials Inventory		Cr
Particulars	Amount ($)	Particulars	Amount ($)
To Opening Balance	20,000	By Work in Process Inventory (Direct Materials Issued)	32,000
To Purchase Payables	26,000	By Manufacturing Overhead (Indirect Materials Issued)	8,000
		By Closing Balance	6,000
Total	46,000	Total	46,000

The direct materials issued will be transferred to work in process inventory, while indirect materials consumed will be considered as a manufacturing overhead respectively.

To determine

(b)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.

To record:

The transactions in relation to Work in Process Inventory for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Work in Process Inventory for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Work in Process Inventory		Cr
Particulars	Amount ($)	Particulars	Amount ($)
To Opening Balance	15,000
To Raw Materials Inventory	32,000
To Wages Payables (Direct Labor)	18,000
To Manufacturing Overhead	54,000
		By Finished Goods	109,000
		By Closing Balance	10,000
Total	119,000	Total	119,000

All such direct costs and applied manufacturing overhead involved in the processing of materials are considered under work in process inventory. As all the jobs are not completed, the direct materials pertaining to work in process amounts to $10,000 is considered as closing balance for such period.

To determine

(c)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.

To record:

The transactions in relation to Finished Goods Inventory for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Finished Goods Inventory for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Finished Goods Inventory		Cr
Particulars	Amount ($)	Particulars	Amount ($)
To Opening Balance	32,000
To Work in Process Inventory	109,000
		By Cost of Goods Sold	70,000
		By Closing Balance	71,000
Total	141,000	Total	141,000

The goods which are completed would be transferred to finished goods inventory. However, the total costs of such jobs which are sold during such period would be transferred as cost of such goods sold respectively.

To determine

(d)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.

To record:

The transactions in relation to Cost of Goods Sold for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Cost of Goods Sold for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Cost of Goods Sold		Cr
Particulars	Amount ($)	Particulars	Amount ($)
		By Sales Revenue	70,000
To Finished Goods	70,000
Total	70,000	Total	70,000

It represents the total cost of such goods sold during the period.

To determine

(e)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.

To record:

The transactions regarding Manufacturing Overhead for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Manufacturing Overhead for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Manufacturing Overhead		Cr
Particulars	Amount ($)	Particulars	Amount ($)
To Raw Materials Inventory	8,000	To Work in Process Inventory (Applied Manufacturing Overhead)	54,000
To Wages Payables (Indirect Labor)	5,200
To Accumulated Depreciation	8,500
To Prepaid Insurance	1,600
To Cash (Other Factory Costs)	7,800
To Over-Applied Overhead c/f	22,900
Total	54,000	Total	54,000

The manufacturing overhead is the factory cost component in such production process. They are applied to work in process inventory as a result of predetermined overhead rate. The assembly workers payroll costs considered as direct labor cost. It is incurred in the manufacturing unit and directly related to such production process respectively. Thus, applied manufacturing overheads are charged at 300% of direct labor costs which is $54,000 ($18,000 * 300%).

To determine

(f)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.

To record:

The transactions related to Selling, General and Administrative Expenses for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Selling, General and Administrative Expenses for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Selling, General and Administrative Expenses		Cr
Particulars	Amount ($)	Particulars	Amount ($)
To Salary Payable for Administrative Personnel	31,000
To Sales Commissions Payable	15,500
To Accumulated Depreciation	2,400
To Prepaid Insurance	2,400
		By Closing Balance	51,300
Total	51,300	Total	51,300

All such costs in relation to administration, selling and distribution of goods during the period are recorded under Selling, General and Administrative Expenses.

To determine

(g)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.

To record:

The transactions in relation to Sales Revenue for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Sales Revenue for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Sales Revenue		Cr
Particulars	Amount ($)	Particulars	Amount ($)
To Cost of Goods Sold	70,000	By Cash	91,000
To Gross Profit	21,000
Total	91,000	Total	91,000

The excess of sales value over the cost of such goods sold represent the gross profit for the period.

To determine

(h)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.

To record:

The transactions other accounts for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Cash for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Cash		Cr
Particulars	Amount ($)	Particulars	Amount ($)
To Sales Revenue	91,000	By Manufacturing Overhead	7,800
		By Closing Balance	83,200
Total	91,000	Total	91,000

The cash transactions during the period have been recorded to determine the cash balance.

The transactions recorded in T-account of Purchase Payables for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Purchase Payables		Cr
Particulars	Amount ($)	Particulars	Amount ($)
		By Raw Materials Inventory	26,000
To Closing Balance	26,000
Total	26,000	Total	26,000

It is a payables account for raw materials acquired on credit terms.

The transactions recorded in T-account of Wages Payables for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Wages Payables		Cr
Particulars	Amount ($)	Particulars	Amount ($)
		By Work in Process Inventory (Direct Labor)	18,000
		By Manufacturing Overhead (Indirect Labor)	5,200
To Closing Balance	23,200
Total	23,200	Total	23,200

The direct as well as indirect labor incurred have been recorded as wages payables.

The transactions recorded in T-account of Salary Payable for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Salary Payable		Cr
Particulars	Amount ($)	Particulars	Amount ($)
		By Selling, General and Administrative Expenses	31,000
To Closing Balance	31,000
Total	31,000	Total	31,000

As the salary to administrative personnel is incurred but not paid, the same is represented as salary payable at the end of such period.

The transactions recorded in T-account of Sales Commissions Payable for the month of January 2016 of C.C.C. Co.are as follows-

Dr	Sales Commissions Payable		Cr
Particulars	Amount ($)	Particulars	Amount ($)
		By Selling, General and Administrative Expenses	15,500
To Closing Balance	15,500
Total	15,500	Total	15,500

The sales commissions are payable at the end of such period.

The transactions recorded in T-account of Accumulated Depreciation for the month of January 2016 of C.C.C. Co. are as follows-

Dr	Accumulated Depreciation		Cr
Particulars	Amount ($)	Particulars	Amount ($)
		By Manufacturing Overhead	8,500
		By Selling, General and Administrative Expenses	2,400
To Closing Balance	10,900
Total	10,900	Total	10,900

The depreciation expense for the period is recorded in respective heads.

The transactions recorded in T-account of Prepaid Insurance for the month of January 2016 of C.C.C. Co. are as follows-

Dr	Prepaid Insurance		Cr
Particulars	Amount ($)	Particulars	Amount ($)
To Opening Balance	4,000	By Manufacturing Overhead	1,600
		By Selling, General and Administrative Expenses	2,400
Total	4,000	Total	4,000

The prepaid insurance which has lapsed during the current period, has been transferred as an expense to respective heads.