When overhead costs are incurred they are recorded in an Accounttitled Manufacturing Overhead Control Account. The account isdebited for each overhead expense billed and an appropriate accountsuch as Cash or Accounts Payable is credited. Since overhead costscannot be traced directly to a cost object or to a Job, the totalannual overhead cost for the coming year are estimated at the endof the preceeding year and a formula is used to estimate the amountof overhead that should be charged to each job or product. Theamount charged to jobs or products is credited to the MOH accountand debited to the Work In Process Account. This estimated amountis a surrogate for the actual overhead costs that are incurredduring the year. At the end of the accounting period, the estimatedamounts charged to all jobs or products may be higher or lower thanthe actual overhead costs incurred during the year. This situationgives rise to the phenomenon of Under /Over applied overhead. Sinceoverhead expenses are just like ordinary expenses except for thefact that they are incorporated in the cost of product, then theMOH account is like any other temporary account and therefore itmust be closed at the end of the accounting period.
Applied overhead is calculated using the following formula:Predetermined Overhead Application Rate (POHAR) x Actualconsumption of the Activity Base. For example, if the POHAR is $10per direct labor hour consumed by a product and the productconsumes 5 direct labor hours, then Applied Overhead would be: 10 X5 = $50. Under/ Over applied overhead is calculated as: ActualOverhead costs - Applied Overhead. If Actual is greater thanapplied then Overhead is described as under applied and if theApplied is greater than Actual then it is described as overapplied.
Assignment: The estimated overhead costs of Abel Furniture were$2,200,000 and the estimated basis used for charging overhead toproduction is direct labor hours estimated at 500,000. The actualoverhead incurred during the year was $2,800,000 and the amountcharged to production was $2,400,000. Calculate the amount ofUnder/Over applied overhead and close the balance to Cost of Goodssold.
When overhead costs are incurred they are recorded in an Accounttitled Manufacturing Overhead Control Account. The account isdebited for each overhead expense billed and an appropriate accountsuch as Cash or Accounts Payable is credited. Since overhead costscannot be traced directly to a cost object or to a Job, the totalannual overhead cost for the coming year are estimated at the endof the preceeding year and a formula is used to estimate the amountof overhead that should be charged to each job or product. Theamount charged to jobs or products is credited to the MOH accountand debited to the Work In Process Account. This estimated amountis a surrogate for the actual overhead costs that are incurredduring the year. At the end of the accounting period, the estimatedamounts charged to all jobs or products may be higher or lower thanthe actual overhead costs incurred during the year. This situationgives rise to the phenomenon of Under /Over applied overhead. Sinceoverhead expenses are just like ordinary expenses except for thefact that they are incorporated in the cost of product, then theMOH account is like any other temporary account and therefore itmust be closed at the end of the accounting period.
Applied overhead is calculated using the following formula:Predetermined Overhead Application Rate (POHAR) x Actualconsumption of the Activity Base. For example, if the POHAR is $10per direct labor hour consumed by a product and the productconsumes 5 direct labor hours, then Applied Overhead would be: 10 X5 = $50. Under/ Over applied overhead is calculated as: ActualOverhead costs - Applied Overhead. If Actual is greater thanapplied then Overhead is described as under applied and if theApplied is greater than Actual then it is described as overapplied.
Assignment: The estimated overhead costs of Abel Furniture were$2,200,000 and the estimated basis used for charging overhead toproduction is direct labor hours estimated at 500,000. The actualoverhead incurred during the year was $2,800,000 and the amountcharged to production was $2,400,000. Calculate the amount ofUnder/Over applied overhead and close the balance to Cost of Goodssold.
Related questions
All questions have to do with cost accounting systems,more in particular, job order costing.
Complete each of the following statements/Answer the followingquestions
1. A custom-furniture designer would probably use which methodof cost accounting? 1. ____
2. The cost of finished products on hand that have not been soldis called 2. ____
3-5. Work in process consists of these costs that have enteredthe manufacturing process on unfinished products:
3. ____
4. ____
5. ____
6. The accounting system that accumulates the product costsoriginating with inventory and ending with the cost of goods soldis the 6. ____
7. The system best suited to industries that manufacture customgoods to fill special orders is referred to as a 7. ____
8. The system that accumulates costs for each of the departmentswithin the factory is a 8. ____
9. The Receiving Department document that shows the quantityreceived and its condition is the 9. ____
10. Materials are released from the storeroom to the factory inresponse to a 10. ____
11. The amount of time spent by an employee in the factory isusually recorded on 11. ____
12. Indirect materials and indirect labor are examples of thismanufacturing cost 12. ____
13. The costing method that accumulates and allocates factoryoverhead costs to products using many overhead rates is 13.____
14. If estimated total factory overhead costs are $75,000 anddirect labor hours are 15,000, the predetermined factory overheadrate is 14. ____
15. The process of assigning factory overhead costs to a costobject is termed 15. ____
16. In highly-automated factory settings, a widely used activitybase for predetermining a factory overhead rate is 16. ____
17. The subsidiary ledger that contains cost data for the unitsmanufactured, units sold, and units on hand is 17. ____
18. The direct labor and overhead costs of a service businessare accumulated in a 18. ____
19. If the actual factory overhead costs exceed the amount offactory overhead applied, the factory overhead account balance willbe a (debit or credit) 19. ____
20. The factory overhead in Question 19 is said to be 20.____
21. The source of the data for debiting Work in Process fordirect materials is a 21. ____
22. The accounting document that is used to accumulate the costsfor each clientâs job in a service business is a 22. ____
23. The controlling account for the cost ledger is 23. ____
24. The measure used to allocate overhead that reflects itsconsumption is called 24. ____
Indicate the titles of the accounts to be debited andcredited in recording the summarized operations presented below byinserting the letter or letters of the account titles listed in theappropriate columns.
ACCOUNTS
A. Accounts Payable E. FactoryOverhead I. Selling and AdministrativeExpenses
B. Accounts Receivable F.Finished Goods J. Wages Payable
C. Cash G. MaterialsK. Work in Process
D. Cost of Goods Sold H.Sales
TRANSACTIONS | Debit | Credit | ||
0. Cash paid on account...................................................................................... | A | 0. ____ | C | 0. ____ |
1-2. Materials requisitioned for use on specific jobsand for general factory use....................................................................................................................... |
|
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3-4. Factory labor incurred on specific jobs and forgeneral factory use ....... | 3. ____ | 4. ____ | ||
5-6. Applied factory overhead to jobs................................................................... | 5. ____ | 6. ____ | ||
7-8. Paid salary of vice-president of finance....................................................... | 7. ____ | 8. ____ | ||
9-10. Cashpaid for overhead costs incurred......................................................... | 9. ____ | 10. ____ | ||
11-12. Transferred smallbalance of under-applied overhead ............................ | 11. ____ | 12. ____ | ||
13-14. Jobs completed................................................................................................. | 13. ____ | 14. ____ |
pleas help me ASAP
Remnant Carpet Company sells and installs commercial carpeting for office buildings. Remnant Carpet Company uses a A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product that passes through the factory.job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered An account in the work in process subsidiary ledger in which the costs charged to a particular job order are recorded.job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On October 1, Remnant Carpet Company gave Jackson Consulting an estimate of $2,436 to carpet the consulting firmâs newly leased office. The estimate was based on the following data:
| Estimated direct materials: | |
| 30 meters at $30 per meter | $ 900 |
| Estimated direct labor: | |
| 16 hours at $30 per hour | 480 |
| Estimated factory overhead (75% of direct labor cost) | 360 |
| Total estimated costs | $1,740 |
| Markup (40% of production costs) | 696 |
| Total estimate | $2,436 |
On October 3, Jackson Consulting signed a purchase contract, and the delivery and installation were completed on October 10.
The related The form or electronic transmission used by a manufacturing department to authorize materials issuances from the storeroom.materials requisitions and The form on which the amount of time spent by each employee and the labor cost incurred for each individual job, or for factory overhead, are recorded.time tickets are summarized as follows:
| Materials Requisition No. | Description | Amount | |
| 112 | 15 meters at $30 | $450 | |
| 114 | 19 meters at $30 | 570 | |
| Time Ticket No. | Description | Amount | |
| H10 | 8 hours at $30 | $240 | |
| H11 | 12 hours at $30 | 360 | |
Required:
Enter amounts as positive numbers.
1. Complete that portion of the job order cost sheet that would be prepared when the estimate is given to the customer.
2. Record the costs incurred, and complete the job order cost sheet.
| JOB ORDER COST SHEET | |||||||||||||||||||||||||||||||||||||||||||||||
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| Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
| Amount | Amount | Amount | |||||||||||||||||||||||||||||||||||||||||||||
| 30 Meters at $30 | 16 Hours at $30 | Direct Materials | |||||||||||||||||||||||||||||||||||||||||||||
| Direct Labor | |||||||||||||||||||||||||||||||||||||||||||||||
| Factory Overhead | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | Total | Total cost | |||||||||||||||||||||||||||||||||||||||||||||
| ACTUAL | |||||||||||||||||||||||||||||||||||||||||||||||
| Direct Materials | Direct Labor | Summary | |||||||||||||||||||||||||||||||||||||||||||||
| Mat. Req. No. | Description | Amount | Time Ticket No. | Description | Amount | Item | Amount | ||||||||||||||||||||||||||||||||||||||||
| 112 | 15 Meters at $30 | H10 | 8 Hours at $30 | Direct Materials | |||||||||||||||||||||||||||||||||||||||||||
| Direct Labor | |||||||||||||||||||||||||||||||||||||||||||||||
| 114 | 19 Meters at $30 | H11 | 12 Hours at $30 | Factory Overhead | |||||||||||||||||||||||||||||||||||||||||||
| Total | Total | Total Cost | |||||||||||||||||||||||||||||||||||||||||||||
What is the best explanation for the variances between actual costs and estimated costs. (For this purpose, assume that the additional meters of material used in the job were spoiled, the factory overhead rate has proven to be satisfactory, and an inexperienced employee performed the work.)
a.)The direct materials cost exceeded the estimate by $120 because 4 meters of materials were spoiled. The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee. The factory overhead cost exceeded the estimate because an additional $90 of factory overhead was allocated because of the increase in direct labor.
b.)Management didn't provide enough direction to complete tasks on budget.
c.)The direct materials cost exceeded the estimate by $75 because 3 meters of materials were spoiled.
d.) The direct labor cost exceeded the estimate by $120 because an additional 4 hours of labor were used by an inexperienced employee.
Star Videos, Inc., produces short musical videos for sale to retail outlets. The companyâs balance sheet accounts as of January 1 are given below.
Star Videos, Inc.
Balance Sheet
January 1
Assets
Cash $ 92,000
Accounts receivable 115,600
Inventories:
Raw materials (film, costumes) $ 17,800
Videos in process 60,200
Finished videos awaiting sale 91,200 169,200
Prepaid insurance 12,600
Studio and equipment (net) 603,000
Total assets $ 992,400
Liabilities and Stockholdersâ Equity
Accounts payable $ 211,000
Retained earnings 781,400
Total liabilities and stockholdersâ equity $ 992,400
Because the videos differ in length and in complexity of production, the company uses a job-order costing system to determine the cost of each video produced. Studio (manufacturing) overhead is charged to videos on the basis of camera-hours of activity. The companyâs predetermined overhead rate for the year ($40 per camera-hour) is based on a cost formula that estimated $280,000 in manufacturing overhead for an estimated allocation base of 7,000 camera-hours. Any underapplied or overapplied overhead is closed to cost of goods sold. The following transactions were recorded for the year:
Film, costumes, and similar raw materials purchased on account, $208,500.
Film, costumes, and other raw materials issued to production, $219,500 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect).
Utility costs incurred (on account) in the production studio, $81,600.
Depreciation recorded on the studio, cameras, and other equipment, $90,000. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration.
Advertising expense incurred (on account), $155,500.
Salaries and wages paid in cash as follows:
Direct labor (actors and directors) $ 99,200
Indirect labor (carpenters to build sets, costume designers, and so forth) $ 100,500
Administrative salaries $ 102,400
Prepaid insurance expired during the year, $10,050 (70% related to production of videos, and 30% related to marketing and administrative activities).
Miscellaneous marketing and administrative expenses incurred (on account), $10,350.
Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year.
Videos that cost $548,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment.
Sales for the year totaled $1,060,000 and were all on account.
The total cost to produce the videos that were sold according to their job cost sheets was $591,810.
Collections from customers during the year totaled $1,010,000.
Payments to suppliers on account during the year, $585,000.
Underapplied or overapplied overhead $__?__.
Required:
1. Prepare a transaction analysis that records all of the above transactions.
2. Prepare a schedule of cost of goods manufactured for the year.
3. Prepare a schedule of cost of goods sold for the year.
4. Prepare an income statement for the year.
PLEASE SHOW ALL WORK AND BOLD ANSWERS. THANK YOU!!
Prepare a transaction analysis that records all of the above transactions. (Amounts to be deducted should be indicated by a minus sign.)
Prepare a schedule of cost of goods manufactured for the year.
Prepare a schedule of cost of goods sold for the year.
Prepare an income statement for the year.
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