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33:010:272 Lecture Notes - Lecture 3: Direct Labor Cost, Accounts Payable, Cost Accounting

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fuchsiagnat257
31 Aug 2016
School
Rutgers University
Department
Accounting
Course
33:010:272
Professor
S A V I T A S A H A Y

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Document Summary

Cost of goods sold equation: beginning inventory + net purchases - ending inventory. An income statement format that organizes costs by their behavior. Costs are separated into variable and fixed categories rather than being separated into product and period costs for external reporting purposes. A cost accounting system in which the costs are collected by time period and averaged over all the units produced during the period. This system can be used with either actual or standard costs in the manufacture of a large number of identical units. i. e. job order costing charge direct material and direct labor cost to each job as work is performed. Cost of goods sold as it relates to the cost of goods manufactured. The decrease in accounts payable is equal to the increase in inventory during the period. A cost that is relevant to a particular decision because it is a future cost and differs among alternatives.

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Related Questions

Ravsten Company uses a job-order costing system.

The company applies overhead cost to jobs on the basis of machine-hours. For the current year, the company estimated that it would work 45,000 machine-hours and incur $211,500 in manufacturing overhead cost. The following transactions occurred during the year:

a. Raw materials requisitioned for use in production, $243,000 (70% direct and 30% indirect).

b. The following costs were incurred for employee services:

Direct labor $ 169,000
Indirect labor $ 27,000
Sales commissions $ 19,000
Administrative salaries $ 34,000

c. Heat, power, and water costs incurred in the factory, $50,000.

d. Insurance costs, $19,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).

e. Advertising costs incurred, $59,000.

f. Depreciation recorded for the year, $69,000 (75% relates to factory operations, and 25% relates to selling and administrative activities).

g. The company used 49,000 machine-hours during the year.

h. Goods that cost $489,000 to manufacture according to their job cost sheets were transferred to the finished goods warehouse.

i. Sales for the year totaled $718,000. The total cost to manufacture these goods according to their job cost sheets was $484,000.

Required:

1. Determine the underapplied or overapplied overhead for the year. (Round predetermined overhead rate to 2 decimal places.).

2. Prepare an income statement for the year. (Hint: No calculations are required to determine the cost of goods sold before any adjustment for underapplied or overapplied overhead.) (Round predetermined overhead rate to 2 decimal places.)

Ravsten Company
Income Statement
For the Year Ended December 31

Listed below are seven technical accounting terms introduced oremphasized in this chapter.


Job Order costing

Overhead application rate

Overapplied overhead

Activity-based costing

Cost driver

Cost of finished goods manufactured

Job cost sheet


Each of the following statements may (or may not) describe thsestechinial terms. For each statment, indicate the term described, oramswer "None" if the statement does not correctly describe any ofthe terms.


a. An activity base that can b etraced directly to unitsproduced and can be used as a denominator in computing an overheadapplication rate.

b. The total of all direct lavor, direct materials andmanufacturing overhead transferred from work in process to finishedgoods.

c. A means of assigning indirect product costs to work inprocess during the period.

d. A debit balance remaining in the Manufacturing Overheadaccount at teh end of the period.

e. The type of cost accounting system likely to be used by aconstruction company.

f. The type of cost accounting method likely to be used foroverhead costs.

Normal costing, overhead allocation, working backward. Gardi Manufacturing uses normal costing for its job-costing system, which has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost category (manufacturing overhead). The following information is obtained for 2017:

· Total manufacturing costs, $8,300,000

· Manufacturing overhead allocated, $4,100,000 (allocated at a rate of 250% of direct manufacturing labor costs)

· Work-in-process inventory on January 1, 2017, $420,000

· Cost of finished goods manufactured, $8,100,000

Required:

1. Use information in the first two bullet points to calculate (a) direct manufacturing labor costs in 2017 and (b) cost of direct materials used in 2017.

2. Calculate the ending work-in-process inventory on December 31, 2017.