ACC 406 Chapter Notes - Chapter 5: Standard Streams, Financial Statement, Finished Good

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bronzepig36

25 Jul 2016

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Job-order costing: firms operating in job order industries produce a wide variety of services or products that are quite distinct from each other. Process costing: firms producing identical products or services can use a process- costing accounting system. Normal costing and estimating overhead: calculate the predetermined overhead rate, apply overhead to output throughout the year, reconcile total actual overheard incurred during the year to total overhead applied to production. Underapplied overhead: if actual overhead is greater than applied overhead. Overapplied overhead: if actual overhead is less than applied overhead. Plantwide overhead rate: single overhead rate calculated using all estimated overhead for a factory and diving by estimated activity for entire plant. Departmental overhead rate: estimated overhead for a department divided by estimated activity level for the same department. Unit cost is a sum of -> direct materials + direct labour + overhead.

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Case 3-49

Avid Assemblers uses normal job-order costing to assign costs toproducts. The company assembles and packages 25 different productsaccording to customer specifications. Products are worked on inbatches of 20 to 40 units. Each batch is given a job number. OnOctober 1, the company had the following balances:

Raw materials		$9,800
Work in process		65,847
Finished goods		30,640

Work in process consisted of the following jobs:

	Job 22	Job 24	Job 25
Direct materials	$6,200	$5,190	$4,800
Direct labour	10,500	9,210	9,500
Applied overhead	7,350	6,447	6,650
Total	$24,050	$20,847	$20,950
Number of units	20	40	30

Finished goods consisted of Job 23, with the following costs:

		Job 23
Direct materials		$8,200
Direct labour		13,200
Applied overhead		9,240
Total		$30,640
Number of units		50

Shown below are the direct cost data related to jobs started inOctober:

	Job 26	Job 27	Job 28	Total
Direct materials	$5,180	$5,600	$4,200	$14,980
Direct labour	11,200	9,340	5,910	26,450
Number of units	20	30	20

Other information:

Direct materials and direct labour added tobeginning work in process in October were as follows:

	Job 22	Job 24	Job 25	Total
Direct materials	$1,150	$610	$1,500	$3,260
Direct labour	3,000	4,500	5,500	$13,000

Overhead is applied at a predetermined rate basedon the direct labour cost.

Actual expenses for October were as follows:

Supervisory salaries	$6,000	Supplies (factory)	$2,100
Factory rent	5,000	Selling expenses	8,500
Depreciation (machines)	5,000	Property tax and insurance	2,250
Indirect labour	4,000	CPP, EI, and other benefits*	4,200

* 80% of employer contributions and benefits relate to factorypersonnel.

Purchases of direct materials (raw materials)during October amounted to $28,500. Indirect materials (supplies)are handled in a separate account.

Only Job Nos. 27 and 28 are still in process atclosing on October 31. Finished goods consisted only of Job No. 25at month end.

Avid writes off any under- and over-applied overhead to Cost ofGoods Sold in the month in which it is incurred.

Requirements:

a.Calculate Predetermined overhead rate

b.Calculate Unit cost of job 24 in October

c.Calulate the Oct 31 Balances for the following account:

Raw Materials, Work in Process, Finished Goods

d.What is the cost of goods manufactured?

e. Determine the under- or over- paid in October

Prepare the journal entry to dispose of this amount.

byzantiumprairie-dog733

Batchelor Company manufactures custom accounting ledgers using ajob-order costing system. Manufacturing Overhead is applied to eachjob as a predetermined rate of 150% of Direct Labor cost. Any underapplied overhead is prorated between work in process, FinishedGoods, and Cost of Goods Sold based on the amount of manufacturingoverhead in their ending balances at the end of each month.

Additional formation:

1. Job 100 was completed but unsold as of 1/31/2016 with actualincurred costs as follows: Direct materials = $3,900 and DirectLabor =$ 2,400

2. Job 101 was the only job in process on 1/31/2016 with actualincurred costs as follows: Direct Materials = $3,300 and DirectLabor = $2,700

3. Job 102, 103, 104, and 105 were started on February 2016

4. Direct Material used in production during February totaled$16,000

5. The total Cost of Goods Manufactured for February was$68,750

6. Actual manufacturing Overhead was $36,000 for February

7. The only job still in process on 2/28/2016 was job 105 whichhas actual incurred costs of $2,800 for Direct Materials and $1,800for Direct Labor

8. The only completed job left unsold on 2/28/2016 was job 104which has actual incurred costs of $3,500 for direct materials and$4,500 for direct labor

A. Calculate the Cost of Goods for Febuary after closing theunder/over applied overhead.

amethystbutterfly904

Identify each statement as true or false. If false, indicate howto correct the statement.

1. Process cost systems are used to apply costs to similarproducts that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit isindistinguishable from another.
3. Companies that produce soft drinks, motion pictures, andcomputers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individualjobs.
5. Job order costing and process costing track differentmanufacturing costs elements.
6. Both job order costing and process costing account for directmaterials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for bothjob order costing and process costing.
8. In a process cost system, only one work in process account isused.
9. In a process cost system, costs are summarized in a job costsheet.
10. In a process cost system, the unit cost is total manufacturingcosts for the period divided by the units produced during theperiod.

byzantiumpanda529

ACC 406 Chapter Notes - Chapter 5: Standard Streams, Financial Statement, Finished Good

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