ACBU 2223 Chapter 3: Chapter 3

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20 Feb 2017

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Absorption costing: costing method that includes all manufacturing costs direct materials, direct labor, & both variable & fixed manufacturing overhead in cost of product: most common approach to product costing in world. Job cost sheet: form that records materials, labor, & manufacturing overhead costs charged to job. Measuring direct labor cost: time ticket: document used to record amount of time employee spends on various activities. Computing predetermined overhead rates: 3 reasons assigning manufacturing overhead to specific job has difficulties. Manufacturing overhead consists of many different types of costs w/ some variable & others fixed. Manufacturing overhead a closer look multiplying predetermined overhead rate by actual amount of allocation base incurred by job. Computation of unit costs: unit cost is average cost & shouldn"t be interpreted as cost that would actually be incurred if another unit were produced. Raw materials purchases recorded in raw materials inventory account. Cost of goods manufactured: manufacturing costs associated w/ goods that.

Related Questions

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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

Customer	Jackson Consulting	Date	October 1
		Date wanted	October 10
		Date completed	October 10
		Job. No.
ESTIMATE

Direct Materials

Direct Labor

Summary

Amount

ACTUAL

Direct Labor

Summary

Mat. Req. No.

Description

Amount

Time Ticket No.

Description

Amount

Item

Amount

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.

greenbat203

I. The basic parts of a joborder costing system are the:

A. Cost______________ and _________________ procedures.

B. ____________________ documents.

C. Accountsthat a company uses when it incurs costs for direct ____________,direct ________________, and ___________________.

II. Accounting for materialsrequires three types of entries.

A. With the ______________ of materials,debit Materials Inventory and credit Accounts Payable.

B. With the _______________ of directmaterials to ________________, debit Work in Process Inventory andcredit Materials Inventory.

C. With the transfer of__________________ materials to production, debit Overhead andcredit Materials Inventory.

III. Accounting for labor requirestwo types of entries.

A. For payroll costs incurred for_____________ labor, debit Work in Process Inventory and creditPayroll Payable.

B. For payroll costs incurred for_______________ labor, debit Overhead and credit PayrollPayable.

IV. Accounting for other overhead requires twotypes of entries.

A. Other overhead includes plant____________, property _____________, insurance, and_______________.

B. To record _____________ overhead costs,debit Overhead and credit Cash or Accumulated Depreciation.

C. To record _____________ overheadcosts, debit Work in Process Inventory and credit Overhead.

D. The actual (debits) and estimated(credits) overhead costs are ________________ at the end of theperiod to determine the accuracy of overhead costrecognition.

V. To recordthe transfer of ________________ units, debit Finished GoodsInventory and credit Work in Process Inventory.

VI. When a companyuses a perpetual inventory system, two accounting entries are madewhen products are sold.

A. To record the sold productâs________________, debit Accounts Receivable (or Cash) and creditSales.

B. To record the sold productâsassociated ____________, debit Cost of Goods Sold and creditFinished Goods Inventory.

VII. Each job in production has a job order_________________.

A. Hasspace for direct materials, direct labor, and overhead costs.

B. Includesthe job order number, product specifications, customer name, dateof order, projected completion date, and a cost summary.

C. Forincomplete jobs, they make up the _______________ ledger for theWork in Process Inventory account.

D. When ajob is completed, the costs are totaled on the_____________________.

1. Unit cost is computed to_____________ items in inventory.

2. Product ___________Cost = Total Costs for Job Ã· Number of Good Units Produced

VIII. Job order costing systems are also used in______________ organizations.

A. Job ordercost cards track ________________ contracts.

IX. Overhead costs are allocated in foursteps.

A. Step 1: _____________ the overheadrate.

1. A ________________ overheadrate is calculated as estimated overhead costs divided by estimatedcost driver activity.

B. Step 2:______________ the overhead rate.

1. Costs are assigned by multiplyingthe actual cost _____________ activity by the predeterminedoverhead rate.

C. Step 3:Record ________________ overhead costs

D. Step 4:_________________ applied and actual overhead amounts

1. Ifover- or underapplied amounts are minimal, credit or debit_________________.

2. Ifover- or underapplied amounts are material, adjustments should bemade to the inventory accounts affected.

X. The__________________ approach to applying overhead costs is to use asingle plantwide rate.

XI. The moreaccurate _____________________ approach to applying overhead costscreates many smaller activity pools and establishes separate ratesfor each pool.

carminewhale946

Job Order Cost Sheet

Remnant Carpet Company sells and installs commercialcarpeting for office buildings. Remnant Carpet Company uses a joborder cost system. When a prospective customer asks for a pricequote on a job, the estimated cost data are inserted on anunnumbered job cost sheet. If the offer is accepted, a number isassigned to the job, and the costs incurred are recorded in theusual manner on the job cost sheet. After the job is completed,reasons for the variances between the estimated and actual costsare noted on the sheet. The data are then available to managementin evaluating the efficiency of operations and in preparing quoteson future jobs. On October 1, Remnant Carpet Company gave JacksonConsulting an estimate of $2,856 to carpet the consulting firmâsnewly leased office. The estimate was based on the followingdata:

Estimated direct materials:
40 meters at $30 per meter	$ 1,200
Estimated direct labor:
24 hours at $20 per hour	480
Estimated factory overhead (75% of direct labor cost)	360
Total estimated costs	$2,040
Markup (40% of production costs)	816
Total estimate	$2,856

On October 3, Jackson Consulting signed a purchasecontract, and the delivery and installation were completed onOctober 10.

The related materials requisitions and time tickets aresummarized as follows:

Materials Requisition No.	Description	Amount
112	20 meters at $30	$600
114	24 meters at $30	720

Time Ticket No.	Description	Amount
H10	12 hours at $20	$240
H11	16 hours at $20	320

Required:

Enter amounts as positive numbers.

1. Complete that portion of the job order costsheet that would be prepared when the estimate is given to thecustomer.

2. Record the costs incurred, and complete thejob order cost sheet.

JOB ORDER COST SHEET

Customer	Jackson Consulting	Date	October 1
		Date wanted	October 10
		Date completed	October 10
		Job. No.
ESTIMATE

Direct Materials

Direct Labor

Summary

Amount

ACTUAL

Direct Labor

Summary

Mat. Req. No.

Description

Amount

Time Ticket No.

Description

Amount

Item

Amount

What is the best explanation for the variances betweenactual costs and estimated costs. (For this purpose, assume thatthe additional meters of material used in the job were spoiled, thefactory overhead rate has proven to be satisfactory, and aninexperienced employee performed the work.)

a. The direct materials cost exceeded the estimate by $120because 4 meters of materials were spoiled. The direct labor costexceeded the estimate by $80 because an additional 4 hours of laborwere used by an inexperienced employee. The factory overhead costexceeded the estimate because an additional $60 of factory overheadwas allocated because of the increase in direct labor.

b. Management didn't provide enough direction to complete taskson budget.

c. The direct materials cost exceeded the estimate by $75because 3 meters of materials were spoiled.

d. The direct labor cost exceeded the estimate by $120 becausean additional 4 hours of labor were used by an inexperiencedemployee.

Materials issued for the current month are as follows:

Requisition No.	Material	Job No.	Amount
201	Aluminum	500	$85,160
202	Plastic	503	26,540
203	Rubber	504	3,960
204	Glue	Indirect	2,180
205	Steel	510	37,960

Journalize the entry on Dec. 31 to record the issuance ofmaterials. Refer to the Chart of Accounts for exact wording ofaccount titles.

CHART OF ACCOUNTS

General Ledger

	ASSETS
110	Cash
121	Accounts Receivable
125	Notes Receivable
126	Interest Receivable
131	Materials
132	Work in Process
133	Factory Overhead
134	Finished Goods
141	Supplies
142	Prepaid Insurance
143	Prepaid Expenses
181	Land
191	Factory
192	AccumulatedDepreciation-Factory

	LIABILITIES
210	Accounts Payable
221	Utilities Payable
231	Notes Payable
236	Interest Payable
241	Lease Payable
251	Wages Payable
252	Consultant Fees Payable

	EQUITY
311	Common Stock
340	Retained Earnings
351	Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Wages Expense
531	Selling Expenses
532	Insurance Expense
533	Utilities Expense
534	Office Supplies Expense
540	Administrative Expenses
560	Depreciation Expense-Factory
590	Miscellaneous Expense
710	Interest Expense

JOURNAL

	DATE	DESCRIPTION	POST.REF.	DEBIT	CREDIT
1
2
3

A summary of the time tickets for the current month follows:

Job No.	Amount
100	$3,940
101	4,480
104	22,080
108	15,570
Indirect	6,130
111	7,120
115	7,960
117	30,690

	Required:
	Journalize the entry on Dec. 31to record the factory labor costs. Refer to the Chart of Accountsfor exact wording of account titles.

CHART OF ACCOUNTS

General Ledger

	ASSETS
110	Cash
121	Accounts Receivable
125	Notes Receivable
126	Interest Receivable
131	Materials
132	Work in Process
133	Factory Overhead
134	Finished Goods
141	Supplies
142	Prepaid Insurance
143	Prepaid Expenses
181	Land
191	Factory
192	AccumulatedDepreciation-Factory

	LIABILITIES
210	Accounts Payable
221	Utilities Payable
231	Notes Payable
236	Interest Payable
241	Lease Payable
251	Wages Payable
252	Consultant Fees Payable

	EQUITY
311	Common Stock
340	Retained Earnings
351	Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Wages Expense
531	Selling Expenses
532	Insurance Expense
533	Utilities Expense
534	Office Supplies Expense
540	Administrative Expenses
569	Depreciation Expense-Factory
590	Miscellaneous Expense
710	Interest Expense

Journalize the entry on Dec. 31 to record the factory laborcosts. Refer to the Chart of Accounts for exact wording of accounttitles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST.REF.	DEBIT	CREDIT
1
2
3

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ACBU 2223 Chapter 3: Chapter 3

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