Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $300,000 and that 20,000 direct labor hours would be worked. At year-end, Anthony, the company's founder and CEO, gives you the following information regarding Oberti's operations. 1. The beginning balances in the inventory accounts were: Raw Materials Inventory $8,000 Work in Process Inventory $26,000 Finished Goods Inventory $32,000 2. During the year, the company purchased raw materials costing $97,000. All purchases were made on account. 3. The production department requisitioned $100,000 of raw materials for use in production. Of those, 70% were direct materials and 30% were indirect materials. 4. The company used 21,000 direct labor hours at a cost of $14 per hour during the year (credit Wages Payable). 5. The company used 6,500 indirect labor hours at a cost of $10 per hour (credit Wages Payable). 6. The company paid $178,000 for insurance, utilities, and property taxes on the factory. 7. The company recorded factory depreciation of $40,000. 8. The company applied manufacturing overhead to inventory based on the 21,000 labor hours actually worked during the year. 9. Products costing $665,000 were completed during the year and transferred to the Finished Goods Inventory. 10. During the year, the company sold products costing a total of $672,000. 11. The company closes under- and overapplied overhead to Cost of Goods Sold.
Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company estimated that total manufacturing overhead costs would be $300,000 and that 20,000 direct labor hours would be worked. At year-end, Anthony, the company's founder and CEO, gives you the following information regarding Oberti's operations. 1. The beginning balances in the inventory accounts were: Raw Materials Inventory $8,000 Work in Process Inventory $26,000 Finished Goods Inventory $32,000 2. During the year, the company purchased raw materials costing $97,000. All purchases were made on account. 3. The production department requisitioned $100,000 of raw materials for use in production. Of those, 70% were direct materials and 30% were indirect materials. 4. The company used 21,000 direct labor hours at a cost of $14 per hour during the year (credit Wages Payable). 5. The company used 6,500 indirect labor hours at a cost of $10 per hour (credit Wages Payable). 6. The company paid $178,000 for insurance, utilities, and property taxes on the factory. 7. The company recorded factory depreciation of $40,000. 8. The company applied manufacturing overhead to inventory based on the 21,000 labor hours actually worked during the year. 9. Products costing $665,000 were completed during the year and transferred to the Finished Goods Inventory. 10. During the year, the company sold products costing a total of $672,000. 11. The company closes under- and overapplied overhead to Cost of Goods Sold.
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Chapter18: Pricing And Profitability Analysis
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Oberti Guitar Company makes high-quality customized guitars. Oberti uses a job order costing system. Because the guitars
are handmade, the company applies overhead based on direct labor hours. At the beginning of the year, the company
estimated that total manufacturing overhead costs would be $300,000 and that 20,000 direct labor hours would be worked. At
year-end, Anthony, the company's founder and CEO, gives you the following information regarding Oberti's operations.
1. The beginning balances in the inventory accounts were:
Raw Materials Inventory
$8,000
Work in Process Inventory
$26,000
Finished Goods Inventory
$32,000
2. During the year, the company purchased raw materials costing $97,000. All purchases were made on account.
3. The production department requisitioned $100,000 of raw materials for use in production. Of those, 70% were direct
materials and 30% were indirect materials.
4. The company used 21,000 direct labor hours at a cost of $14 per hour during the year (credit Wages Payable).
5. The company used 6,500 indirect labor hours at a cost of $10 per hour (credit Wages Payable).
6. The company paid $178,000 for insurance, utilities, and property taxes on the factory.
7. The company recorded factory depreciation of $40,000.
8. The company applied manufacturing overhead to inventory based on the 21,000 labor hours actually worked during
the year.
9. Products costing $665,000 were completed during the year and transferred to the Finished Goods Inventory.
10. During the year, the company sold products costing a total of $672,000.
11. The company closes under- and overapplied overhead to Cost of Goods Sold.
Transcribed Image Text:Prepare journal entries for each of the transactions just listed. (Credit account titles are automatically indented when
the amount is entered. Do not indent manually. Post entries in order presented in the problem. If no entry is required,
select "No Entry" for the account titles and enter 0 for the amounts.)
No. Account Titles and Explanation
Debit
Credit
1.
(To record raw materials purchases)
3.
(To record use of direct and indirect materials in production)
2.
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