Sierra Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the cutting process. The following information is available regarding its May inventories: Beginning Inventory Ending Inventory Raw materials inventory $ 6,000 $ 9,250 Work in process inventory—Cutting 43,500 51,500 Work in process inventory—Stitching 63,300 60,500 Finished goods inventory 20,100 8,250 The following additional information describes the company's production activities for May. Direct materials Raw materials purchased on credit $ 25,000 Direct materials used—Cutting 21,750 Direct materials used—Stitching 0 Direct labor Direct labor—Cutting $ 15,600 Direct labor—Stitching 62,400 Factory Overhead (Actual costs) Indirect materials used $ 6,000 Indirect labor used 55,000 Other overhead costs 46,505 Factory Overhead Rates Cutting 150% of direct materials used Stitching 120% of direct labor used Sales $ 256,000 2.Prepare May 31 journal entries to record the following May activities: Raw materials purchases Direct materials used Indirect materials used Direct labor used Indirect labor used Other overhead costs paid in cash Overhead applied Goods transferred from Cutting to Stitching Goods transferred from Stitching to finished goods Sales (on account) Cost of goods sold
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.
Sierra Company manufactures soccer balls in two sequential processes: Cutting and Stitching. All direct materials enter production at the beginning of the cutting process. The following information is available regarding its May inventories:
| Beginning Inventory | Ending Inventory | |
|---|---|---|
| Raw materials inventory | $ 6,000 | $ 9,250 |
| Work in process inventory—Cutting | 43,500 | 51,500 |
| Work in process inventory—Stitching | 63,300 | 60,500 |
| Finished goods inventory | 20,100 | 8,250 |
The following additional information describes the company's production activities for May.
| Direct materials | |
|---|---|
| Raw materials purchased on credit | $ 25,000 |
| Direct materials used—Cutting | 21,750 |
| Direct materials used—Stitching | 0 |
| Direct labor | |
|---|---|
| Direct labor—Cutting | $ 15,600 |
| Direct labor—Stitching | 62,400 |
| Factory Overhead (Actual costs) | |
|---|---|
| Indirect materials used | $ 6,000 |
| Indirect labor used | 55,000 |
| Other overhead costs | 46,505 |
| Factory Overhead Rates | |
|---|---|
| Cutting | 150% of direct materials used |
| Stitching | 120% of direct labor used |
| Sales | $ 256,000 |
2.Prepare May 31
- Raw materials purchases
- Direct materials used
- Indirect materials used
- Direct labor used
- Indirect labor used
- Other overhead costs paid in cash
- Overhead applied
- Goods transferred from Cutting to Stitching
- Goods transferred from Stitching to finished goods
- Sales (on account)
- Cost of goods sold
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