Opticom, Inc. a manufacturer of fiber optic communications equipment, use a job-order costing system. Since the production process is heavily automated, manufacturing overhead is applied on the basis of machine hour using a predetermined overhead rate. The current annual rate of $30 per machine hour is based on budgeted manufacturing overhead cost of $2,400,000 and a budgeted activity level of 80,000 machine hours (the company’s estimated practical capacity). Operations for the year have been completed, and all of the accounting entries have been made for the year except the application of manufacturing overhead to the jobs worked on during December, the transfer of cost from Work in Process to Finished Good for the Jobs, completed in December, and the transfer of cost from Finished Goods to cost of Goods Sold for the jobs that have been sold during December. Summarized data as of November 30 and for the month of December are presented in the following table. Jobs T11-007, N11-013, N11-015 were completed during December. All completed job except N11-013 had been turned over to customers by the close of business on December 31. Work in Process December Activity Job No Balance Nov 30 Direct Material Direct Labor Machine Hours T11-007 $ 174,000 $ 3,000 $9,000 300 N11-013 110,000 8,000 24,000 1,000 N11-015 0 51,200 53,400 1,400 D12-002 0 75,800 40,000 2,500 D12-003 0 52,000 33,600 800 Total $284,000 $190,000 $160,000 6,000 Operating Activity Activity Through November 30 December Activity Actual manufacturing overhead incurred: Indirect material $ 250,000 $ 18,000 Indirect labor 690,000 60,000 Utilities 490,000 44,000 Depreciation 770,000 70,000 Total Overhead $2,200,000 $ 192,000 Other Data: Raw Material purchases* $1,930,000 $ 196,000 Direct-labor cost $1,690,000 $ 160,000 Machine hours 73,000 6,000 Account Balances at Beginning of Year January 1 Raw-material Inventory * $ 210,000 Work-in-process inventory 120,000 Finished-goods inventory 250,000 *Raw material purchases and raw-material inventory consist of both direct and indirect materials. The balance of the raw material inventory account as of December 31 of the year just completed is $170,000 Account Balances at Beginning of Year January 1 Raw-material Inventory * $ 210,000 Work-in-process inventory 120,000 Finished-goods inventory 250,000 *Raw material purchases and raw-material inventory consist of both direct and indirect materials. The balance of the raw material inventory account as of December 31 of the year just completed is $170,000 Required: Explain why manufacturers uses a predetermined overhead rate to apply manufacturing overhead to their jobs How much manufacturing overhead would Opticom have applied to jobs through November 30 of the year completed How much manufacturing overhead would have been applied to jobs during December of the year completed Determine the amount by which manufacturing overhead is overapplied or underapplied as of December of the year completed Determine the balance in the Finished-Goods Inventory account on December 31 of the year just completed. Prepare a Schedule of Cost of Goods Manufactured for Opticom, Inc. for the year just completed. (Hint: In Computing the cost of direct material used, remember that Opticom includes both direct and indirect material in its Raw-Material Inventory account) How much is the Cost of Goods Sold for the year just completed? Please answer from number 1 with question start "determine the amount by which manufacturing overhead is overapplied or underapplied"
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.
Opticom, Inc. a manufacturer of fiber optic communications equipment, use a
$30 per machine hour is based on budgeted
|
Work in Process |
December Activity |
|||
|
Job No |
Balance Nov 30 |
Direct
Material |
Direct Labor |
Machine
Hours |
|
T11-007 |
$ 174,000 |
$ 3,000 |
$9,000 |
300 |
|
N11-013 |
110,000 |
8,000 |
24,000 |
1,000 |
|
N11-015 |
0 |
51,200 |
53,400 |
1,400 |
|
D12-002 |
0 |
75,800 |
40,000 |
2,500 |
|
D12-003 |
0 |
52,000 |
33,600 |
800 |
|
Total |
$284,000 |
$190,000 |
$160,000 |
6,000 |
|
Operating Activity |
Activity Through
November 30 |
December Activity |
|
Actual manufacturing overhead incurred: |
|
|
|
Indirect material |
$ 250,000 |
$ 18,000 |
|
Indirect labor |
690,000 |
60,000 |
|
Utilities |
490,000 |
44,000 |
|
|
770,000 |
70,000 |
|
Total Overhead |
$2,200,000 |
$ 192,000 |
|
|
|
|
|
Other Data: |
|
|
|
Raw Material purchases* |
$1,930,000 |
$ 196,000 |
|
Direct-labor cost |
$1,690,000 |
$ 160,000 |
|
Machine hours |
73,000 |
6,000 |
Account Balances at Beginning of Year January 1
Raw-material Inventory * $ 210,000
Work-in-process inventory 120,000
Finished-goods inventory 250,000
*Raw material purchases and raw-material inventory consist of both direct and indirect materials. The balance of the raw material inventory account as of December 31 of the year just completed is $170,000
Account Balances at Beginning of Year January 1
Raw-material Inventory * $ 210,000
Work-in-process inventory 120,000
Finished-goods inventory 250,000
*Raw material purchases and raw-material inventory consist of both direct and indirect materials. The balance of the raw material inventory account as of December 31 of the year just completed is $170,000
Required:
- Explain why manufacturers uses a predetermined overhead rate to apply manufacturing overhead to their jobs
- How much manufacturing overhead would Opticom have applied to jobs through
November 30 of the year completed
- How much manufacturing overhead would have been applied to jobs during December of the year completed
- Determine the amount by which manufacturing overhead is overapplied or underapplied as of December of the year completed
- Determine the balance in the Finished-Goods Inventory account on December 31 of the year just completed.
- Prepare a Schedule of Cost of Goods Manufactured for Opticom, Inc. for the year just completed. (Hint: In Computing the cost of direct material used, remember that Opticom includes both direct and indirect material in its Raw-Material Inventory account)
- How much is the Cost of Goods Sold for the year just completed?
Please answer from number 1 with question start "determine the amount by which manufacturing overhead is overapplied or underapplied"
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