The Sun Company uses the job-order costing system. The following data relate to October, The first month of the company’s fiscal year. Raw material purchased on account $210,000 Raw material issued to production $190,000 ( 178,000 Direct material) Direct labor cost incurred, $90,000 and Indirect labor, $110,000 Depreciation recorded the factory equipment, $40,000 Other manufacturing overhead cost incurred during October, $ 70,000 (Credit account payable) The Company apples manufacturing overhead cost to production on the basis of $8 per machine-hour. Total 30,000 machine-hour were recorded for October. Production orders $ 520,000 according to their job cost sheets were completed during October and transferred to finished goods. Production orders that had cost $480,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold on account at 25% above cost. Required: Prepare journal entries to records transactions given above. Prepare T-account for manufacturing overhead and work in process. Compute the ending balance each accounts, assuming that work in process has beginning balance of $42,000.
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.
. The Sun Company uses the job-order costing system. The following data relate to October, The first month of the company’s fiscal year.
- Raw material purchased on account $210,000
- Raw material issued to production $190,000 ( 178,000 Direct material)
- Direct labor cost incurred, $90,000 and Indirect labor, $110,000
- Depreciation recorded the factory equipment, $40,000
- Other
manufacturing overhead cost incurred during October, $ 70,000 (Credit account payable) - The Company apples manufacturing overhead cost to production on the basis of $8 per machine-hour. Total 30,000 machine-hour were recorded for October.
- Production orders $ 520,000 according to their
job cost sheets were completed during October and transferred to finished goods. - Production orders that had cost $480,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold on account at 25% above cost.
Required:
- Prepare
journal entries to records transactions given above. - Prepare T-account for manufacturing overhead and work in process. Compute the ending balance each accounts, assuming that work in process has beginning balance of $42,000.
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