Concept explainers
(a)
Recording
In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.
Analyzing Manufacturing Overhead:
The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.
To record:
The transactions in Raw Materials Inventoryfor the month of January 2016.
Explanation of Solution
The transactions recorded in T-account of Raw Materials Inventory for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Raw Materials Inventory | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
To Opening Balance | 20,000 | By Work in Process Inventory (Direct Materials Issued) | 32,000 |
To Purchase Payables | 26,000 | By Manufacturing Overhead (Indirect Materials Issued) | 8,000 |
By Closing Balance | 6,000 | ||
Total | 46,000 | Total | 46,000 |
The direct materials issued will be transferred to work in process inventory, while indirect materials consumed will be considered as a manufacturing overhead respectively.
(b)
Recording Manufacturing Costs:
In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.
Analyzing Manufacturing Overhead:
The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.
To record:
The transactions in relation to Work in Process Inventory for the month of January 2016.
Explanation of Solution
The transactions recorded in T-account of Work in Process Inventory for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Work in Process Inventory | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
To Opening Balance | 15,000 | ||
To Raw Materials Inventory | 32,000 | ||
To Wages Payables (Direct Labor) | 18,000 | ||
To Manufacturing Overhead | 54,000 | ||
By Finished Goods | 109,000 | ||
By Closing Balance | 10,000 | ||
Total | 119,000 | Total | 119,000 |
All such direct costs and applied manufacturing overhead involved in the processing of materials are considered under work in process inventory. As all the jobs are not completed, the direct materials pertaining to work in process amounts to $10,000 is considered as closing balance for such period.
(c)
Recording Manufacturing Costs:
In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.
Analyzing Manufacturing Overhead:
The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.
To record:
The transactions in relation to Finished Goods Inventory for the month of January 2016.
Explanation of Solution
The transactions recorded in T-account of Finished Goods Inventory for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Finished Goods Inventory | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
To Opening Balance | 32,000 | ||
To Work in Process Inventory | 109,000 | ||
By Cost of Goods Sold | 70,000 | ||
By Closing Balance | 71,000 | ||
Total | 141,000 | Total | 141,000 |
The goods which are completed would be transferred to finished goods inventory. However, the total costs of such jobs which are sold during such period would be transferred as cost of such goods sold respectively.
(d)
Recording Manufacturing Costs:
In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.
Analyzing Manufacturing Overhead:
The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.
To record:
The transactions in relation to Cost of Goods Sold for the month of January 2016.
Explanation of Solution
The transactions recorded in T-account of Cost of Goods Sold for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Cost of Goods Sold | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
By Sales Revenue | 70,000 | ||
To Finished Goods | 70,000 | ||
Total | 70,000 | Total | 70,000 |
It represents the total cost of such goods sold during the period.
(e)
Recording Manufacturing Costs:
In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.
Analyzing Manufacturing Overhead:
The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.
To record:
The transactions regarding Manufacturing Overhead for the month of January 2016.
Explanation of Solution
The transactions recorded in T-account of Manufacturing Overhead for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Manufacturing Overhead | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
To Raw Materials Inventory | 8,000 | To Work in Process Inventory (Applied Manufacturing Overhead) | 54,000 |
To Wages Payables (Indirect Labor) | 5,200 | ||
To |
8,500 | ||
To Prepaid Insurance | 1,600 | ||
To Cash (Other Factory Costs) | 7,800 | ||
To Over-Applied Overhead c/f | 22,900 | ||
Total | 54,000 | Total | 54,000 |
The manufacturing overhead is the factory cost component in such production process. They are applied to work in process inventory as a result of predetermined overhead rate. The assembly workers payroll costs considered as direct labor cost. It is incurred in the manufacturing unit and directly related to such production process respectively. Thus, applied manufacturing overheads are charged at 300% of direct labor costs which is $54,000 ($18,000 * 300%).
(f)
Recording Manufacturing Costs:
In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.
Analyzing Manufacturing Overhead:
The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.
To record:
The transactions related to Selling, General and Administrative Expenses for the month of January 2016.
Explanation of Solution
The transactions recorded in T-account of Selling, General and Administrative Expenses for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Selling, General and Administrative Expenses | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
To Salary Payable for Administrative Personnel | 31,000 | ||
To Sales Commissions Payable | 15,500 | ||
To Accumulated |
2,400 | ||
To Prepaid Insurance | 2,400 | ||
By Closing Balance | 51,300 | ||
Total | 51,300 | Total | 51,300 |
All such costs in relation to administration, selling and distribution of goods during the period are recorded under Selling, General and Administrative Expenses.
(g)
Recording Manufacturing Costs:
In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.
Analyzing Manufacturing Overhead:
The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.
To record:
The transactions in relation to Sales Revenue for the month of January 2016.
Explanation of Solution
The transactions recorded in T-account of Sales Revenue for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Sales Revenue | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
To Cost of Goods Sold | 70,000 | By Cash | 91,000 |
To Gross Profit | 21,000 | ||
Total | 91,000 | Total | 91,000 |
The excess of sales value over the cost of such goods sold represent the gross profit for the period.
(h)
Recording Manufacturing Costs:
In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.
Analyzing Manufacturing Overhead:
The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources.
To record:
The transactions other accounts for the month of January 2016.
Explanation of Solution
The transactions recorded in T-account of Cash for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Cash | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
To Sales Revenue | 91,000 | By Manufacturing Overhead | 7,800 |
By Closing Balance | 83,200 | ||
Total | 91,000 | Total | 91,000 |
The cash transactions during the period have been recorded to determine the cash balance.
The transactions recorded in T-account of Purchase Payables for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Purchase Payables | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
By Raw Materials Inventory | 26,000 | ||
To Closing Balance | 26,000 | ||
Total | 26,000 | Total | 26,000 |
It is a payables account for raw materials acquired on credit terms.
The transactions recorded in T-account of Wages Payables for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Wages Payables | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
By Work in Process Inventory (Direct Labor) | 18,000 | ||
By Manufacturing Overhead (Indirect Labor) | 5,200 | ||
To Closing Balance | 23,200 | ||
Total | 23,200 | Total | 23,200 |
The direct as well as indirect labor incurred have been recorded as wages payables.
The transactions recorded in T-account of Salary Payable for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Salary Payable | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
By Selling, General and Administrative Expenses | 31,000 | ||
To Closing Balance | 31,000 | ||
Total | 31,000 | Total | 31,000 |
As the salary to administrative personnel is incurred but not paid, the same is represented as salary payable at the end of such period.
The transactions recorded in T-account of Sales Commissions Payable for the month of January 2016 of C.C.C. Co.are as follows-
Dr | Sales Commissions Payable | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
By Selling, General and Administrative Expenses | 15,500 | ||
To Closing Balance | 15,500 | ||
Total | 15,500 | Total | 15,500 |
The sales commissions are payable at the end of such period.
The transactions recorded in T-account of Accumulated Depreciation for the month of January 2016 of C.C.C. Co. are as follows-
Dr | Accumulated Depreciation | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
By Manufacturing Overhead | 8,500 | ||
By Selling, General and Administrative Expenses | 2,400 | ||
To Closing Balance | 10,900 | ||
Total | 10,900 | Total | 10,900 |
The depreciation expense for the period is recorded in respective heads.
The transactions recorded in T-account of Prepaid Insurance for the month of January 2016 of C.C.C. Co. are as follows-
Dr | Prepaid Insurance | Cr | |
Particulars | Amount ($) | Particulars | Amount ($) |
To Opening Balance | 4,000 | By Manufacturing Overhead | 1,600 |
By Selling, General and Administrative Expenses | 2,400 | ||
Total | 4,000 | Total | 4,000 |
The prepaid insurance which has lapsed during the current period, has been transferred as an expense to respective heads.
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Chapter 2 Solutions
Managerial Accounting
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