ADM 2341 Lecture Notes - Lecture 3: Finished Good

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lilachippopotamus32

22 Apr 2018

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> process cost systems = apply costs to similar products that are mass-produced in a continuous way (pop, oli, chemicals) > job-order cost system = costs are assigned to a specific job (e. g, construction of a customized home, the making of a motion picture, or the manufacturing of a specialized machine) >both costing systems track three manufacturing cost elements direct materials, direct labour, and manufacturing overhead: the accumulation of the costs of materials, labour, and overhead. > in both costing systems, raw materials are debited to raw. Materials inventory, factory labour is debited to factory labour, and manufacturing overhead costs are debited to manufacturing. >as noted above, all manufacturing costs are accumulated by debits to raw materials inventory, factory. These costs are then assigned to the same accounts in both costing systems work in. Process, finished goods inventory, and cost of goods sold. The methods of assigning costs, however, differ significantly. Diff: the number of work in process accounts used.

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Yu Technology Co. manufactures CDs and DVDs for computer software and entertainment companies. Yu uses job order costing and has a perpetual inventory system. The business has a highly labour intensive production process, so it applies manufacturing overhead to jobs based on direct labour cost. Yu expects to incur $1,080,000 0f manufacturing overhead costs and estimated direct labour costs of $900,000 during 2015. At the end of March 2015,

Yu Technology reported work in process inventory of $15,000

During April 2015, Yu Technology recorded the following transactions.

1) Materials requisitioned for use in production:

Direct materials: $120,000

Indirect materials: $20,000

2) Advertising costs were incurred, $15,000.

3) Salaries and wages incurred as follows:

Direct labour $121,875

Indirect labour $40,625

Selling and administrative salaries $ 25,000

4) Insurance expired during the year, $30,000 (90% relates to the factory, the remainder is on selling and administrative items).

5) Depreciation recorded for the year, $80,000 (75% relates to factory assets and the remainder relates to selling and administrative assets).

6) Utilities expense incurred, $53,750 (80% of this amount relates to the factory, the remainder relates to the administrative offices).

7) Applied manufacturing overhead costs to jobs

8) Two jobs were completed with total costs of $120,000 & $85,000 respectively. They were sold on account at a mark-up of 75% on cost.

All purchases and services were acquired on account.

(d) Record a journal entry to close manufacturing overhead to cost of goods sold.
(e) Prepare an income statement for the year
(f) Determine the balance in work in process inventory on April 30.

ultramarineclam743

Yu Technology reported work in process inventory of $15,000

During April 2015, Yu Technology recorded the following transactions.

1) Materials requisitioned for use in production:

Direct materials: $120,000

Indirect materials: $20,000

2) Advertising costs were incurred, $15,000.

3) Salaries and wages incurred as follows:

Direct labour $121,875

Indirect labour $40,625

Selling and administrative salaries $ 25,000

4) Insurance expired during the year, $30,000 (90% relates to the factory, the remainder is on selling and administrative items).

5) Depreciation recorded for the year, $80,000 (75% relates to factory assets and the remainder relates to selling and administrative assets).

6) Utilities expense incurred, $53,750 (80% of this amount relates to the factory, the remainder relates to the administrative offices).

7) Applied manufacturing overhead costs to jobs

8) Two jobs were completed with total costs of $120,000 & $85,000 respectively. They were sold on account at a mark-up of 75% on cost.

All purchases and services were acquired on account.

1. State the journal entries necessary to record the above transactions in the general journal.

2. Is manufacturing overhead over-applied or under-applied? By how much?

3. Record a journal entry to close manufacturing overhead to cost of goods sold.

whitewhale369

1.) When products held in inventory are sold:

A.)Cost of Goods Sold is credited.

B.)Work in Process Inventory is credited.

C.)Finished Goods Inventory is credited.

D.)Finished Goods Inventory is debited.

2.)Since manufacturing costs (direct materials, direct labor,and overhead) are incurred in the process of manufacturing units ofproduct, these costs are credited t

A.)	The Direct Materials Inventory, Direct Labor, and ManufacturingOverhead accounts respectively.
B.)	Liability accounts.
C.)	The Work in Process Inventory account.
D.)	The Cost of Goods Sold account.

3.)Management accounting systems are designed to assistorganizations in the performance of all of the following functionsexcept:

A.)	The assignment of decision-making authority over companyassets.
B.)	Planning and decision-making.
C.)	Monitoring, evaluating, and rewarding performance.
D.)	The preparation of income tax returns.

4.)In a schedule of cost of finished goods manufactured, thefigure for total manufacturing costs:

	A.) May be less than the cost of direct materials used.
	B.) May be less than the direct labor costs assigned toproduction.
	C.) May be less than the manufacturing overhead applied toproduction.
	D.) May be less than the cost of finished goodsmanufactured.

5.) When a manufacturing company purchases raw materials orcomponent parts to be used in manufacturing finished goods, thesecosts are initially debited to:

	A.) Expense accounts.
	B.) Raw Materials Inventory.
	C.) Finished Goods Inventory.
	D.) Manufacturing Overhead.

6.) The wages paid to employees working directly on a company'sproducts would be shown as a:

	A.) Credit to Direct Labor.
	B.) Debit to Direct Labor.
	C.) Credit to Work in Process.
	D.) Debit to Manufacturing Overhead.

7.) Amounts credited to the Work in Process inventory accountmay best be described as:

	A.) The cost of finished goods manufactured.
	B.) Total manufacturing costs charged to production.
	C.) The cost of goods sold.
	D.) Direct materials purchased, direct labor costs paid, andpayments for items classified as manufacturing overhead.

chocolatetiger413

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