ACCTG 231 Chapter Notes - Chapter 4: Direct Labor Cost, Finished Good, Indian Railways

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23 Feb 2017

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Differences between job-order and process costing: job-order. Many different jobs are worked on during each period. Each job has a different production requirement. Unit costs are computed by job on the job cost sheet: process. A single product is produced either on a continuous basis or for long periods of time. The activity is preformed uniformly on all of the units passing through it. The output is homogenous; all products are identical. Completed units are transferred to finished goods: materials, labor, and oh costs can be added in any processing dept. not just the. Materials can be added in any processing dept. In process costing, labor costs are traced to depts. In process costing and job-order costing, predetermined oh rates are usually used: manufacturing oh cost is applied according to the amount of the allocation base incurred in the dept.

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Case 3-49

Avid Assemblers uses normal job-order costing to assign costs toproducts. The company assembles and packages 25 different productsaccording to customer specifications. Products are worked on inbatches of 20 to 40 units. Each batch is given a job number. OnOctober 1, the company had the following balances:

Raw materials		$9,800
Work in process		65,847
Finished goods		30,640

Work in process consisted of the following jobs:

	Job 22	Job 24	Job 25
Direct materials	$6,200	$5,190	$4,800
Direct labour	10,500	9,210	9,500
Applied overhead	7,350	6,447	6,650
Total	$24,050	$20,847	$20,950
Number of units	20	40	30

Finished goods consisted of Job 23, with the following costs:

		Job 23
Direct materials		$8,200
Direct labour		13,200
Applied overhead		9,240
Total		$30,640
Number of units		50

Shown below are the direct cost data related to jobs started inOctober:

	Job 26	Job 27	Job 28	Total
Direct materials	$5,180	$5,600	$4,200	$14,980
Direct labour	11,200	9,340	5,910	26,450
Number of units	20	30	20

Other information:

Direct materials and direct labour added tobeginning work in process in October were as follows:

	Job 22	Job 24	Job 25	Total
Direct materials	$1,150	$610	$1,500	$3,260
Direct labour	3,000	4,500	5,500	$13,000

Overhead is applied at a predetermined rate basedon the direct labour cost.

Actual expenses for October were as follows:

Supervisory salaries	$6,000	Supplies (factory)	$2,100
Factory rent	5,000	Selling expenses	8,500
Depreciation (machines)	5,000	Property tax and insurance	2,250
Indirect labour	4,000	CPP, EI, and other benefits*	4,200

* 80% of employer contributions and benefits relate to factorypersonnel.

Purchases of direct materials (raw materials)during October amounted to $28,500. Indirect materials (supplies)are handled in a separate account.

Only Job Nos. 27 and 28 are still in process atclosing on October 31. Finished goods consisted only of Job No. 25at month end.

Avid writes off any under- and over-applied overhead to Cost ofGoods Sold in the month in which it is incurred.

Requirements:

a.Calculate Predetermined overhead rate

b.Calculate Unit cost of job 24 in October

c.Calulate the Oct 31 Balances for the following account:

Raw Materials, Work in Process, Finished Goods

d.What is the cost of goods manufactured?

e. Determine the under- or over- paid in October

Prepare the journal entry to dispose of this amount.

byzantiumprairie-dog733

Valport Company, a manufacturer of fiber optic communications equipment, uses a job-order costing system. Since the production process is heavily automated, manufacturing overhead is allocated on the basis of machine hours using a predetermined overhead rate. The current annual rate of $15 per machine hour is based on budgeted manufacturing overhead costs of $1,200,000 and a budgeted activity level of 80,000 machine hours. Operations for year 20xx have been completed, and all of the accounting entries have been made for the year except the allocation of manufacturing overhead to the jobs worked on during December, the transfer of costs from Work in Process to Finished Goods for the jobs completed in December, and the transfer of costs from Finished Goods to Cost of Goods Sold for the jobs that have been sold during December. Summarized data as of November 30, 20xx and for December 20xx are presented in the following table. Jobs T11-007, N11-013, and N11-015 were completed during December. All completed jobs except Job N11-013 had been turned over to customers by the close of business on December 31, 20xx.

Work-in-Process December 20xx Activity

Balance Direct Direct Machine

Job No. 11/30/xx Material Labor Hours

T11-007 $ 87,000 $ 1,500 . $ 4,500 300

N11-013 55,000 4,000 12,000 1,000

N11-015 -0- 25,600 26,700 1,400

D12-002 -0- 37,900 20,000 2,500

D12-00 . -0- 26,000 16,800 800

________ _______ ______ _______

Total $142,000 $95,000 $80,000 6,000

Activity December

through 20xx

11/30/xx Activity

Actual manufacturing overhead incurred:

Indirect material . . . . . . . . . . . . . . . . . . . . . . . . $125,000 . . . . . . . . $ 9,000

Indirect labor. . . . . . . . . . . . . . . . . . . . . . . . . . . 345,000 . . . . . . . . 30,000

Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,000 . . . . . . . . 22,000

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,000 . . . . . . . . 35,000

Total overhead . . . . . . . . . . . . . . . . . . . . . . . . . $1,100,000 . . . . . . . $96,000

Other items:

Raw-material purchases* . . . . . . . . . . . . . . . . . $ 965,000 . . . . . . . $98,000

Direct-labor costs . . . . . . . . . . . . . . . . . . . . . . $ 845,000 . . . . . . . . 80,000

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . 73,000 . . . . . . . . 6,000

Account Balances at Beginning of Year 1/1/xx

Raw-materials inventory* . . . . . . . . . . . . . . . . . . . . $105,000

Work-in-process inventory . . . . . . . . . . . . . . . . . . . 60,000

Finished-goods inventory . . . . . . . . . . . . . . . . . . . 125,000

*Raw-material purchases and raw-materials inventory consist of both direct and indirect materials. The balance of the Raw-Materials Inventory account as of December 31, 20xx is $85,000.

REQUIRED:

How much manufacturing overhead would Valport have allocated to jobs through November 30, 20xx?

How much manufacturing overhead would be allocated to jobs by Valport during December 20xx?

Determine the amount by which the manufacturing overhead is overallocated or underallocated as of December 31, 20xx?

Determine the balance in Valport Company's Finished-Goods Inventory account on December 31, 20xx? (Hint: which completed job(s) are still in the finished goods warehouse as of December 31, 20xx?)

Determine the balance in Valport Company's Work-in-process Inventory account on December 31, 20xx? (Hint: which incomplete job(s) are still in the factory as of December 31, 20xx?)

Prepare a Schedule of Cost of Goods Manufactured for Valport Company for the year 20xx. (Hint: In computing the cost of direct material used, remember that Valport includes both direct and indirect material in its Raw-Materials Inventory account i.e.

Raw materials used in 20xx = Direct materials used in 20xx + Indirect materials used in 20xx)

copperporcupine291

EXERCISE 3â16

Dillon Products manufactures various machined parts to customerspecifications. The company uses a job-order costing system andapplies overhead cost to jobs on the basis of machine-hours. At thebeginning of the year, it was estimated that the company would work240,000 machine-hours and incur $4,800,000 in manufacturingoverhead costs.

The company spent the entire month of January working on a largeorder for 16,000 custom made machined parts. The company had nowork in process at the beginning of January. Cost data relating toJanuary follow:

1.

Raw materials purchased on account, $325,000.
2.

Raw materials requisitioned for production, $290,000 (80% directmaterials and 20% indirect materials).
3.

Labor cost incurred in the factory, $180,000 (one-third directlabor and two-thirds indirect labor).
4.

Depreciation recorded on factory equipment, $75,000.
5.

Other manufacturing overhead costs incurred, $62,000 (creditAccounts Payable).
6.

Manufacturing overhead cost was applied to production on the basisof 15,000 machine-hours actually worked during the month.
7.

The completed job was moved into the finished goods warehouse onJanuary 31 to await delivery to the customer. (In computing thedollar amount for this entry, remember that the cost of a completedjob consists of direct materials, direct labor, and appliedoverhead.)

Required:

1.

Prepare journal entries to record items (a) through (f) above[ignore item (g) for the moment].
2.

Prepare T-accounts for Manufacturing Overhead and Work in Process.Post the relevant items from your journal entries to theseT-accounts.
3.

Prepare a journal entry for item (g) above.
4.

Compute the unit product cost that will appear on the job costsheet.

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ACCTG 231 Chapter Notes - Chapter 4: Direct Labor Cost, Finished Good, Indian Railways

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