Docstoc

Introduction to Managerial Accounting and Review of Product Costing

Document Sample
Introduction to Managerial Accounting and Review of Product Costing Powered By Docstoc
					Lesson 12
Problem 12-1

Managerial vs. Financial Accounting

Respond to the following questions:

Lesson 12
Introduction to Managerial Accounting and Review of Product Costing

1. What is the primary purpose behind managerial as opposed to financial accounting and note some of the key distinguishing characteristics of each? 2. Why do you suppose some people suggest that the development of a company's managerial accounting information is the result of an evolutionary process over time?

1

2

Problem 12-1 - Answer

Problem 12-1 - Answer

Managerial vs. Financial Accounting
1. What is the primary purpose behind managerial as opposed to financial accounting and note some of the key distinguishing characteristics of each?
Answer: The primary purpose behind financial accounting is to provide useful information to external users (investors, creditors, analysts, government regulatory agencies and others). This is done through a company's general-purpose financial statements, its balance sheet, income statement, statement of cash flows and supplemental notes prepared in accordance with standardized rules of accounting or generally accepted accounting principles. These statements provide summarized information reflecting a company's financial position and results of operations for recently completed periods. The primary purpose behind managerial accounting is to provide a company's management personnel with the kind of information that's needed to successfully plan, control, and evaluate a business' day-to-day operations. Now, it's true that managers are interested in the summarized historical results reported in a company's periodic financial statements, but good managers need detailed and immediate information to successfully manage a company. That's what managerial accounting is all about and it involves the development and use of forecasts and budgets as well historical data arising from a company's current and past transactions. In managerial accounting there are no governing rules or standards of presentation, the bottom-line is the development of information that gives managers the ability to lead a company in today's competitive and dynamic business environment.

2. Why do you suppose some people suggest that the development of a company's managerial accounting information is the result of an evolutionary process over time?
Answer: In a constantly changing and competitive marketplace, only those companies that adapt and continually improve ultimately survive. A big part of any company's continuous improvement is the ongoing development of better and more-timely management information. As companies experiment with new systems, access new data and explore new methods of analysis, information tools that add competitive value are incorporated and those that don't are quickly discarded. Even in the arena of information, only the strong survive.

3

4

Regardless of the kind of business a company engages in, whether it involves manufacturing, merchandising or the providing of services, all of a company's operating costs can be categorized as either

Product or Period Costs.

Much of managerial accounting focuses on a company's costs.
The goal is to plan for, control and evaluate costs in a way that helps maximize a company's profits.

Product costs: All costs incurred in the acquisition or manufacture of goods offered for sale, or costs incurred in the providing of services to a customer.
Merchandiser - Costs of goods acquired from suppliers for sale to customers. Manufacturer - All the costs of direct materials, direct labor and manufacturing overhead (indirect materials, indirect labor and other costs) incurred in the manufacturing process of its products. Service company - Costs of any salary, wages, supplies and other costs incurred in providing services to customers.

For financial reporting purposes, all product costs are accounted for as assets (inventory or unbilled service costs) until the product is sold or services are billed to the customer, at which time the costs become an expense (cost of goods sold or cost of services sold).

5

6

12-1

Problem 12-2

Product vs. Period Costs
Hit-it-Long, Inc. (HIL) manufactures custom golf clubs for customers interested in hitting a golf ball exceptionally long distances. During the production process, HIL incurs the following types of costs. Identify each cost as either a period or a product cost and for each product cost, indicate whether its part of direct materials, direct labor, or manufacturing overhead. In the case of manufacturing overhead, also distinguish the cost as an indirect material, indirect labor or other cost of manufacturing overhead.
A. Depreciation of equipment used to shape golf clubs. B. Advertising costs. C. Wages for janitors responsible for keeping the factory production floor clean. D. Freight-in costs on direct materials used in the manufacture of the golf clubs. E. Cost of oil and grease used to maintain the manufacturing equipment. F. Cost of steel, graphite, titanium and other materials incorporated in the final product. G. Freight-out costs of shipping finished goods to customers.

Period costs: All of the non-product costs incurred in the operation of a business. This includes the costs of marketing and selling the company's products or services, plus any costs incurred in the general administration of the business. (Selling and administrative costs) For financial reporting purposes, these period costs are simply accounted for as an expense in the period incurred.

7

8

Problem 12-2

Problem 12-2 - Answer

Product vs. Period Costs
Hit-it-Long, Inc. (HIL) manufactures custom golf clubs for customers interested in hitting a golf ball exceptionally long distances. During the production process, HIL incurs the following types of costs. Identify each cost as either a period or a product cost and for each product cost, indicate whether its part of direct materials, direct labor, or manufacturing overhead. In the case of manufacturing overhead, also distinguish the cost as an indirect material, indirect labor or other cost of manufacturing overhead.
H. Wages for company accountants. I. Commissions for sales personnel. J. Wages for golf club assemblers. K. Salaries of factory supervisors. L. Wages of production quality control personnel. M. Factory utility costs. N. Corporate office utility costs. O. Factory property taxes. P. Corporate office property taxes. Q. CEO salary.

Product vs. Period Costs
Description Product vs. Period Cost Type of Product Cost

A. Depreciation of equipment used to shape golf clubs. B. Advertising costs. C. Wages for janitors responsible for keeping the factory production floor clean. D. Freight-in costs on direct materials used in the manufacture of the golf clubs. E. Cost of oil and grease used to maintain the manufacturing equipment. F. Cost of steel, graphite, titanium and other materials incorporated in the final product. G. Freight-out costs of shipping finished goods to customers. H. Wages for company accountants.

Product Period Product Product Product Product Period Period

Mfg. Overhead (other cost) Mfg. Overhead (indirect labor) Direct Materials Mfg. Overhead (indirect mtls.) Direct Materials

9

10

Problem 12-2 - Answer

Product vs. Period Costs
Description Product vs. Period Cost Type of Product Cost

I. Commissions for sales personnel. J. Wages for golf club assemblers. K. Salaries of factory supervisors. L. Wages of production quality control personnel. M. Factory utility costs. N. Corporate office utility costs. O. Factory property taxes. P. Corporate office property taxes. Q. CEO salary

Period Product Product Product Product Period Product Period Period Mfg. Overhead (other costs) Direct Labor Mfg. Overhead (indirect labor) Mfg. Overhead (indirect labor) Mfg. Overhead (other costs)

It's absolutely crucial for a company to understand and accurately accumulate and account for its product costs.
For financial accounting purposes a company's product costs affect the amount of inventory reported on the company's balance sheet and the cost of goods sold reflected in its income statement. From a managerial standpoint, knowing a product's cost of production is essential in setting sales prices, understanding operating results and coming up with plans for improved performance.

11

12

12-2

The two methods used by manufacturing companies to accumulate and account for their product costs:
Process costing - Typically used by companies that manufacture a common product in a separate manufacturing facility or process.

Job order costing - Typically used by companies producing a variety of products from a common factory or manufacturing process.

Wheaties Factory
Direct Materials + Direct Labor + Manufacturing Overhead Total Costs ($) # of Boxes Produced
cheerios

Cheerios Factory
Direct Materials + Direct Labor + Manufacturing Overhead Total Costs ($) # of Boxes Produced Tables

Furniture Factory
Bookcases Chairs

Cost

Cost

Allocate the factory's direct material, direct labor and manufacturing overhead costs based on the relative costs incurred in the production of each product.

13

14

Problem 12-4

Problem 12-4

Review of Job-Order Costing
Custom Boat Manufacturing ("CBM") uses a job order cost system to account for its product costs. A. Prepare journal entries to record the following CBM transactions and events during the month of January, 20X4: a. CBM purchases on account $100,000 of direct materials (lumber, sails, glue, nails, paint, etc.) and $10,000 of indirect materials (factory supplies, sandpaper, paint brushes, etc.) b. On January 4th, CBM receives a customer order for two "Bullet" sailboats and initiates a manufacturing job (job order #303) to produce four boats to meet the current order and build inventory for future sales. The following job cost record is set up for job #303:

Job Cost Record
Job Order #: 303 Product Description: Bullet sailboat # of Units: 4 Direct Materials:
Date Requisition Number Time Cards Number Hours Amount

Date Started: 1/4/X4 Date Completed:

Direct Labor:
Date

Rate

Amount

Manufacturing Overhead:
Date Rate Labor Hours Amount

Total Cost Cost Per Unit:

$

= $

15

16

Problem 12-4

Problem 12-4

c. On January 5th, direct materials costing $12,000 are requisitioned from raw materials (Requisition # 2255) and placed into production exclusively for job #303. (Also make an appropriate entry to the Job #303 Job Cost Record) d. Indirect materials amounting to $3,000 (sandpaper, paint brushes, etc.) are requisitioned for used in the production of Job #303 and other jobs. e. Nails and glue costing $1,500 are requisitioned and placed into production for Job #303 and other jobs. f. Total wages paid to direct manufacturing employees for the month amount to $50,000 (2,500 total hours at an average rate of $20/hr.) of which time card #'s 222 and 224 show a total of 320 hours at a rate of $20/hour for Job #303. (Ignore payroll tax withholdings and employer payroll taxes. Also make an appropriate entry to the Job #303 Job Cost Record)

g. Total manufacturing supervisor and production maintenance salaries paid for the month amount to $30,000. (Ignore payroll tax withholdings and employer payroll taxes.) h. Total factory utility, rent, insurance, property taxes and other costs amounting to $40,000 for the month are paid. i. Depreciation of factory equipment for the month amounts to $8,000. j. Assume manufacturing overhead is applied to WIP jobs based on a predetermined rate of $32 per direct labor hour. (Also make an appropriate entry to the Job #303 Job Cost Sheet) k. Job #303 's production is completed. l. Two of the four Bullet boats completed in Job #303 are shipped to the customer. The customer has agreed to pay a price of $15,000 each for the boats within 30 days of delivery.

17

18

12-3

Problem 12-4

Problem 12-4 - Answer

B. Determine the gross margin made on this sale. Is this the amount of net income made by CBM on these two boats? C. Prepare journal entries for the following: a. Sales, accounting and all administrative salaries and wages for the month totaling $40,000 are paid. b. Total selling and administrative building rent, utilities, supplies, insurance, property taxes, and other costs amounting to $25,000 are paid during the month. c. The manufacturing overhead account is closed-out at the end of the month. D. What journal entry would be required at the end of the month if manufacturing overhead had been over-applied by $2,500.

A.

Review of Job-Order Costing
a. CBM purchases on account $100,000 of direct materials (lumber, sails, glue, nails, paint, etc.) and $10,000 of indirect materials (factory supplies, sandpaper, paint brushes, etc.)
Raw Materials Inventory Accounts Payable 110,000 110,000

b. On January 4th, CBM receives a customer order for two "Bullet" sailboats and initiates a manufacturing job (job order #303) to produce four boats to meet the current order and build inventory for future sales. No journal entry is made. c. On January 5th, direct materials costing $12,000 are requisitioned from raw materials (Requisition # 2255) and placed into production exclusively for job #303. (Also make an appropriate entry to the Job #303 Job Cost Record)
WIP Inventory Raw Materials Inventory 12,000 12,000

19

20

Problem 12-4 - Answer

Problem 12-4 - Answer

Job Cost Record
Job Order #: 303 Product Description: Bullet sailboat # of Units: 4 Direct Materials:
Date Requisition Number Amount

Date Started: 1/4/X4 Date Completed:

d. Indirect materials amounting to $3,000 (sandpaper, paint brushes, etc.) are requisitioned for used in the production of Job #303 and other jobs.
Manufacturing Overhead Raw Materials Inventory 3,000 3,000

1/5/X4 Direct Labor:
Date

2255
Time Cards Number Hours Rate

$12,000
Amount

e. Nails and glue costing $1,500 are requisitioned and placed into production for Job #303 and other jobs.
Manufacturing Overhead Raw Materials Inventory 1,500 1,500

Manufacturing Overhead:
Date Rate Labor Hours Amount

Total Cost Cost Per Unit:

$

f. Total wages paid to direct manufacturing employees for the month amount to $50,000 (2,500 total hours at an average rate of $20/hr.) of which time card #'s 222 and 224 show a total of 320 hours at a rate of $20/hour for Job #303. (Ignore payroll tax withholdings and employer payroll taxes. Also make an appropriate entry to the Job #303 Job Cost Record)
WIP Inventory Cash 50,000 50,000

= $

21

22

Problem 12-4 - Answer

Problem 12-4 - Answer

Job Cost Record
Job Order #: 303 Product Description: Bullet sailboat # of Units: 4 Direct Materials:
Date Requisition Number Amount

Date Started: 1/4/X4 Date Completed:

g. Total manufacturing supervisor and production maintenance salaries paid for the month amount to $30,000. (Ignore payroll tax withholdings and employer payroll taxes.)
Manufacturing Overhead Cash 30,000 30,000

h. Total factory utility, rent, insurance, property taxes and other costs amounting to $40,000 for the month are paid.
Manufacturing Overhead Cash 40,000 40,000

1/5/X4 Direct Labor:
Date

2255
Time Cards Number Hours Rate

$12,000
Amount

1/31/X4
Date

222, 224
Rate

320

$20
Labor Hours

$6,400
Amount

i. Depreciation of factory equipment for the month amounts to $8,000.
Manufacturing Overhead Accumulated Depreciation 8,000 8,000

Manufacturing Overhead:

Total Cost Cost Per Unit:

$

j. Assume manufacturing overhead is applied to WIP jobs based on a predetermined rate of $32 per direct labor hour. (Also make an appropriate entry to the Job #303 Job Cost Sheet)
WIP Inventory ($32 x 2,500 hours) Manufacturing Overhead 80,000 80,000

= $

23

24

12-4

Problem 12-4 - Answer

Problem 12-4 - Answer

Job Cost Record
Job Order #: 303 Product Description: Bullet sailboat # of Units: 4 Direct Materials:
Date Requisition Number Amount

k. Job #303 's production is completed.
Finished Goods Inventory WIP Inventory 28,640 28,640

Date Started: 1/4/X4 Date Completed:

l. Two of the four Bullet boats completed in Job #303 are shipped to the customer. The customer has agreed to pay a price of $15,000 each for the boats within 30 days of delivery.
Accounts Receivable Sales Revenues Cost of Goods Sold ($7,160 x 2) Finished Goods Inventory 30,000 30,000 14,320 14,320

1/5/X4 Direct Labor:
Date

2255
Time Cards Number Hours Rate

$12,000
Amount

1/31/X4
Date

222, 224
Rate

320

$20
Labor Hours

$6,400
Amount

Manufacturing Overhead: 1/31/X4 $32 320 Total Cost Cost Per Unit: 28,640 $10,240 $ 28,640 7,160

B. Determine the gross margin made on this sale. Sales revenues $ 30,000 Less: Cost of goods sold 14,320 Gross margin $ 15,680 Is this the amount of net income made by CBM on these two boats? No. (It doesn't take into consideration selling and administrative costs.)

4 = $

25

26

Problem 12-4 - Answer

Problem 12-4 - Answer

C. Prepare journal entries for the following: a. Sales, accounting and all administrative salaries and wages for the month totaling $40,000 are paid.
Selling and Administrative Expense Cash 40,000 40,000

D. What journal entry would be required at the end of the month if manufacturing overhead had been over-applied by $2,500.
Manufacturing Overhead Cost of Goods Sold Manufacturing Overhead
3,000 1,500 30,000 40,000 8,000 Adjustment 2,500 0 85,000 2,500 Over-applied

2,500 2,500

b. Total selling and administrative building rent, utilities, supplies, insurance, property taxes, and other costs amounting to $25,000 are paid during the month.
Selling and Administrative Expense Cash 25,000 25,000

c. The manufacturing overhead account is closed-out at the end of the month.
Cost of Goods Sold Manufacturing Overhead
3,000 1,500 30,000 40,000 8,000 Under-applied 2,500 0

2,500 2,500

Manufacturing Overhead

80,000 2,500 adjustment

27

28

In a job order cost system, the allocation of direct material and direct labor costs on a job-by-job basis is simplified through the use of material requisition forms and employee time cards that provide breakdowns by job of the materials used and time worked on each job. Where things become difficult is in the allocation of manufacturing overhead costs. Generally speaking, as these costs are incurred, no job-by-job breakdown is provided.
Example: A company's factory utility bill doesn't designate utility usage by job; the amount payable is typically stated in a single monthly amount.

A correlating relationship between a company's direct labor hours and manufacturing overhead costs is fairly common. For some companies with more automated manufacturing facilities, manufacturing overhead costs may correlate more directly with machine hours (the number of hours the company's manufacturing equipment is in operation) than with direct labor hours. In other cases, the amount of direct materials used may be the primary driving force behind a company's overhead costs. In those cases, the predetermined overhead rate should be based on machine hours or direct material costs as long as those hours or costs can be determined on a per job basis. Total budgeted manufacturing overhead costs for the upcoming period Predetermined Overhead Rate = Total budget for the measurable activity or cost that correlates with or drives overhead costs over the same period Example: If a company's total budget for manufacturing overhead costs for the next year amounts to $500,000 and total budgeted machine hours, the company's measurable cost driver of overhead for the same period, is 25,000 hours, then: $500,000 Predetermined Overhead Rate = 25,000 hrs. = $20 per machine hour If a specific job is processed using 100 machine hours: 100 hrs. x $20 = $2,000 allocated to that job

As a result, the allocation of such costs must be made on an estimated basis, usually through the use of a predetermined overhead rate.
Example: In the previous problem for Custom Boat Manufacturing ("CBM"), overhead was applied to work-in-process jobs at a rate of $32 per direct labor hour. This means that based on the company's past experience, there's an apparent correlation between the number of direct labor hours worked and the amount of manufacturing overhead costs incurred. The more direct laborers work, the higher the company's overhead costs. In fact, for CBM, that correlation apparently runs at a rate of about $32 per direct labor hour and by keeping track of the number of direct labor hours worked on each job, a reasonable allocation of total overhead costs can be made to specific jobs.

29

30

12-5

Problem 12-5

Problem 12-5

Predetermined Manufacturing Overhead Rates Jones Manufacturing, Inc. provides the following data from its last three years of operations:
20X3 20X4 20X5

Predetermined Manufacturing Overhead Rates Jones Manufacturing, Inc. provides the following data from its last three years of operations:
20X3 20X4 20X5

Manufacturing overhead costs Machine hours Direct material costs Direct labor hours

$305,000 15,000 $600,000 17,000

$450,000 12,000 $800,000 25,000

$640,000 10,000 $750,000 35,000

Manufacturing overhead costs Machine hours Direct material costs Direct labor hours

$305,000 15,000 $600,000 17,000

$450,000 12,000 $800,000 25,000

$640,000 10,000 $750,000 35,000

A. Based on the above information, identify the measurable activity that best correlates with or seems to drive manufacturing overhead costs and, as a result, would best serve as the basis for the company's predetermined manufacturing overhead rate in 20X6. B. Compute the predetermined overhead rate to be used in applying manufacturing overhead to jobs in progress for the upcoming year 20X6 if budgeted manufacturing overhead costs and direct-labor hours are projected at $765,000 and 42,000 hours, respectively.

C. How much manufacturing overhead cost should be applied to Job #111 in 20X6 using the data provided in part B above, if 50 total direct labor hours are incurred on the job? D. Prepare the 20X6 year-end adjusting entry to close out the company's manufacturing overhead account if actual manufacturing overhead costs for the year amounted to $784,000 and actual direct labor totaled 43,200 hours.
Questions: What was the actual manufacturing overhead rate for the year 20X6? Why use a predetermined overhead rate to allocate overhead costs when the actual rate can be determined at the end of the period?

31

32

Problem 12-5 - Answer

Problem 12-5 - Answer

Predetermined Manufacturing Overhead Rates
A. Direct labor hours reflect the most consistent correlating relationship with total manufacturing overhead costs.
20X3 20X4 20X5

D.

Manufacturing Overhead
Actual costs 784,000 786,672 Applied costs (43,200 hrs. x $18.21) 2,672 Adjusting entry 2,672 0

Manufacturing overhead costs Machine hours Direct material costs Direct labor hours Overhead cost/ machine hour Overhead cost/ $ of direct matls. Overhead cost/ direct labor hour B. 20X6:
Predetermined Overhead Rate =

$305,000 15,000 $600,000 17,000 $20.33 $ .51 $17.94

$450,000 12,000 $800,000 25,000 $37.50 $ .56 $18.00

$640,000 10,000 $750,000 35,000 $64.00 $ .85 $18.29

Adjusting entry:
Manufacturing Overhead Cost of Goods Sold 2,672 2,672

Questions: What was the actual manufacturing overhead rate for the year 20X6?
Actual Overhead Rate = $784,000 = $18.15 per direct labor hour 43,200 hrs.

$765,000 = $18.21 per direct labor hour 42,000 hrs.

C. Manufacturing overhead allocated to Job #111: 50 hours x $18.21 = $910.50

Why use a predetermined overhead rate to allocate overhead costs when the actual rate can be determined at the end of the period?
Answer: Management simply can't afford to wait around until the end of the year to determine and account for its product costs. Management information is always better sooner rather than later as long as it's reasonably accurate.

33

34

Custom Boat Manufacturing, Inc. January, 20X4
Raw Materials Inventory
Beg. Balance Purchases End Balance 30,000 110,000 35,000 Ind. Mtls. 4,500 105,000 To Production Beg. Balance Dir. Labor Applied OH End Balance

Custom Boat Manufacturing Cost of Goods Manufactured Schedule For the month of January, 20X4
Direct Materials: Beginning raw materials inventory, 1/1/X4 Add: Raw materials purchased Total raw materials available Less: Ending raw materials inventory, 1/31/X4 Total raw materials put into production Less: Indirect materials put into production Direct materials input to WIP Direct Labor Manufacturing Overhead: Indirect materials Indirect labor Utilities Rent Depreciation Other manufacturing overhead costs Actual manufacturing overhead costs Less: Under-applied overhead Manufacturing overhead applied to WIP Total manufacturing costs added to WIP Beginning WIP inventory, 1/1/X4 Total costs of goods in process Less: Ending WIP inventory, 1/31/X4 Total cost of goods manufactured $ 30,000 110,000 140,000 (35,000) 105,000 (4,500) $ 100,500 50,000 $ 4,500 30,000 10,000 20,000 8,000 10,000 82,500 (2,500) 80,000 230,500 40,000 270,500 (50,000) $220,500

WIP Inventroy
40,000 220,500 Completed 110,000 80,000 50,000 Dir. Materials 100,500

Manufacturing Overhead
Ind. Materials Ind. Labor Utilities Rent Depreciation Other Under Applied 4,500 30,000 10,000 20,000 8,000 10,000 2,500 2,500 Closed 0 Goods Sold Under Applied 80,000 Applied to WIP

Finished Goods Inventory
Beg. Balance Completed End Balance 35,000 220,500 30,000 225,500 Goods Sold

Cost of Goods Sold
225,500 2,500 228,000

35

36

12-6

Problem 12-6

Custom Boat Manufacturing Cost of Goods Sold Schedule For the month of January, 20X4
Cost of goods manufactured Add: Beginning finished goods inventory, 1/1/X4 Goods available for sale Less: Ending finished goods inventory Unadjusted cost of goods sold Add: Under-applied overhead Cost of goods sold $220,500 35,000 255,500 (30,000) 225,500 2,500 $228,000

Schedules for Cost of Goods Manufactured and Cost of Goods
For Johnson Industries, use the information provided below to prepare schedules reflecting the company's September, 20X1 cost of goods manufactured and cost of goods sold. Johnson applies manufacturing overhead to work-in-process jobs on the basis of direct labor hours. The 20X1 budgets for manufacturing overhead costs and direct labor hours were:
Manufacturing overhead …………$2,400,000 Direct labor hours………………… 400,000

September, 20X1 events and transactions:
Raw materials purchased Direct labor costs incurred (40,000 hrs. x $15/hr.) Indirect labor costs incurred Indirect materials put into production Selling, general and administrative expenses Manufacturing overhead costs incurred: Plant depreciation (factory) Equipment depreciation (factory) Utilities (factory) Factory maintenance Factory taxes and insurance Miscellaneous manufacturing overhead $630,000 $600,000 $ 75,000 $ 70,000 $200,000 $ 40,000 $ 16,000 $ 12,000 $ 6,000 $ 7,000 $ 9,000

Inventory balances:
Raw materials Work-in-process Finished goods

9/1/X1

9/30/X1

$44,000 $75,000 $65,000

$34,000 $87,000 $85,000

37

38

Problem 12-6 - Answer

Problem 12-6 - Answer

Schedules for Cost of Goods Manufactured and Cost of Goods
Johnson Industries Cost of Goods Manufactured Schedule For the month of September, 20X1
Direct Materials: Beginning raw materials inventory, 9/1/X1 Add: Raw materials purchased Total raw materials available Less: Ending raw materials inventory, 9/30/X1 Total raw materials put into production Less: Indirect materials put into production Direct materials input to WIP Direct Labor Manufacturing Overhead: Indirect materials Indirect labor Plant depreciation (factory) Equipment depreciation (factory) Utilities (factory) Factory maintenance Factory taxes and insurance Miscellaneous manufacturing overhead Add over-applied overhead* Manufacturing overhead applied to WIP Total manufacturing costs added to WIP Beginning WIP inventory, 1/1/X4 Total costs of goods in process Less: Ending WIP inventory, 1/31/X4 Total cost of goods manufactured $ 44,000 630,000 674,000 (34,000) 640,000 (70,000) $ 570,000 600,000 $ 70,000 75,000 40,000 16,000 12,000 6,000 7,000 9,000 5,000 240,000 1,410,000 75,000 1,485,000 (87,000) $1,398,000

Johnson Industries Cost of Goods Sold Schedule For the month of September, 20X1
$1,398,000 Cost of goods manufactured 65,000 Add: Beginning finished goods inventory, 9/1/X1 1,463,000 Goods available for sale (85,000) Less: Ending finished goods inventory, 9/30/X1 1,378,000 Unadjusted cost of goods sold (5,000) Less: Over-applied overhead $1,373,000 Cost of goods sold

$235,000 * Actual overhead costs Applied overhead costs ($6/hr. x 40,000 hrs.) 240,000 Over-applied $ 5,000

39

40

12-7


				
DOCUMENT INFO
Categories:
Stats:
views:132
posted:6/21/2009
language:English
pages:7