Question: What types of companies use process costing systems?
Soft drink companies, surfboard manufacturers, and medical equipment manufacturers use the process costinh system for computing the cost of production.
Cost of goods sold is computed by the company to know about the profit earned by the company on the goods produced and sold during the reporting period. It is shown in the income statement as a deduction from the gross revenue generated by the company.
Companies that produce similar products through a series of production steps or processes use the process costing system. Soft drink companies, medical equipment manufacturers, etc., use this process costing system.
Question: Match the following terms to their definitions.
a. A record used to assign direct labor cost to specific jobs. 1. Job
b. A document that requests the transfer of materials to 2. Job cost order
the production floor.
c. A document that shows the direct materials, direct labor, 3. Job order costing
and manufacturing overhead costs for an individual job.
d. An accounting system that accumulates costs by process. 4. Labor time record
e. The production of a unique product or specialized service 5. Material requisition
f. Used by companies that manufacture unique products or 6. Process costing system
provide specialized services
June production generated the following activity in Bentley Chassis Company’s Work-in-Process Inventory account:
June 1 balance
Direct materials used
Direct labor assigned to jobs
Manufacturing overhead allocated to jobs
Additionally, Bentley Chassis has completed Jobs 142 and 143, with total costs of
$37,000 and $48,000, respectively.
3. Prepare the journal entry to record the sale on account of Job 143 for $63,000.
Also, prepare the journal entry to record Cost of Goods Sold for Job 143.
Young Foundry uses a predetermined overhead allocation rate to allocate overhead to individual jobs, based on the machine hours required. At the beginning of 2018, the company expected to incur the following:
Manufacturing overhead costs
Direct labor cost
At the end of 2018, the company had actually incurred:
Direct labor cost
Depreciation on manufacturing plant and equipment
Property taxes on plant
Delivery driver’s wages
Plant janitor’s wages
1. Compute Young’s predetermined overhead allocation rate.
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