Process Costing and Spoilage

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Week 15 Distance Student File

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Problem 7 – Job Order Costing Jessica Company started operations on January 2, 20x6. The company manufactures custom products and uses a job order system. Overhead is allocated to jobs based on direct labour costs. The budgeted manufacturing overhead for 20x6 was $396,900 and the direct labour costs were budgeted at $567,000. At the end of 20x6, there were two jobs in work in process: Direct material cost Direct labour cost Job A605 $20,000 12,000 Job A608 $36,000 38,000

Actual manufacturing overhead for the year amounted to $350,000 and total direct labour charges for the year amounted to $550,000. The year-end finished good inventory balance was $175,000 and included direct labour costs of $48,000. Cost of goods sold for the year amounted to $1,750,000. Required 1. 2. 3. Prepare a schedule showing the detailed cost of the ending work-in-process, and finished goods inventory. Compute the over/under –applied overhead for the year. Allocate the balance in the manufacturing overhead account using each of the 4 approaches discussed in class.

CMA Accelerated Program 2011

© CMA Ontario, 2011

Week 15 Distance Student File

2 of 35

Problem 6 – Process Costing Deterra, Inc., uses three departments to produce a detergent. The Finishing Department is the third and last step before the product is transferred to storage. All materials needed to give the detergent its final composition are added at the beginning of the process in the Finishing Department. The company uses FIFO costing. The following data for the Finishing Department for October have been made available: Production data: In process, October 1 (labor and factory overhead, 75% complete) Transferred in from preceding department Finished and transferred to storage In process, October 31 (labor and factory overhead, 50% complete) Additional data:…...

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