Part-1
Process Costing and Job-Order Costing
Which method of determining product costs, job-order costing or process costing, would be more appropriate in each of the following situations?
- a. An Elmer's glue factory.
- b. A textbook publisher such as McGraw-Hill.
- c. An Exxon oil refinery.
- d. A facility that makes Minute Maid frozen orange juice.
- e. A Scott paper mill.
- f. A custom home builder.
- g. A shop that customizes vans.
- h. A manufacturer of specialty chemicals.
- i. An auto repair shop.
- j. A Firestone tire manufacturing plant.
- k. An advertising agency.
- l. A law office.
Part-2
Cycle Gear Corporation has incurred the following costs on job number W456, an order for 20 special sprockets to be delivered at the end of next month.
Direct materials:
• On April 10, requisition number 15673 was issued for 20 titanium blanks to be used in the special order. The blanks cost $15.00 each. On April 11, requisition number 15678 was issued for 480 hardened nibs also to be used in the special order. The nibs cost $1.25 each.
Direct labor:
• On April 12, Jamie Unser worked from 11:00 am until 2:45 pm on Job W456. He is paid $9.60 per hour. On April 18, Melissa Chan worked from 8:15 am until 11:30 am on Job W456. She is paid $12.20 per hour.
Required:
• 1. On what documents would these costs be recorded?
• 2. How much cost should have been recorded on each of the documents for Job W456?
Part-2
Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor hours. At the beginning of the year it estimated that its total manufacturing overhead would be $134,000 and the total direct labor would be 20,000 hours. Its actual total manufacturing overhead for the year was $123,900 and its actual total direct labor was 21,000 hours.
Required:
Compute the company's predetermined overhead rate for the year.
Part-3
Prepare Journal Entries
Larned Corporation recorded the following transactions for the just completed month.
• a. $80,000 in raw materials were purchased on account.
• b. $71,000 in raw materials were requisitioned for use in production. Of this amount, $62,000 was for direct materials and the remainder was for indirect materials.
• c. Total labor wages of $112,000 were incurred. Of this amount, $101,000 was for direct labor and the remainder was for indirect labor.
• d. Additional manufacturing overhead costs of $175,000 were incurred.
Required:
Record the above transactions in journal entries.