Information for Merit Manufacturing Ltd. at May 1, 2012, is given below: Inventories: Raw materials (all direct)
Question:
Information for Merit Manufacturing Ltd. at May 1, 2012, is given below:
Inventories:
Raw materials (all direct) ......................$3,500
Work in process ..................................2,040
Finished goods ....................................2,890
Transactions in May 2012:
1. Purchased $22,400 of direct materials on account.
2. Transferred $18,800 of direct materials into production.
3. Production wages totalled $6,500, of which direct labour accounted for $5,000.
4. The salary in May for the production supervisor was $3,000.
5. The total utility cost was $520, of which $410 was variable and $110 was fixed.
6. Transferred $1,300 of indirect material from factory supplies into production.
7. Depreciation on factory assets for May was $22,500.
8. Amortization of prepaid insurance on factory assets was $1,600.
Other information:
(i) The company transfers actual overhead costs during each month to the work in process inventory account. It uses separate accounts to record the incurrence of fixed and variable overhead.
(ii) During May, goods with a value of $52,450 were completed and transferred to finished goods.
(iii) During May, finished goods with a value of $51,315 were sold on account for $74,670.
Instructions
(a) Using T accounts, show the flow of costs into and out of the Factory Overhead, Inventory, and Cost of Goods Sold accounts for the month of May. Also calculate the value of each of the materials, work in process, and finished goods inventories at the end of May 2012. Be sure to use separate accounts as necessary.
(b) Name an industry or product for which job-order costing would be appropriate and one for which process costing would be appropriate. Identify four differences between the production processes for job-order and process costing.
Step by Step Answer:
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly