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Following is a list of cost system characteristics and sample companies. Match each to either job order costing or process costing.

h. A company that bottles milk into one-gallon containers.

Short Answer

Expert verified

Answer:

Process costing system is used by the companies that bottles milk into large number of containers.

Step by step solution

01

Step-by-Step Solution:

Step 1: Process costing system

Process costing system is applicable to the companies which manufacture the product in large quantity and the production process of which involves a series of procedures.

02

Classification of costing system according to the characteristics

The company that bottles the milk into one gallon containers uses the process costing system to value the costing of the process performed by the company. It is so because the company is engaged in the production of similar product in large quantity.

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Most popular questions from this chapter

Question: Journalize the following transactions for Margeโ€™s Sofas. Explanations are not required.

h. Sold inventory on account, \(22,000; cost of goods sold, \)18,000.

Question: Analyze the following T-accounts, and describe each lettered transaction. Note that some transactions may be compound entries.

Raw material inventory

(a)

(b)

Work in process inventory

(b)

(f)

(c )

(e )

Finished goods inventory

(f)

(g)

Prepaid insurance

(d)

Account payable

(a)

Wages payable

(c)

Manufacturing overhead

(b)

(e)

(c )

(h)

(d)

Cost of goods sold

(g)

(h)

Goldenrod Company makes artificial flowers and reports the following data for the month:

Purchases of materials, on account

$51,000

Materials requisition:

Direct material

42,300

Indirect materials

500

Labor incurred (not yet paid):

Direct labor

20,300

Indirect labor

1,340

Journalize the entries relating to materials and labor.

Distinguishing between job order costing and process costing

Would the following companies most likely use job order costing or process costing?

f. A custom home builder

Superior Construction, Inc. is a home builder in Arizona. Superior uses a job order costing system in which each house is a job. Because it constructs houses, the company uses an account titled Construction Overhead. The company applies overhead based on estimated direct labor costs. For the year, it estimated construction overhead of \(1,150,000 and total direct labor costs of \)5,750,000. The following events occurred during August:

a. Purchased materials on account, \(400,000.

b. Requisitioned direct materials and used direct labor in construction. Recorded the materials requisitioned.

Direct material

Direct Labor

House 402

\)58,000

\(44,000

House 403

62,000

32,000

House 404

61,000

58,000

House 405

86,000

57,000

c. The company incurred total wages of \)300,000. Use the data from Item b to assign the wages. Wages are not yet paid.

d. Depreciation of construction equipment, \(6,700.

e. Other overhead costs incurred: Equipment rentals paid in cash, \)30,000; Worker liability insurance expired, \(7,000.

f. Allocated overhead to jobs.

g. Houses completed: 402, 404.

h. House sold on account: 404 for \)250,000.

Requirements

1. Calculate Superiorโ€™s predetermined overhead allocation rate for the year.

2. Prepare journal entries to record the events in the general journal.

3. Open T-accounts for Work-in-Process Inventory and Finished Goods Inventory.

Post the appropriate entries to these accounts, identifying each entry by letter.

Determine the ending account balances, assuming that the beginning balances

were zero.

4. Add the costs of the unfinished houses, and show that this total amount equals the ending balance in the Work-in-Process Inventory account.

5. Add the costs of the completed house that has not yet been sold, and show that this equals the ending balance in Finished Goods Inventory.

6. Compute gross profit on the house that was sold. What costs must gross profit

cover for Superior Construction?

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