Basic Accounting

A job order costing system is used in situations when the products or services are made to fill clients or customers explicit orders. In job order costing system, every client is treated differently and delivered products and services to explicitly meet their needs.

Working in progress account.

Cost of beginning in work in progress $1,591,000

cost of raw material

inventory $579000

inventory purchase$622000

total cost of raw material $1201000

cost of labour $ 591,100

cost of factory overhead $ 49,900

total balance of cost working in progress = $ 2001100

Cost of finished goods

Begin of finished goods. $ 679,000

Purchases @13,800

Available $ 692800

Direct labour $ 43,200

Manufacturing cost $ 4,000

Total manufacturing cost $ 47200

Cost of chairs $740,000

Actual manufacturing overhead incurred in June amounted to 217,000. Calculate the over or underapplied overhead for the year.

Actual budget = $4,500,000

Overheads per month=$ 4,500,00012=$ 375,000Expected overheads per month=$ 375,000-$ 217,000=$ 158,000The over applied overhead=$ 158,000Manufacturing overhead

Debit

$ 3750000 Credit

$ 217000

$ 158000

If the amount of the over-applied or under-applied overhead is not material or the outcome of an error in the overhead application rate, the amount is changed to CGS. If the amount is significant, the amount ought to be prorated over the relevant account, for instance, WIP, FG, and CGS.

Manufacturing overheadmaterial

Debit

375000 Credit

217000

158000 Debit

Credit

40,000 622,000.

375000 375000 b/d 622000

They should credit the overapplied overhead to the material account thus removing the overhead.

Turramurra Furniture Company can adopt Activity Based Costing system since the technique brings precision and reliability in the determination of products costs as the system focuses on cause and effect association in the incurrence. Activity Based Costing technique gives a more realistic products costs. Furthermore, Activity Based Costing utilizes various cost drivers, many of which are established on the transactions as opposed to product volume.

References

Durden, C. H., & Mak, Y. T. (1999). Reporting of overhead variances: a cost management perspective. Journal of Accounting Education, 17(2), 321-331.

Eilon, S. (1961). FIFO and LIFO policies in inventory management. Management Science, 7(3), 304-315.

Gray, J. C., & Ricketts, D. (1982). Cost and managerial accounting. McGraw-Hill Companies.

Gordon, L. A. (2000). Managerial Accounting: Concepts and empirical evidence. McGraw-Hill Primis Custom Pub.

Gul, F. A. (2001). Free cash flow, debt-monitoring and managers' LIFO/FIFO policy choice. Journal of Corporate Finance, 7(4), 475-492.

Hussey, R. (1989). Introduction. In Cost and Management Accounting (pp. 1-9). Palgrave, London.

Hilton, R. W. (1991). Managerial accounting. New York: McGraw-Hill.

Lukka, K., & Granlund, M. (1996). Cost accounting in Finland: current practice and trends of development. European Accounting Review, 5(1), 1-28.

Maher, M. W., & Deakin, E. B. (1994). Cost accounting. Boston: Irwin.

Salem, M. S. E., & Mazhar, S. The Benefits of the Application of Activity Based Cost System-Field Study on Manufacturing Companies Operating in Allahabad CityIndia.