Scribd Logo
Upload

Welcome to Scribd!

  • 51 views

    Procedures For Materials, Labor, and Factory Overhead Costs

    Uploaded by

    George Paracka
    The document provides details on procedures for tracking materials, labor, and factory overhead costs in a process costing system. Materials costs are charged to departments rather than individual jobs. Labor costs are also identified and charged by department. Factory overhead is accumulated in a factory overhead control account and then charged to work in process accounts for each department using actual or predetermined overhead rates. Journal entries are provided as examples to charge costs to departments.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd

    Procedures For Materials, Labor, and Factory Overhead Costs

    Uploaded by

    George Paracka
    51 views4 pages
    The document provides details on procedures for tracking materials, labor, and factory overhead costs in a process costing system. Materials costs are charged to departments rather than individual jobs. Labor costs are also identified and charged by department. Factory overhead is accumulated in a factory overhead control account and then charged to work in process accounts for each department using actual or predetermined overhead rates. Journal entries are provided as examples to charge costs to departments.

    Original Title

    Project Management

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document provides details on procedures for tracking materials, labor, and factory overhead costs in a process costing system. Materials costs are charged to departments rather than individual jobs. Labor costs are also identified and charged by department. Factory overhead is accumulated in a factory overhead control account and then charged to work in process accounts for each department using actual or predetermined overhead rates. Journal entries are provided as examples to charge costs to departments.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    51 views4 pages

    Procedures For Materials, Labor, and Factory Overhead Costs

    Uploaded by

    George Paracka
    The document provides details on procedures for tracking materials, labor, and factory overhead costs in a process costing system. Materials costs are charged to departments rather than individual jobs. Labor costs are also identified and charged by department. Factory overhead is accumulated in a factory overhead control account and then charged to work in process accounts for each department using actual or predetermined overhead rates. Journal entries are provided as examples to charge costs to departments.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Project Management-Crash the Project

    I have been given a Decision Tree where A is 4 days B is 5 days, C is 2 days, D is 2 days, E is 3 days,
    F is two days and G is 7 days. I have been told that the benefits are $100.00 per day to crash the
    project. 

    I have also been given a chart which says that: 

    A has a crash duration of 2 days and a slope of 110 


    B has a crash duration of 2 days and a slope of 40 
    C has a crash duration of 1 day and a slope of 10 
    D has a crash duration of 1 day and  a slope of 50 
    E has a crash duration of 3 days and no slope? 
    F has a crash duration of 1 day and a slope of 40 
    G has a crash duration of 6 days and a slope of 20 

    The instructions are to crash the project as far as practical. Can someone show me how this type of
    problem  is done?

    Procedures for Materials, Labor, and Factory


    Overhead Costs:
    In process costing, materials, labor, and factory overhead costs are accumulated in the
    usual accounts, using normal cost accounting procedures. Costs are then analyzed by
    departments or processes and charged to departments by appropriatejournal entries. The
    details involved in process costing are usually fewer than those in the job order costing,
    where accumulation of costs for many orders can become unwieldy.

    Materials Costs:

    In job order costing system, materials requisitions are used to charge jobs for direct
    materials used. If requisitions are used in process costing, details are considerably reduced
    because materials are charged to departments rather than to jobs, and the number of
    departments using materials is usually less than the number of jobs a firm might handle at
    a given time. Frequently materials are issued only to the process-originating department;
    subsequent department other than the first, they are charged to that department
    performing the specific operation.

    For materials control purposes, materials need not always be priced individually on
    requisition forms. The cost of materials used can be determined at the end of the production
    period through inventory difference procedures, i.e., adding purchases to beginning
    inventory and then deducting ending inventory. Or consumption reports which which state
    the cost of materials or quantity of materials put into process by various departments can
    be used. Costs or quantities charged to departments by consumption reports may be based
    on formulas or proration. Formulas specify the type and quantity of materials required in the
    various products and are applied to finished production in order to calculate the materials
    consumed. Chemical and pharmaceutical industries use such procedures, particularly when
    more than one product is manufactured by a department. Frequently the cost of materials
    used by a department must by prorated to different products on various estimated bases.
    This portion is described in chapterBy-Products and Joint Products Costing.

    For any of the materials cost computation methods discussed, a typical journal entry
    charging direct manufacturing materials used during a period is:

    Work in Process - Blending department 24,500   Dr.

      Materials   24,500   Cr.

    The source of the cost figures for the above entry as well as the entries for labor and factory
    overhead is the cost of production report which is discussed on cost of production report
    page.

    Direct Labor:

    Labor costs are identified by and charged to departments in process costing, thus
    eliminating the detailed clerical work of accumulating labor costs by jobs. Daily time tickets
    or weekly time clock cards are used instead of job time tickets. Summary labor charges are
    made to departments through an entry which distributes the direct manufacturing payroll:

    Work in Process - Blending department 29,140       Dr.  

    Work in Process - Testing Departments 37,310       Dr.  

    Work in Process - Terminal Department 32,400       Dr.  

      Payroll   98,850     Cr.

    Factory Overhead Costs:

    Factory overhead incurred in process costing as well as in job order costing should be
    accumulated in the factory overhead subsidiary ledger for producing and service
    departments. This procedure is consistent with requirements for responsibility accounting
    and responsibility reporting.

    Normally it is emphasized to use the predetermined overhead rates for charging overhead


    to jobs and products. However, in various process and job order costing procedures, actual
    rather than applied overhead is sometimes used for product costing. This practice is feasible
    when production remains comparatively stable from period to period, since factory overhead
    will then remain about the same from one month to the next. The use of actual overhead
    can also be justified when factory overhead is not and important part of total cost. However,
    predetermined overhead rates for producing departments should be used if:

    1. Production is not stable.


    2. Factory overhead, especially fixed overhead, is a significant cost.
    Fluctuations in production can lead to the unequal incurrence of actual factory overhead
    from month to month. In such cases, factory overhead should be applied to production
    using predetermined rates, so that units produced receive proper charges for factory
    overhead. Similarly, if factory overhead - especially fixed factory overhead - is significant, it
    is desirable to allocate factory overhead on the basis of normal or uniform production using
    predetermined overhead rates. Indeed, the use of predetermined rates is highly
    recommended for improving cost control and facilitating cost analysis.

    Prior to charging factory overhead to departments via their respective work in process
    accounts, expenses must be accumulated in a factory overhead control account. As
    expenses are incurred the entry is:
     

    Factory overhead control xxxxx       Dr.  

      Accounts Payable   xxxxx      Cr.

      Accumulated Depreciation - Machinery   xxxxx      Cr.

      Prepaid Insurance   xxxxx      Cr.

      Materials   xxxxx      Cr.

      Payroll   xxxxx      Cr.

    The use of factory overhead control account requires a subsidiary ledger for factory
    overhead, with departmental expense analysis sheet to which all expenses are posted.
    Service department expenses are kept in like manner and distributed later to producing
    departments. At the end of each period, departmental expense analysis sheets are totaled.
    These totals, which also include distributed service department costs, represent factory
    overhead for each department. By debiting the actual cost incurred or by using the
    predetermined overhead rates multiplied by the respective actual activity base (e.g., direct
    labor hours) for each producing department, the entry charging these expenses to work in
    process is as follows:
     

    Work in Process - Blending department 28,200      Dr.  

    Work in Process - Testing Departments 32,800      Dr.  

    Work in Process - Terminal Department 19,800      Dr.  

      Factory Overhead Control   80,800    Cr.

    You may also be interested in other relevant articles:

    1. Characteristics  and Procedures of Process Costing System


    2. Costing By Departments
    3. Product Flow
    4. Procedure for Materials, Labor and Factory Overhead Costs in a Process
    Costing System
    5. Cost of Production Report (CPR)
    6. General Questions and Answers About Process Costing System
    7. Exercises and Problems
    8. Process Costing System - Case Study

    You might also like