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Chapter 17: Q17-9RQ (page 937)

Question: How does the use of direct and indirect materials in production affect the accounts?

Short Answer

Expert verified

Answer:

The cost of direct materials is deducted from the Raw Materials Inventory (credit) and is assigned to Work-in-Process Inventory (debit). The cost of indirect materials is deducted from the Raw Materials Inventory account (credit) and is accumulated in the Manufacturing Overhead account (debit)

Step by step solution

01

Material cost

Material cost means the cost incurred by an organization on the material used to manufacture the product or provide a service. It is classified as the direct cost incurred by the company.

02

Books of accounts

The books of accounts are maintained by the company to show the transactions of the company. It is referred by the accountant while preparing the financial statements of the company.

While preparing the books of accounts of the company the direct material cost of the production is treated as the work in process inventory and the indirect cost of material is treated as the manufacturing overheads.

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Most popular questions from this chapter

Question: Wesson Company is a consulting firm. The firm expects to have \(45,000 in indirect costs during the year and bill customers for 6,000 hours. The cost of direct labor is \)75 per hour.

16. Calculate the predetermined overhead allocation rate for Wesson using estimated billable hours for the allocation base.

17. Wesson completed a consulting job for George Peterson and billed the customer for 15 hours. What was the total cost of the consulting job?

18. If Wesson wants to earn a profit equal to 60% of the cost of a job, how much should the company charge Mr. Peterson?

Question: Why does the sale of a completed job require two journal entries? What are they?

Selected cost data for Classic Print Co. are as follows:

Estimated manufacturing overhead cost for the year

$125,000

Estimated direct labor cost for the year

78,125

Actual manufacturing overhead cost for the year

116,000

Actual direct labor cost for the year

67,000

Requirements

4. Prepare the journal entry to adjust for the under allocated or overallocated manufacturing overhead.

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

The manufacturing records for Sporty Kayaks at the end of the 2018 fiscal year show the following information about manufacturing overhead:

Overhead allocated to production

\(409,200

Actual manufacturing overhead cost

432,000

Predetermined overhead allocation rate

\)44 per machine hours

Requirements

1. How many machine hours did Sporty Kayaks use in 2018?
See all solutions

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