Question
AAA Manufacturing Company's raw material inventory on August 31 was $300,000. In September, direct material purchases were $800,000, and factory direct manufacturing labor was $220,000.
AAA Manufacturing Company's raw material inventory on August 31 was $300,000. In September, direct material purchases were $800,000, and factory direct manufacturing labor was $220,000. Indirect expenses incurred in the same month were indirect materials $60,000, indirect labor $28,000, plant rent $10,000, plant $6,000 for utilities and $15,000 for depreciation of plant equipment. The estimated manufacturing cost allocation rate is 50% of the direct manufacturing labor. The company started production of job numbers 502 and 503 in August and started production of job number 504 in September. All three jobs were completed in September. The following are the direct production costs for these three jobs:
Job No. 502 Job No. 503 Job No. 504
Balance on August 31st: |
| ||
Direct material | $28,000 | $20,000 |
|
direct labor | $19,000 | $22,000 |
|
Direct production cost in September: |
|
|
|
Direct material | $200,000 | $270,000 | $90,000 |
Direct labor | $40,000 | $56,000 | $160,000 |
Require:
1. Try to calculate the total cost of job numbers 502, 503, and 504 using the normal costing method.
2. Record the following transactions and events in September in a journal (no description required )Pieces:
i. Purchasing Direct Materials (Full Credit)
ii. Consumption of indirect materials
iii. Allocate indirect manufacturing labor
iv. Payment of plant rent and plant water and electricity bills in cash
v. Depreciation of factory equipment
3. Ms. Hu, general manager of AAA manufacturing company, do not understand why the company needs to use normal
Cost method, it is believed that using the actual cost method is more accurate in calculating the cost of work. try
Express your opinion, explain to Miss Hu the difference between the two methods, and explain as
Most companies still use the normal costing method to calculate costs.
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