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[INSERT TITLE HERE] 3 [INSERT TITLE HERE] Student Name Allied American University Author Note This paper was prepared for [INSERT COURSE NAME], [INSERT COURSE ASSIGNMENT] taught by [INSERT INSTRUCTOR’S NAME]. ACC 227: Principles of Accounting II Module 5 Homework Assignment Directions : Please use an Excel Spreadsheet to present your homework (note: if you have a Mac, you may use Pages). Accounting homework cannot be accomplished in Microsoft Word. Please use the presentations that have been provided with the course as reference. Also, you may use the Generic Working Papers Excel Workbook found in the Course Resources to complete this assignment.
Please visit the Course Resources section. Please note that you may have additional written homework alongside these application assignments. Please complete the following exercises found at the end Chapter 19: Problem Set A: Problem 19-4A Problem Set B: Problem 19-3B Beyond the Numbers: BTN 19-9 Serial Problem: SP 19, Business Solutions (course-long project) Please complete the following exercises found at the end Chapter 20: Problem Set B: Problem 20-1B Beyond the Numbers: BTN 20-2 Beyond the Numbers: BTN 20-9 COURSE-LONG PROJECT DIRECTIONS : This course contains a course-long project in which you will work on a variety of problems in regards to a computer services company called Business Solutions.
Each module will build upon one another, so it is important to complete each part successfully. Please note that there are 8 total parts to the course-long project. You will have 1 week to complete each part. This course-long project is a serial problem taken from your textbook. You can view the problem starting in Chapter 13.
It will continue through Chapter 25. Please use the Generic Working Papers Excel Workbook found in the Course Resources to complete this project. COURSE-LONG PROJECT: PART V (Modules 5) Scenario : On October 1, 2015, Santana Rey launched a computer services company, Business Solutions, that is organized as a proprietorship and provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2015. Chapter 19: Serial Problem: SP 19, Business Solutions Please complete the following: The computer workstation furniture manufacturing that Santa Rey started in January is progressing well.
As of the end of June, Business Solutions’s job cost sheets show the following costs accumulated on three furniture jobs. Job 602 was started in production in May, and these costs were assigned to it in May: direct materials, $600; direct labor, $180; and overhead, $90. Jobs 603 and 604 were started in June. Overhead cost is applied with a predetermined rate based on direct labor costs. Jobs 602 and 603 are finished in June, and Job 604 is expected to be finished in July.
No raw materials are used indirectly in June. (Assume this company’s predetermined overhead rate did not change over these months.) Required What is the cost of the raw materials used in June for each of the three jobs and in total? How much total direct labor cost is incurred in June? What predetermined overhead rate is used in June? How much cost is transferred to Finished Goods Inventory in June?
Paper For Above instruction
The scenario provided revolves around the financial activities and job costing details of Business Solutions, a proprietorship specializing in computer services, including consulting, system installations, and tailored software development. The primary goal is to analyze and compute various cost components related to furniture manufacturing projects undertaken by Santana Rey, which serve as an exemplar of how manufacturing costs are tracked and allocated in a job-order costing system, particularly within a service-oriented company branching into manufacturing activities.
Introduction
Understanding job costing and overhead application is fundamental to managerial accounting, especially for small businesses that venture into manufacturing alongside their core services. This paper aims to demonstrate the calculation of raw materials used, direct labor costs, overhead rates, and cost transfers to finished goods, based on the detailed costs accumulated during June for three dedicated furniture jobs. These computations are crucial for accurate product costing, inventory valuation, and financial reporting within the company’s accounting framework.
Raw Materials Used in June
The direct materials used for each job are typically recorded at the time of incurrence, and their allocation is based on the specific job sheets and material issuance records. For Jobs 602, 603, and 604, the direct materials allocated are available: $600 assigned to Job 602 in May, with no additional materials used in June for jobs 603 and 604. Since the problem specifies that no raw materials are used indirectly in June, it indicates that all raw materials used are direct and directly traceable to the jobs, simplifying the calculation process.
Thus, for Job 602, the direct materials used in June would be considered as $600 (for May, carried forward as job costs). For Jobs 603 and 604, since they were started in June and no specific material costs are provided for them in the problem, it is reasonable to infer that the actual material costs assigned in June are minimal or zero unless otherwise specified. The total raw materials used across all three jobs in June would then primarily consist of the direct materials assigned to Job 602, amounting to $600.
Calculating Total Direct Labor Cost in June
Direct labor costs for each job are recorded as the wages paid for hours worked on the respective projects. From the data, Jobs 602 and 603 are completed in June, with wages corresponding to $180 for Job 602. Since direct labor wages are specific and time-based, the total direct labor cost for June involves summing the wages incurred for all jobs being worked on during that month, primarily Jobs 602 and 603. If only these two are active and finished, then the total direct labor cost in June will be the sum of the wages recorded for these jobs, which amounts to $180 (Job 602) + wages for Job 603 (not explicitly specified but assumed to be part of June’s labor costs). The problem indicates the wages for Job 602, but not explicitly for Job 603; thus, an estimate or the given data should be used for comprehensive calculation.
In typical job costing, direct labor cost for each job is accumulated from hours directly attributable to the job multiplied by the wage rate. Since the 'direct labor' cost for Job 602 is $180 in May and the wages for June are not clearly delineated per job, an assumption can be made that the wages incurred in June for Jobs 602 and 603 (both completed) sum to the known amounts, likely equal or close to the previously recorded $180 for Job 602 and an equivalent or minimal amount for Job 603. For the sake of calculation, if only the specified wages are considered, the total direct labor costs incurred in June approximate to $180, representing the labor for Job 602, plus additional wages for Job 603 inferred from project progression. Precise values depend on detailed wage records, but the general method remains consistent across costing practices.
Overhead Application and Predetermined Overhead Rate
The overhead costs are applied using a predetermined rate based on direct labor costs. From the data, Jobs 602 and 603 have overhead costs of $90 each, assigned in June, with Job 602 being started in May and finished in June, and Job 603 also completed in June. Using these overhead costs, the predetermined overhead rate can be calculated as a ratio of overhead to direct labor costs, since the rate is based on direct labor costs.
The overhead applied to Job 602 was $90, with a corresponding direct labor cost of $180, leading to an overhead rate of:
Overhead Rate = (Overhead / Direct Labor Cost) = $90 / $180 = 0.5 or 50%
This rate indicates that for every dollar of direct labor, 50 cents of overhead are applied.
Cost Transfer to Finished Goods Inventory
The transfer of costs to finished goods inventory occurs when jobs are completed. Since Jobs 602 and 603 are finished in June, their total costs, including direct materials, direct labor, and applied overhead, are transferred to Finished Goods inventory. The total transferred cost comprises the sum of all accumulated costs for these jobs up to their completion.
Assuming the costs are accumulated as follows:
- Job 602: Direct materials = $600, direct labor = $180, overhead = $90, total = $600 + $180 + $90 = $870
- Job 603: Direct materials (assumed minimal or not explicitly provided), direct labor, and overhead similar in calculation; if not specified, the known overhead and labor costs are used as a basis for transfer.
The total cost transferred to Finished Goods for June is the sum of the costs of completed jobs. If only the specified data are used, the transfer for Job 602 is $870, and for Job 603, assuming similar proportional costs, an estimated total can be made based on the overhead and labor costs provided.
This process ensures proper matching of costs with revenues in financial reporting, adhering to accrual accounting principles, and accurately reflects inventory valuation.
Conclusion
In summation, the calculations demonstrate the fundamental principles of job costing and overhead application. By determining the raw material costs, labor expenses, and overhead rates, managers can accurately price products, control costs, and evaluate manufacturing efficiency. The process also highlights the importance of precise record-keeping and the utility of predetermined overhead rates in simplifying the allocation process, which are crucial in manufacturing environments intertwined with service operations like Business Solutions.
References
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