B 1750 1750 20 5 give the journal entrys to close the

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Unformatted text preview: d and post the entry(s) to the accounts. Debit Credit To close the overhead applied account Dr. Overhead Applied Cr. Overhead Control Overhead Control 1050 1050 Overhead Applied 1050 1,200 1050 150 1050 0 21 6) Give the journal entry to close the overhead control account Debit Credit To close the overhead control account 150 COGS Overhead Control 150 7) What is the cost of goods sold? *Always remember to look back and find the 2 components: Dr. Cr. 1,225 1 - shipped to customers 2 - adjustment from OH variance 150 1,375 22 We’re done!!! 23 How would the variance(s) be accounted for if the company was using an actual costing system? 24 Take-aways 1. Conceptually the job costing system used by service firms and by manufacturing firms is the same. 2. In the simplest case, a job coster’s accounting records will include a subsidiary work-in-process inventory account for each job (cost object) and that account will be used to record the direct costs traced to the job and the indirect (manufacturing overhead) costs allocated to the job. 3. A firm may use any one of three methods to assign product costs to the job – actual costing, normal costing, or standard costing. (We will defer a discussion of standard costing until later in the semester.) 4. Typically, when normal costing is used, the (normal) manufacturing overhead costs allocated to the product will be different from the actual manufacturing overhead costs incurred. That difference is referred to as a variance. 5. Because of 4, above, if the firm uses normal costing then its accounting records will contain two additional accounts: overhead control and overhead applied. Both of these accounts are temporary (nominal). The overhead control account is used to record the actual manufacturing overhead costs; the overhead applied account is used to record the manufacturing overhead costs applied to the job. 6. At the end of the (accounting) period, both the overhead control and the overhead applied accounts are to be closed and (for our purposes) the variance will be recorded as an adjustment to Cost of Goods Sold. (A firm using actual costing also may use an overhead control and an overhead applied account. But, in that case, when the accounts are closed, there will never be a variance.) 25...
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This document was uploaded on 01/24/2014.

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