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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 150 1050 0
21 6) Give the journal entry to close the overhead control account
Debit Credit To close the overhead control account
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.)
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This document was uploaded on 01/24/2014.
- Winter '14
- Cost Accounting