31 Prepare Journal Entries for a Process Costing System

Calculating the expenses associated via the assorted procedures within a procedure costing device is just a component of the accounting process. Journal entries are offered to document and also report the financial information relating to the transactions. The example that complies with illustprices just how the journal entries reflect the procedure costing mechanism by recording the flow of items and expenses through the process costing setting.

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Purchased Materials for Multiple Departments

Each department within Rock City Percussion has a sepaprice occupational in procedure inventory account. Raw products totaling $33,500 were ordered before being requisitioned by each department: $25,000 for the shaping department and also $8,500 for the packaging department. The July 1 journal entry to document the purchases on account is:

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During July, the packaging department requisitioned $2,000 in straight material and also overhead expenses for indirect product totaled $300 for the month of July. The journal enattempt to record the requisition and also intake of materials is:

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During July, the packaging department incurred $13,000 of straight labor costs and indirect labor of $1,000. The journal entry to document the labor prices is:

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Rock City Percussion established that machine hours is the proper base to usage once allocating overhead. The approximated yearly overhead price is $340,000 per year. It was additionally estimated that the total machine hrs will be 34,000 hrs, so the alplace rate is computed as:

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The finishing department supplied 910 machine hours, and also with an overhead application rate of $10 per straight labor hour, the journal entry to record the overhead alarea is:

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Transferred Goods from the Packaging Department to Finimelted Goods

The computation of inventory for the packaging department is displayed in (Figure).


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Recording the Cost of Goods Sold Out of the Finimelted Goods Inventory

Each unit is a package of 2 drumsticks that price $8.40 to make and sells for $24.99. Tright here are 2 transactions when recording a sale. One enattempt is to carry the inventory from finished items inventory to cost of items marketed and also is at the price of the product. The second transactivity is to document the sale at the sales price. The compound entry to record both transactions for the sale of 500 devices on account is:

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The prominence of appropriately recording the manufacturing procedure is shown in this report on occupational in process inventory from InventoryOps.com.

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Key Concepts and Summary

Timeless journal entries show the purchase of product and also the incurring of overhead prices.Each department records the move of material from the storeroom right into production, its straight labor costs, the application of overhead, and also the move of products to the following department or finimelted products.The worth of the inventory transferred to the following department or to finiburned products equals the amount listed as transferred on the manufacturing expense report.