Goods in Transit

Goods in Transit: Definition Goods in transit are purchased goods that have not yet been received by the purchaser. These goods are easily overlooked when counting the ending inventory because they are not physically located at either the seller’s or the purchaser’s warehouse. Accounting Treatment of Goods in Transit When accounting for goods in transit, … Read more

Periodic Inventory System

What Is a Periodic Inventory System? A periodic inventory system does not keep continuous track of ending inventories and the cost of goods sold. Instead, these items are determined at the end of each quarter, year, or accounting period.  Although this method offers ease of use for record-keeping, it hinders the managerial decision-making process. However, … Read more

Factory Overhead: Practical Problems and Solutions

Factory Overhead Application Methods Problem 1 IQIZ estimated its factory overhead for the next period at $160,000. It is estimated that 40,000 units will be produced at a materials cost of $200,000. Production will require 40,000 man-hours at an estimated wage cost of $80,000. The machines will run for approximately 25,000 hours. Required: Calculate the … Read more

Important Techniques of Labour Costing

In this article, we are trying to explain some important techniques and formulas to calculate labour cost, payroll and incentive wages. 1. Measurement of Labour Turnover (a). Separation Method Labour Turnover = (No. of separations in a period / Average No. of Workers) x 100 LT = (NS / ANW) x 100 (b). Replacement Method … Read more

Labor Costing: Practical Questions With Answers

Question 1 Consider the following information concerning the monthly remuneration of three workers: Standard production per month per worker 1,000 units Actual production during the month: A, 850 units; B, 750 units; and C, 950 units. Piece work rate is $0.10 per unit (actual production) Additional production bonus is $10 for each percentage of actual … Read more

Job Order Costing: Examples, Practical Problems, and Solutions

Problem 1: Job Order Costing Cycle Excellent Ltd. had the following inventories on 1 April 2019: $ Raw Materials 50,000 Finished Goods 28,000 WIP – Materials 2,000 WIP – Labor 30,000 WIP – FOH 12,000 During the month, the cost of materials purchased was $120,000. Also, the direct labor cost was $160,000 and factory overhead … Read more

Predetermined Overhead Rate

What Is Predetermined Overhead Rate? – Definition: A predetermined overhead rate is an allocation rate that is given for indirect manufacturing costs that are involved in the production of a product or various products. It is used to estimate the manufacturing costs that will take place. The estimation takes place at the beginning of an … Read more

Cost of Production Report (CPR) Questions and Answers

Question No. 1 The MST Manufacturing Company produces one product that passes through just one process in a manufacturing cycle lasting approximately 18 days. Therefore, there will generally be some work in process inventories at the end of each month. After MST started its manufacturing operations on 1st January, the costs of production for the rest of … Read more

Incentive Plans

What Are Incentive Plans? – Definition Incentive Plans are the techniques in which an organization keeps its employees motivated to perform their specific tasks with more effort and efficiency and pay several incentives to complete those tasks. Advantages of Incentives Generally, the following advantages result from the introduction of incentive plans in a factory: Rate … Read more