31 Prepare Journal Entries for a Process Costing System

Calculating the prices connected through the various procedures within a process costing mechanism is only a part of the accountancy process. Journal entries are supplied to record and also report the financial indevelopment relating to the transactions. The instance that follows illustrates just how the journal entries reflect the procedure costing device by recording the circulation of goods and also expenses with the procedure costing setting.

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Purchased Materials for Multiple Departments

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


Throughout July, the packaging department requisitioned $2,000 in straight product and overhead expenses for instraight product totaled $300 for the month of July. The journal enattempt to record the requisition and also consumption of products is:


During July, the packaging department incurred $13,000 of direct labor prices and indirect labor of $1,000. The journal enattempt to record the labor prices is:


Rock City Percussion figured out that machine hours is the correct base to usage when allocating overhead. The estimated annual overhead expense is $340,000 per year. It was additionally estimated that the total machine hrs will be 34,000 hrs, so the allocation rate is computed as:


The finishing department provided 910 machine hrs, and through an overhead application rate of $10 per straight labor hour, the journal entry to record the overhead alarea is:


Transferred Goods from the Packaging Department to Finished Goods

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


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

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


The prestige of appropriately recording the manufacturing procedure is illustrated in this report on work-related in process inventory from InventoryOps.com.

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Key Concepts and Summary

Traditional journal entries present the purchase of material and also the incurring of overhead costs.Each department records the transfer of material from the storeroom into production, its straight labor costs, the application of overhead, and also the transfer of goods to the next department or finiburned items.The value of the inventory moved to the following department or to finimelted items equates to the amount listed as transferred on the manufacturing expense report.