Procedures For Materials, Labor, and Factory Overhead Costs

Project Management-Crash the Project
I have been given a Decision Tree where A is 4 days B is 5 days, C is 2 days, D is 2 days, E is 3 days,
F is two days and G is 7 days. I have been told that the benefits are $100.00 per day to crash the
project.
I have also been given a chart which says that:
A has a crash duration of 2 days and a slope of 110

B has a crash duration of 2 days and a slope of 40
C has a crash duration of 1 day and a slope of 10
D has a crash duration of 1 day and a slope of 50
E has a crash duration of 3 days and no slope?
F has a crash duration of 1 day and a slope of 40
G has a crash duration of 6 days and a slope of 20
The instructions are to crash the project as far as practical. Can someone show me how this type of
problem is done?
Procedures for Materials, Labor, and Factory

Overhead Costs:
In process costing, materials, labor, and factory overhead costs are accumulated in the
usual accounts, using normal cost accounting procedures. Costs are then analyzed by
departments or processes and charged to departments by appropriatejournal entries. The
details involved in process costing are usually fewer than those in the job order costing,
where accumulation of costs for many orders can become unwieldy.
Materials Costs:
In job order costing system, materials requisitions are used to charge jobs for direct
materials used. If requisitions are used in process costing, details are considerably reduced
because materials are charged to departments rather than to jobs, and the number of
departments using materials is usually less than the number of jobs a firm might handle at
a given time. Frequently materials are issued only to the process-originating department;
subsequent department other than the first, they are charged to that department
performing the specific operation.
For materials control purposes, materials need not always be priced individually on
requisition forms. The cost of materials used can be determined at the end of the production
period through inventory difference procedures, i.e., adding purchases to beginning
inventory and then deducting ending inventory. Or consumption reports which which state
the cost of materials or quantity of materials put into process by various departments can
be used. Costs or quantities charged to departments by consumption reports may be based
on formulas or proration. Formulas specify the type and quantity of materials required in the
various products and are applied to finished production in order to calculate the materials
consumed. Chemical and pharmaceutical industries use such procedures, particularly when
more than one product is manufactured by a department. Frequently the cost of materials
used by a department must by prorated to different products on various estimated bases.
This portion is described in chapterBy-Products and Joint Products Costing.
For any of the materials cost computation methods discussed, a typical journal entry
charging direct manufacturing materials used during a period is:
Work in Process - Blending department 24,500 Dr.
Materials 24,500 Cr.
The source of the cost figures for the above entry as well as the entries for labor and factory
overhead is the cost of production report which is discussed on cost of production report
page.
Direct Labor:
Labor costs are identified by and charged to departments in process costing, thus
eliminating the detailed clerical work of accumulating labor costs by jobs. Daily time tickets
or weekly time clock cards are used instead of job time tickets. Summary labor charges are
made to departments through an entry which distributes the direct manufacturing payroll:
Work in Process - Testing Departments 37,310 Dr.
Work in Process - Terminal Department 32,400 Dr.
Payroll 98,850 Cr.
Factory Overhead Costs:
Factory overhead incurred in process costing as well as in job order costing should be
accumulated in the factory overhead subsidiary ledger for producing and service
departments. This procedure is consistent with requirements for responsibility accounting
and responsibility reporting.
Normally it is emphasized to use the predetermined overhead rates for charging overhead

to jobs and products. However, in various process and job order costing procedures, actual
rather than applied overhead is sometimes used for product costing. This practice is feasible
when production remains comparatively stable from period to period, since factory overhead
will then remain about the same from one month to the next. The use of actual overhead
can also be justified when factory overhead is not and important part of total cost. However,
predetermined overhead rates for producing departments should be used if:
1. Production is not stable.

2. Factory overhead, especially fixed overhead, is a significant cost.
Fluctuations in production can lead to the unequal incurrence of actual factory overhead
from month to month. In such cases, factory overhead should be applied to production
using predetermined rates, so that units produced receive proper charges for factory
overhead. Similarly, if factory overhead - especially fixed factory overhead - is significant, it
is desirable to allocate factory overhead on the basis of normal or uniform production using
predetermined overhead rates. Indeed, the use of predetermined rates is highly
recommended for improving cost control and facilitating cost analysis.
Prior to charging factory overhead to departments via their respective work in process
accounts, expenses must be accumulated in a factory overhead control account. As
expenses are incurred the entry is:

Factory overhead control xxxxx Dr.
Accounts Payable xxxxx Cr.
Accumulated Depreciation - Machinery xxxxx Cr.
Prepaid Insurance xxxxx Cr.
Materials xxxxx Cr.
Payroll xxxxx Cr.
The use of factory overhead control account requires a subsidiary ledger for factory
overhead, with departmental expense analysis sheet to which all expenses are posted.
Service department expenses are kept in like manner and distributed later to producing
departments. At the end of each period, departmental expense analysis sheets are totaled.
These totals, which also include distributed service department costs, represent factory
overhead for each department. By debiting the actual cost incurred or by using the
predetermined overhead rates multiplied by the respective actual activity base (e.g., direct
labor hours) for each producing department, the entry charging these expenses to work in
process is as follows:

Work in Process - Testing Departments 32,800 Dr.
Work in Process - Terminal Department 19,800 Dr.
Factory Overhead Control 80,800 Cr.
You may also be interested in other relevant articles:
1. Characteristics and Procedures of Process Costing System

2. Costing By Departments
3. Product Flow
4. Procedure for Materials, Labor and Factory Overhead Costs in a Process
Costing System
5. Cost of Production Report (CPR)
6. General Questions and Answers About Process Costing System
7. Exercises and Problems
8. Process Costing System - Case Study

Procedures For Materials, Labor, and Factory Overhead Costs

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Project Management-Crash the Project

I have also been given a chart which says that:

A has a crash duration of 2 days and a slope of 110

Procedures for Materials, Labor, and Factory

Work in Process - Blending department 24,500 Dr.

Materials 24,500 Cr.

Work in Process - Blending department 29,140 Dr.

Work in Process - Testing Departments 37,310 Dr.

Work in Process - Terminal Department 32,400 Dr.

Payroll 98,850 Cr.

Factory Overhead Costs:

Normally it is emphasized to use the predetermined overhead rates for charging overhead

1. Production is not stable.

Factory overhead control xxxxx Dr.

Accounts Payable xxxxx Cr.

Accumulated Depreciation - Machinery xxxxx Cr.

Prepaid Insurance xxxxx Cr.

Materials xxxxx Cr.

Payroll xxxxx Cr.

Work in Process - Blending department 28,200 Dr.

Work in Process - Testing Departments 32,800 Dr.

Work in Process - Terminal Department 19,800 Dr.

Factory Overhead Control 80,800 Cr.

You may also be interested in other relevant articles:

1. Characteristics and Procedures of Process Costing System

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