Solved by verified expert :PROBLEM I — MULTIPLE CHOICES (10 points)
Instructions: Designate the best answer for each of the
following questions.
____ 1. A
debit balance in the Manufacturing Overhead account at the end of an interim
month means that
a. the
balance should be reported as a current liability in the monthly balance sheet.
b. corrective action by management is necessary.
c. overhead has been under applied.
d. cost of goods sold should be credited on the monthly income
statement.
The following data
should be used for questions 7-10:
Raw materials inventory, January 1
$10,000
Raw materials purchases
$600,000
Raw materials
inventory, December 31
15,000
Direct labor
230,000
Work in process,
January 1
9,000
MHO Factory
utilities
75,000
Work in process,
December 31
5,000
MOH Indirect
labor
25,000
Finished goods,
January 1
16,000
MOH Factory
depreciation
200,000
Finished goods, December 31
20,000
Selling and
administrative expenses
210,000
____ 2. Direct materials used
is
a. $630,000.
b. $610,000.
c. $600,000.
d. $595,000.
____ 3. Total manufacturing
cost added is
a. $1,130,000.
b. $1,127,000.
c. $1,030,000.
d. $1,340,000.
____ 4. Cost of goods
manufactured equals
a. $1,096,000.
b. $1,097,000.
c. $1,104,000.
d. $1,109,000.
____ 5. The cost of goods sold
is
a. $1,123,000.
b. $1,104,000.
c. $1,116,000.
d. $1,124,000.
PROBELM II — CLASSIFICATION OF COSTS AND EXPENSES (20 points)
Instructions: Classify the
following manufacturing costs and expenses incurred by Garcia Manufacturing Co.,
making soda drinks, by using the following code letters:
A. Direct
material Cost
B. Direct labor
cost
C. Manufacturing
overhead cost
D. Period Cost
1.
Sale’s
commissions to employees
6.
Depreciation on
delivery trucks
2.
Depreciation on factory
equipment
7.
Factory
insurance cost
3.
Promotions in a
radio station
8.
Factory
maintenance materials
4.
Syrup, alkaline
water and sugar
9.
Wages of
maintenance workers
5.
Rent on leased
factory machinery
10.
Wages of mixing
line workers
PROBLEM III —Determine
work in process and finished goods balances(12 points)
Robles
Manufacturing begins operations on October 1. Information from job cost sheets
shows the following:
Manufacturing Costs Assigned
Job
October
November
December
A
$14,600
B
$ 5,400
$9,300
C
$ 3,200
$5,800
$5,800
D
$7,400
$8,300
E
$4,400
Job A was
completed in October.
Job B was
completed in November.
Job C was
completed in December.
Each job
was sold in the month following completion.
Instructions: Determine the following amounts:
1
Work in
process inv. Oct 31
4
Finished
goods inv. Nov 30
2
Finished
goods inv. Oct 31
5
Work in
process inv. Dec 31
3
Work in
process inv. Nov 30
6
Finished
goods inv. Dec 31
PART IV — JOB ORDER COST ACCOUNTING ENTRIES (24 points)
The ledger
accounts of ROPRIN Company are presented below, with an identification number
for each.
Instructions: Prepare appropriate job order cost system entries to
record the data/events given below.
1. Cash 6.
Manufacturing Overhead 11. Depreciation Expense
2. Accounts
Receivable 7. Accounts Payable 12. Factory Labor
3. Raw Materials
Inv. 8. Factory Wages Payable 13. Wages Expense
4. Work in
Process Inv. 9. Accumulated Depreciation 14.
Cost of Goods Sold
5. Finished Goods Inv. 10. Sales
15. Other Accounts
Transaction Information for the Entry
1. Incurred
factory labor, $110,000.
2. Charged direct labor to Job AA,
$80,000.
3. Purchased
raw materials on account, $180,000.
4. Charged direct materials to Job AA, $78,000.
5. Recorded the remaining factory labor as
indirect labor related to Job AA
6. Incurred
manufacturing overhead on account, $57,000.
7. Recognized
depreciation on factory equipment, $30,000.
8. Charged overhead to Job AA at $1.25 for each
direct labor dollar cost.
9. Recorded completion of Job AA.
10. Recorded cost of sales for Job AA.
11. Recorded revenue from sale of Job AA on account,
$425,000.
12.Assume total actual overhead was $2,280,000 and total applied overhead
was $2,230,000 for the year. Record
the entry to close the MOH account and transfer the over or under applied
overhead to Cost of Good Sold account.
PROBLEM IV — JOB
ORDER COST ACCOUNTING ENTRIES:
GENERAL JOURNAL
#
ACCOUNTS
DESCRIPTION
DEBIT
CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
Problem V. (20 Points)ROMALY, INC. has several processing departments. Costs charged to
the Forming Department for December
2011 totaled $1,505,000 as follows:
Work
in Process, December 1
Materials
$ 103,400
Conversion costs
60,000
$ 163,400
Costs
Added:
Materials added
$ 1,100,800
Labor
$ 100,000
Manufacturing Overhead
102,800
Total Conversion Costs
202,800
Total
Cost added
1,303,600
Total
Department Costs
$ 1,467,000
Production
records show that:
1. 60,000 units were in beginning work in process
inventory
a. 25% complete as
to materials costs
b. 70% complete as
to conversion cost
2. 410,000 units were started into production
3. 40,000 units were in ending work in process
inventory
a. 40% complete as
to materials costs
b. 20% complete as
to conversion costs.
Required:
a.
Compute
the physical unit flow, step 1.
b.
Determine
the equivalent units of production for materials and conversion costs, step 2.
c.
Compute
the unit cost of production, step 3.
d.
Determine
the costs to be assigned to the units transferred out and in process.
e.
Prepare
a production cost report for the Forming Department for the month of December.
Problem V:
FOUR SPETS TO PREPARE PRODUCTION COST REPORT (86 Puntos)
FORMING DEPARTMENT INFORMATION (23
Puntos)
WIP, Dec/1
(Beginning Inventory)
DIRECT MATERIALS: _____________Units X _____% COMPLETED
CONVERSION COSTS: _____________Units X _____ %COMPLETED
UNITS
STARTED IN PRODUCTION DURING DECEMBER
UNITS
COMPLETED AND TRANSFERRED OUT TO PACKING
WIP, Dec/31
(Ending Inventory)
DIRECT MATERIALS: _____________Units X _____% COMPLETED
CONVERSION COSTS: _____________Units X _____%
COMPLETED
C O S T S
WIP, Dec/1
(Bebinning Inventory)
DIRECT MATERIALS
$
CONVERSION COSTS
TOTAL
COST OF WIP, Dec/1 (Beginning Inventory)
$
COSTS
ADDED DURING PRODUCTION IN DECEMBER
DIRECT MATERIALS
$
CONVERSION COSTS (DL $_________ + MOH $__________)
TOTAL
COST ADDED IN DECEMBER
TOTAL
COST AS OF DECEMBER 31
Part a.Compute the physical units flow (step 1).
FORMING DEPARTMENT (6 Puntos)
PHYSICAL UNITS TO BE ACCOUNTED
FOR
WIP, Dec 1 (Beginning Inventory)
STARDED (TRANSFERRED) INTO PRODUCTION
TOTAL
UNITS
COMPLETED AND TRANSFERRD OUT
WIP, Dec 31 (Ending Inventory)
TOTAL
UNITS
Part b. Determine the
equivalent units of production for
materials and conversion costs (step 2).
FORMING DEPARTMENT (6
Puntos)
EQUIVALENT UNITS
MATERIAL
CONVERSION
COSTS
UNITS
TRANSFERRED OUT
WIP, Dec
31 (Ending Inventory) MATERIALS
WIP, Dec
31 (Ending Inventory)CONVERSION COST
TOTAL
EQUIVALENT UNITS
Part c.Compute the unit
cost of production (Sept 3).
STEP 3:
COMPUTE UNIT PRODUCTION COSTS
(15 Puntos)
FORMING
DEPARTMENT
M A T E R I A L C O S T S PER UNIT
WIP,
Dec 1 – (Beginning Inventory) Direct Material
$
Material
Costs incurred or added into production during December
Total
Material Costs
$
TOTAL MATERIAL COSTS / EQUIVALENT
UNITS = UNITS MATERIAL COST
$_____________ DIVIDIDO ENTRE ___________ = $________
C O N V E R S I O N C O S T S PER UNIT
WIP,
Dec 1 – (Beginning Inventory) Conversion costs
$
Conversion
costs incurred or added into production during December
TOTAL
CONVERSION COSTS
$
TOTAL CONVERSION COSTS / EQUIVALENT UNITS
= UNIT CONVERSION COST
$__________ DIVIDIDO ENTRE ___________
= $_________
MATERIAL
UNIT COST
$
CONVERSION
UNIT COST
TOTAL
MANUFACTURING UNIT COST
$
Part d.Determine the
costs to be assigned to the units transferred out and in process (Step 4)
FORMING
DEPARTMENT (8 Puntos)
C O S T RECONCILIATION
REPORT
COST ACCOUNTED FOR
WIP, Dec 1 (Beginning Inventory)
$
STARTED INTO PRODUCTION
TOTAL
COSTS
$
COST ACCOUNTED FOR
Completed
& Transferred Out
$
WIP
Ending Inventory- Dec 31 MATERIALS
$
WIP
Ending Inventory- Dec31 CONVERSION COSTS
TOTAL
WIP Dec 31 (Ending Inventory)
TOTAL
COSTS
$
Part e. Prepare a
production cost report for the Forming Department for the month of December.
FORMING
DEPARTMENT (28 Puntos)
PRODUCTION
COST REPORT
FOR THE MONTH
ENDED DECEMBER 31, 2011
STEPS 1 AND 2
PHYSICAL UNITS
UNITS TO BE
ACCOUNTED FOR
STEP 1
WIP, Dec 1 (Beginning Inventory)
STARTED INTO PRODUCTION
TOTAL
UNITS
STEP 2
STEP 1
EQUIVALENT
UNITS
UNITS TO BE ACCOUNTED FOR
PHYSICAL UNITS
MATERIALS
CONVERSION
COSTS
TRANSFERRED OUT
WIP, Dec 31 (Ending Inventory)
TOTAL
UNITS
STEP 3
U N I T C O S T S
COSTS
MATERIALS
CONVERSION
COSTS
TOTAL
TOTAL COSTS AS OF DECEMBER
(a)
$
$
$
EQUIVALENT UNITS
(b)
UNIT COSTa/b
$
$
$
STEP 4
C O S T ACCOUNTED
FOR
WIP, Dec 1 (Beginning Inventory)
$
STARTED INTO PRODUCTION
TOTAL
COST FOR THE MONTH OF DECEMBER
$
COST
RECONCILIATION SCHEDULE
Completed
& Transferred Out
$
WIP
Ending Inventory-Dec 31-Direct Material Costs(Equivalent Units)
$
WIP
Ending Inventory-Dec 31-Conversion Costs (Equivalent Units)
Total Costs WIP
Ending Inventory-Dec 31 (Based on equivalent units)
TOTAL
COST FOR THE MONTH OF DECEMBER 2011
$
CHAPTER 4
ACTIVITY BASED COSTING (ABC)
PROBLEM VI: (52
Points)
JOKARY
Company manufactures two models of TV: (1) Regular TV (2) Custom TV. The Regular
TV model is a high volume product and the Custom TV model is a low volume
product. The following information was provided by management:
Regular TV
Custom TV
Total
Quantity
Per Unit
Quantity
Per Unit
Volume
of Production in units
50,000
10,000
60,000
Direct
Material per unit
$100.00
$400.00
Direct
Labor Hours per Unit
5.0
5.0
Total
Direct Labor (DL) Hours
250,000
50,000
300,000
Direct
Labor Cost per Unit
$10.00
$10.00
Total
MHO
$1,650,000
Predetermined
MHO Per DL Hours
$5.50*
*$1,650,000
/ 300,000 = $5.50
Management identified six activities
cost pools and related cost drivers and accumulated overhead by cost pool as
follows:
Activity Cost
Pools
Cost Drivers
Estimated
Overhead
Expected Use
of Cost Drivers
Expected Use
of Drivers by Product
Regular TV
Custom TV
Purchasing
Orders
$ 200,000
500
170
330
Receiving
Pounds
161,000
140,000
58,000
82,000
Forming
Parts
581,000
830,000
415,000
415,000
Inspecting
Inspections
208,000
130,000
82,000
48,000
Painting
Units
240,000
120,000
80,000
40,000
Warehousing
Cartons
260,000
10,000
7,000
3,000
$1,650,000
Instructions:
a)
Compute the total unit cost of each product under the
traditional product costing.
b)
Compute the activity based overhead rates (per cost
driver).
c)
Assign each
activity’s overhead cost pool to each product based on the use of cost drivers.
(Include a computation of overhead cost per unit, rounding to the nearest
cent.)
d)
Compute the total cost per unit for each product under
ABC.
b. Computation of each product unit cost—traditional
costing.
Manufacturing Cost
Products
Regular TV Model
Custom TV Model
Direct
materials
Direct
Labor
Overhead
Total
unit cost
c. Computation of the activity based overhead rates
(per cost driver).
Activity
Cost Pools
Total
Estimated Overhead
Expected
Use of Cost Drivers
Activity
Based Overhead Rate
Purchasing
$ 200,000
500
Receiving
161,000
140,000
Forming
581,000
830,000
Inspecting
208,000
130,000
Painting
240,000
120,000
Warehousing
260,000
12,100
$1,650,000
d. Assign each activity’s
overhead cost pool to each product based on the use of cost drivers.
Activity
Cost Pools
Regular TV Model
Custom TV
Model
Expected
Use of Drivers
Activity-
Based
Overhead
Rates
Cost
Assigned
Expected
Use
of
Drivers
Activity-
Based
Overhead
Rates
Cost
Assigned
Purchasing
170
330
Receiving
58,000
82,000
Forming
415,000
415,000
Inspecting
82,000
48,000
Painting
80,000
40,000
Warehousing
8,040
4,060
Total Cost
Assigned
Units Produced
Overhead Cost
Per Unit
e. Compute the total cost per unit for each
product under ABC.
ABC
Manufacturing Cost
Regular
TV Model
Custom
TV Model
Direct
Materials
Direct Labor
Overhead
Total cost per
unit
