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Chapter 5
1.) Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhead costs. Discussions with the plant supervisor suggest that overhead seems to vary with labor-hours, machine-hours, or both. The following data were collected from last year’s operations:

1 725 1,345 \$ 102,799
2 725 1,405 103,849
3 675 1,529 109,953
4 745 1,444 108,331
5 780 1,588 116,169
6 760 1,585 114,568
7 735 1,391 106,958
8 725 1,301 102,140
9 705 1,455 106,484
10 800 1,542 113,154
11 680 1,296 103,372
12 710 1,606 116,392
________________________________________

Required:
(a) Use the high-low method to estimate the fixed and variable portions of overhead costs based on machine-hours. (Round your variable cost answer to 2 decimal places. Omit the “\$” sign in your response.)

Variable cost (per machine hour) \$
Fixed cost \$

(b) Managers expect the plant to operate at a monthly average of 1,400 machine-hours next year. What are the estimated monthly overhead costs, assuming no inflation? (Use rounded variable cost. Omit the “\$” sign in your response.)

A consulting firm’s accounting records show the following costs for year 1:

Direct materials (supplies) \$ 128,000
Direct labor 897,000
________________________________________

Production was 150,000 billable hours. Fixed overhead was \$212,000.

2.) For year 2, direct materials costs are expected to increase by 10 percent per unit. Direct labor costs are expected to increase by 15 percent. Variable overhead per billable hour is expected to remain the same, but fixed overhead is expected to increase by 5 percent.

Required:
(a) Year 2 production is expected to be 195,000 billable hours. What are the estimated direct materials, direct labor, variable overhead, and fixed overhead costs for year 2? (Do not round intermediate calculations. Round your final answers to the nearest dollar amount. Omit the “\$” sign in your response.)

Cost item This year’s cost
Direct materials (supplies) \$
Direct labor
________________________________________
Total costs \$
________________________________________________________________________________
________________________________________

(b) Determine the total costs per billable hour for year 1 and year 2. (Round your answers to 2 decimal places. Omit the “\$” sign in your response.)

Costs per
billable hour
Last year \$
This year \$

3.) Assume that General Dynamics, which manufactures high-technology instruments for spacecraft, is considering the sale of a navigational unit to a government agency in India that wishes to launch its own communications satellite. The government agency plans to purchase 8 units, although it would also consider buying 16 units. General Dynamics has started a chart relating labor time required to units produced.

Unit Produced (X) Time Required to
Produce the Xth Unit
1 11,000 hours
2 6,600 hours
4 3,960 hours
8 ?
16 ?
________________________________________

Required:
(a) Compute the labor time required to produce 8 and 16 units. (Round your answers to 2 decimal places.)

Time Required to produce 8th unit hours
Time Required to produce 16th unit hours

(b) Assume that labor time costs \$80 per hour. Compare the cost of producing the first unit to the cost of producing the 16th unit. What is the percentage of the cost of the 16th unit to the cost of the first unit? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Percentage of cost of 16th unit to first unit cost %

4.) The accounting department of a large limousine company is analyzing the costs of its services. The cost data and level of activity for the past 16 months follow:

Month Special Analyses Customer
Accounts Paychecks
Processed Accounting
Service Costs
1 0 180 810 \$ 58,900
2 0 300 900 59,400
3 2 210 870 60,400
4 3 290 1,240 60,600
5 3 240 1,010 61,000
6 2 300 1,250 59,600
7 0 310 890 60,400
8 2 180 950 59,800
9 3 210 900 61,100
10 3 310 1,100 60,500
11 3 310 840 60,100
12 1 330 1,280 61,600
13 1 200 1,270 60,300
14 1 300 1,280 60,500
15 1 180 810 58,900
16 3 280 1,110 58,700
________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________
Totals 28 4,130 16,510 \$ 961,800
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________

In addition to the above information, you learn that the accounting department had the following total costs for the past 16 months for each of the following:

Total cost of paychecks processed \$ 186,563
Total cost of maintaining customer accounts 124,726
Total cost of performing special analyses 112,840
Total fixed costs (total for 16 months) 537,671
________________________________________ ________________________________________ ________________________________________
Total costs \$ 961,800
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
________________________________________

Required:
(a) What is the cost per unit for paychecks processed, customer accounts maintained, and special analyses performed? (Round your answers to 2 decimal places. Omit the “\$” sign in your response.)

Activity Cost per unit
Paychecks processed \$
Maintain customer accounts
Perform special analyses
________________________________________

(b) Assuming the following level of cost-driver volumes for a month, what are the accounting department’s estimated costs of doing business using the account analysis approach?
• 1,020 paychecks processed.
• 220 customer accounts maintained.
• 3 special analyses.

Estimated cost \$

5.) Multiple regression results from the data of Adriana Corporation are as follows:

Equation:
Overhead = \$24,351 + (\$32.60 × Labor-hours) + (\$41.40 × Machine-hours)
Statistical data
Correlation coefficient .955
R2 .912
________________________________________

Required:
Estimate overhead using the multiple regression results, assuming that the company expects the plant to operate at a monthly average of 9,170 machine-hours and 3,090 labor-hours next year. (Omit the “\$” sign in your response.)

6.) A cost driver is defined as: (CMA adapted)
the largest cost in a manufacturing process.
a fixed cost that cannot be avoided.
the significant factor in developing a new product.
an indirect cost that cannot be traced to a particular cost objective but is essential to the business.
a causal factor that increases the total cost of a cost objective.

7.) Which of the following statements is (are) true regarding cost behaviors?
(A) In general, accounting records accumulate cost information according to its behavior.
(B) Cost behaviors are the most important consideration in managerial decision making.
only A is true.
only B is true.
Both A and B are true.
Neither A nor B is true.

8.) Hagler’s Toupees has the following machine hours and production costs for the last six months of last year:

If Hagler expects to incur 14,000 machine hours in January, what will be the estimated total production cost using the high-low method? (Round your intermediate calculations to 3 decimal places and final answer to 1 decimal place.)
\$8,750.00
\$11,142.50
\$22,400.00
\$10,889.10

9.) A consulting firm’s accounting records show the following costs for year 1:

Direct materials (supplies) \$ 135,000
Direct labor 886,000
________________________________________

Production was 193,000 billable hours. Fixed overhead was \$236,000.

For year 2, direct materials costs are expected to increase by 10 percent per unit. Direct labor costs are expected to increase by 15 percent. Variable overhead per billable hour is expected to remain the same, but fixed overhead is expected to increase by 5 percent.

Required:
(a) Year 2 production is expected to be 238,000 billable hours. What are the estimated direct materials, direct labor, variable overhead, and fixed overhead costs for year 2? (Do not round intermediate calculations. Round your final answers to the nearest dollar amount. Omit the “\$” sign in your response.)

Cost item This year’s cost
Direct materials (supplies) \$
Direct labor
________________________________________
Total costs \$
________________________________________________________________________________
________________________________________

(b) Determine the total costs per billable hour for year 1 and year 2. (Round your answers to 2 decimal places. Omit the “\$” sign in your response.)

Costs per
billable hour
Last year \$
This year \$

10.) Assume that General Dynamics, which manufactures high-technology instruments for spacecraft, is considering the sale of a navigational unit to a government agency in India that wishes to launch its own communications satellite. The government agency plans to purchase 8 units, although it would also consider buying 16 units. General Dynamics has started a chart relating labor time required to units produced.

Unit Produced (X) Time Required to
Produce the Xth Unit
1 23,000 hours
2 16,100 hours
4 11,270 hours
8 ?
16 ?
________________________________________

Required:
(a) Compute the labor time required to produce 8 and 16 units. (Round your answers to 2 decimal places.)

Time Required to produce 8th unit hours
Time Required to produce 16th unit hours

(b) Assume that labor time costs \$70 per hour. Compare the cost of producing the first unit to the cost of producing the 16th unit. What is the percentage of the cost of the 16th unit to the cost of the first unit? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Percentage of cost of 16th unit to first unit cost %

11.) The accounting department of a large limousine company is analyzing the costs of its services. The cost data and level of activity for the past 16 months follow:

Month Special Analyses Customer
Accounts Paychecks
Processed Accounting
Service Costs
1 3 180 850 \$ 60,600
2 3 300 920 59,300
3 3 340 940 61,000
4 1 160 1,020 59,200
5 1 210 850 61,100
6 3 290 1,190 58,300
7 4 230 910 58,400
8 3 330 870 60,500
9 4 330 910 58,500
10 1 150 1,170 59,000
11 1 290 1,080 60,700
12 2 180 840 59,700
13 1 300 1,210 60,300
14 2 180 1,060 61,200
15 0 300 1,180 58,800
16 3 230 1,140 58,400
________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________ ________________________________________
Totals 35 4,000 16,140 \$ 955,000
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________

In addition to the above information, you learn that the accounting department had the following total costs for the past 16 months for each of the following:

Total cost of paychecks processed \$ 192,066
Total cost of maintaining customer accounts 121,600
Total cost of performing special analyses 141,750
Total fixed costs (total for 16 months) 499,584
________________________________________ ________________________________________ ________________________________________
Total costs \$ 955,000
________________________________________________________________________________
Required:
(a) What is the cost per unit for paychecks processed, customer accounts maintained, and special analyses performed? (Round your answers to 2 decimal places. Omit the “\$” sign in your response.)

Activity Cost per unit
Paychecks processed \$
Maintain customer accounts
Perform special analyses
________________________________________

(b) Assuming the following level of cost-driver volumes for a month, what are the accounting department’s estimated costs of doing business using the account analysis approach?
• 980 paychecks processed.
• 160 customer accounts maintained.
• 3 special analyses.

Estimated cost \$

12.) Multiple regression results from the data of Adriana Corporation are as follows:

Equation:
Overhead = \$24,654 + (\$31.70 × Labor-hours) + (\$41.60 × Machine-hours)
Statistical data
Correlation coefficient .950
R2 .902
________________________________________

Required:
Estimate overhead using the multiple regression results, assuming that the company expects the plant to operate at a monthly average of 9,090 machine-hours and 3,140 labor-hours next year. (Omit the “\$” sign in your response.)

Chapter 6
1.) Big City Bank processes the checks its customers write at Riverdale Operations Center (ROC). ROC processed 1,390,000 checks in September. It takes only seconds to process a check, so none are left unprocessed at the end of the day. ROC cost data from September show the following costs:

Labor \$ 2,980
________________________________________

Required:

Cost per check \$

2.) The Office Mart store in South Beach experienced the following events during the current year:

1. Incurred \$382,000 in marketing costs.
2. Purchased \$1,183,000 of merchandise.
3. Paid \$53,000 for transportation-in costs.
4. Incurred \$401,000 of administrative costs.
5. Took an inventory at year-end and learned that goods costing \$193,000 were on hand. This compared with a beginning inventory of \$282,000 on January 1.
6. Determined that sales revenue during the year was \$2,920,000.
7. Debited all costs incurred to the appropriate account and credited to Accounts Payable. All sales were for cash.

Required:
Give the amounts for the following items in the Merchandise Inventory account (Omit the “\$” sign in your response):

Amount
a. Beginning balance (BB) \$
b. Transfers-in (TI) \$
c. Ending balance (EB) \$
d. Transfers-out (TO) \$

3.) Tiger Furnishings produces two models of cabinets for home theater components, the Basic and the Dominator. Data on operations and costs for March follow:

Basic Dominator Total
Units produced 1,200 300 1,500
Machine-hours 4,800 2,600 7,400
Direct labor-hours 3,200 1,200 4,400

Direct materials costs \$ 10,800 \$ 4,150 \$ 14,950
Direct labor costs 69,900 36,600 106,500
________________________________________ ________________________________________ ________________________________________
Total costs \$ 273,250
________________________________________________________________________________
Required:

Predetermined overhead rate \$ per direct labor hour

4.) Howrley-David, Inc., manufactures two models of motorcycles: the Fatboy and the Screamer. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is the cost of materials. The following data are available for August.

Fatboy Screamer Total
Number of units assembled 900 1,800 2,700
Materials cost per unit \$ 3,000 \$ 4,000
Other costs:
Direct labor \$ 2,592,000
Indirect materials 432,000
________________________________________

Required:
Howrley-David uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in August. (Omit the “\$” sign in your response.)

Unit cost
Fatboy \$
Screamer \$

5.) Kim & Smith Refiners starts business on March 1. The following operations data are available for March for the one lubricant it produces:

Gallons
Beginning inventory 0
Started in March 155,000
Ending work-in-process inventory (70% complete) 17,000
________________________________________

Costs incurred in March follow:

Materials \$ 198,800
Labor 23,000
________________________________________

All production at Kim & Smith is sold as it is produced (there are no finished goods inventories).

Required:
(a) Compute cost of goods sold for March. (Do not round intermediate calculations. Omit the “\$” sign in your response.)

Cost of goods sold \$

(b) What is the value of work-in-process inventory on March 31? (Do not round intermediate calculations. Omit the “\$” sign in your response.)

Work-in-process inventory \$

6.) The following information has been gathered for Roswell Machining for its fiscal year ending December 31:

What is the predetermined factory overhead rate per labor hour?
\$29.01
\$31.25
\$37.01
\$34.36

7.) Which of the following statements is true?
Job costing can only be used when a single unit is produced rather than a batch.
Process costing is used when products are customized.
Job costing must be used in a continuous flow processing environment.
Process costing does not separately record the costs for each unit.

8.) The following information has been gathered for Cheatham Law Offices for its fiscal year ending December 31:

What is the predetermined office overhead rate per billable labor dollar?
118.10%
25.00%
32.21%
400.00%

9.) The cost per unit of the allocation base used to charge overhead to products is the
job cost.
operational cost.
process cost.

10.) Big City Bank processes the checks its customers write at Riverdale Operations Center (ROC). ROC processed 1,550,000 checks in September. It takes only seconds to process a check, so none are left unprocessed at the end of the day. ROC cost data from September show the following costs:

Labor \$ 3,300
________________________________________

Required:

Cost per check \$

11.) The Office Mart store in South Beach experienced the following events during the current year:

1. Incurred \$386,000 in marketing costs.
2. Purchased \$1,203,000 of merchandise.
3. Paid \$21,000 for transportation-in costs.
4. Incurred \$396,000 of administrative costs.
5. Took an inventory at year-end and learned that goods costing \$219,000 were on hand. This compared with a beginning inventory of \$303,000 on January 1.
6. Determined that sales revenue during the year was \$2,847,000.
7. Debited all costs incurred to the appropriate account and credited to Accounts Payable. All sales were for cash.

Required:
Give the amounts for the following items in the Merchandise Inventory account (Omit the “\$” sign in your response):

Amount
a. Beginning balance (BB) \$
b. Transfers-in (TI) \$
c. Ending balance (EB) \$
d. Transfers-out (TO) \$

13.) Tiger Furnishings produces two models of cabinets for home theater components, the Basic and the Dominator. Data on operations and costs for March follow:

Basic Dominator Total
Units produced 1,150 300 1,450
Machine-hours 4,600 1,100 5,700
Direct labor-hours 3,000 2,900 5,900

Direct materials costs \$ 8,600 \$ 3,350 \$ 11,950
Direct labor costs 59,600 35,600 95,200
________________________________________ ________________________________________ ________________________________________
Total costs \$ 315,420
________________________________________________________________________________
Required:

Predetermined overhead rate \$ per direct labor hour

14.) Howrley-David, Inc., manufactures two models of motorcycles: the Fatboy and the Screamer. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is the cost of materials. The following data are available for August.

Fatboy Screamer Total
Number of units assembled 1,170 2,340 3,510
Materials cost per unit \$ 2,000 \$ 3,000
Other costs:
Direct labor \$ 4,001,400
Indirect materials 666,900
________________________________________

Required:
Howrley-David uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in August. (Omit the “\$” sign in your response.)

Unit cost
Fatboy \$
Screamer \$

15.) Kim & Smith Refiners starts business on March 1. The following operations data are available for March for the one lubricant it produces:

Gallons
Beginning inventory 0
Started in March 159,000
Ending work-in-process inventory (70% complete) 13,000
________________________________________

Costs incurred in March follow:

Materials \$ 136,650
Labor 22,000
________________________________________

All production at Kim & Smith is sold as it is produced (there are no finished goods inventories).

Required:
(a) Compute cost of goods sold for March. (Do not round intermediate calculations. Omit the “\$” sign in your response.)

Cost of goods sold \$

(b) What is the value of work-in-process inventory on March 31? (Do not round intermediate calculations. Omit the “\$” sign in your response.)

Work-in-process inventory \$

CHAPTER 7
1.) Tappan, Inc., manufactures one product and accounts for costs using a job cost system. You have obtained the following information from the corporation’s books and records for the year ended December 31, Year 1:

• Total manufacturing cost during the year was \$2,737,000 based on actual direct material, actual direct labor, and applied manufacturing overhead.
• Manufacturing overhead was applied to work in process at 150 percent of direct labor dollars. Applied manufacturing overhead for the year was 30 percent of the total manufacturing cost during the year.

Required:

Direct material used \$
Direct labor

2.) Mary’s Landscaping uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for August:

Description Amount
August 1 Balance \$ 13,700
For the month Direct materials 81,500
For the month Direct labor 54,700
For the month Factory overhead 45,401
For the month To finished goods ( 161,900 )
________________________________________

Mary’s applies overhead to production at a predetermined rate of 83 percent based on direct labor cost. Job 3318, which was started during August and is the only job still in process at the end of August, has been charged direct labor of \$6,800.

Required:
What cost amount of direct materials was charged to Job 3318? (Omit the “\$” sign in your response.)

Direct materials \$

3.) Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 458 hours for Massive Airframes and 662 hours for Gigantic Drydocks. AB bills clients at the rate of \$516 per hour; labor cost for its professional staff is \$220 per hour. Overhead costs in March totaled \$40,140. Overhead is applied to clients at \$41 per labor-hour. In addition, AB had \$198,400 in marketing and administrative costs. All transactions are on account. All services were billed.

Required:
(a) Show labor and overhead cost flows through T-accounts. (Record the transactions in the given order. Omit the “\$” sign in your response.)

Wages Payable
________________________________________ ________________________________________
Transfer to Work in Progress

Work in Process
________________________________________ ________________________________________
Transfer from Wages
Payable Transfer to Cost of Services Billed
________________________________________ ________________________________________
________________________________________________________________________________

Cost of Services Billed
________________________________________ ________________________________________
Transfer from Work in
process Over applied

________________________________________ ________________________________________
Actual Transfer to Cost of Services Billed

Applied Service O.H.
________________________________________ ________________________________________
Transfer to Cost of
Services Billed Applied
________________________________________

(b) Prepare an income statement for the company for March. (Input all amounts as positive values. Omit the “\$” sign in your response.)

Allocation Busters
Income Statement
For the Month Ended March 31
\$
\$
:

\$

4.) Tony’s Textiles uses a predetermined factory overhead rate based on machine-hours. For May, Tony’s budgeted overhead was \$2,731,050 based on a budgeted volume of 433,500 machine-hours. Actual overhead amounted to \$2,903,000 with actual machine-hours totaling 467,000.

Required:
What was over- or underapplied manufacturing overhead in May? (Input the amount as a positive value. Do not round intermediate calculations. Omit the “\$” sign in your response.)

\$

5.) Partially completed T-accounts and additional information for Pine Ridge Corporation for the month of February follow.

Materials Inventory
________________________________________ ________________________________________
BB (2/1) 57,800
227,900 188,400

Finished Goods Inventory
________________________________________ ________________________________________
BB (2/1) 200,300
345,500 249,500

________________________________________ ________________________________________
155,100

Work-In-Process Inventory
________________________________________ ________________________________________
BB (2/1) 100,500
Labor 187,100

Cost of Goods Sold
________________________________________ ________________________________________

________________________________________ ________________________________________
134,712
________________________________________

Labor wage rate was \$28 per hour.
During the month, sales revenue was \$601,900, and selling and administrative costs were \$104,500.
This company has no indirect materials or supplies.
The company applies manufacturing overhead on the basis of direct labor costs.

Required:
(a) What was the cost of direct materials issued to production during February? (Omit the “\$” sign in your response.)

Cost of direct materials issued \$

(b) What was the over- or underapplied manufacturing overhead for February? (Input the amount as a positive value. Omit the “\$” sign in your response.)

(d) What was the cost of products completed during February? (Omit the “\$” sign in your response.)

Cost of products completed \$

(e) What was the balance of the Work-in-Process Inventory account at the end of February? (Omit the “\$” sign in your response.)

Work-in-Process Inventory account \$

(f) What was the operating profit for February? Any over- or underapplied overhead is written off to Cost of Goods Sold. (Omit the “\$” sign in your response.)

Operating profit \$

6.) Two jobs were worked on during the year: Job A-101 and Job A-102. The number of direct labor hours spent on Job A-101 and Job A-102 were 1,200 and 1,000, respectively. The actual manufacturing overhead was \$37,000.

What was the amount of manufacturing overhead applied to Job A-101?
\$16,000
\$18,000
\$24,000
\$44,000

What is the predetermined manufacturing overhead rate per direct labor hour for the year?
\$15
\$20
\$25
\$30

7.) The journal entry to record the completion of a job in a job order cost system is

a
b
c
d
e
8.) The journal entry to record the actual manufacturing overhead costs for indirect material is

a
b
c
d
e

9.) It is possible that the total cost of a job started in April and completed in May will not include:
direct material purchased in May.

10.) The journal entry to write-off a significant underapplied overhead balance at the end of an accounting period is

a
b
c
d

11.) Which of the following approaches allocates overhead by multiplying a predetermined overhead rate × actual activity?
Actual costing
Normal costing
Regression costing
Standard costing

12.) Tappan, Inc., manufactures one product and accounts for costs using a job cost system. You have obtained the following information from the corporation’s books and records for the year ended December 31, Year 1:

• Total manufacturing cost during the year was \$1,869,000 based on actual direct material, actual direct labor, and applied manufacturing overhead.
• Manufacturing overhead was applied to work in process at 200 percent of direct labor dollars. Applied manufacturing overhead for the year was 20 percent of the total manufacturing cost during the year.

Required:

Direct material used \$
Direct labor

13.) Mary’s Landscaping uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for August:

Description Amount
August 1 Balance \$ 13,600
For the month Direct materials 81,400
For the month Direct labor 54,100
For the month Factory overhead 44,903
For the month To finished goods ( 160,200 )
________________________________________

Mary’s applies overhead to production at a predetermined rate of 83 percent based on direct labor cost. Job 3318, which was started during August and is the only job still in process at the end of August, has been charged direct labor of \$6,600.

Required:
What cost amount of direct materials was charged to Job 3318? (Omit the “\$” sign in your response.)

Direct materials \$

14.) Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 446 hours for Massive Airframes and 677 hours for Gigantic Drydocks. AB bills clients at the rate of \$510 per hour; labor cost for its professional staff is \$220 per hour. Overhead costs in March totaled \$40,690. Overhead is applied to clients at \$45 per labor-hour. In addition, AB had \$198,300 in marketing and administrative costs. All transactions are on account. All services were billed.

Required:
(a) Show labor and overhead cost flows through T-accounts. (Record the transactions in the given order. Omit the “\$” sign in your response.)

Wages Payable
________________________________________ ________________________________________
Transfer to Work in Progress

Work in Process
________________________________________ ________________________________________
Transfer from Wages
Payable Transfer to Cost of Services Billed
________________________________________ ________________________________________
________________________________________________________________________________

Cost of Services Billed
________________________________________ ________________________________________
Transfer from Work in
process Over applied

________________________________________ ________________________________________
Actual Transfer to Cost of Services Billed

Applied Service O.H.
________________________________________ ________________________________________
Transfer to Cost of
Services Billed Applied
________________________________________

(b) Prepare an income statement for the company for March. (Input all amounts as positive values. Omit the “\$” sign in your response.)

Allocation Busters
Income Statement
For the Month Ended March 31
\$
\$
:
________________________________________ ________________________________________
\$

________________________________________
\$

15.) Tony’s Textiles uses a predetermined factory overhead rate based on machine-hours. For May, Tony’s budgeted overhead was \$2,062,500 based on a budgeted volume of 412,500 machine-hours. Actual overhead amounted to \$2,281,300 with actual machine-hours totaling 464,100.

Required:
What was over- or underapplied manufacturing overhead in May? (Input the amount as a positive value. Do not round intermediate calculations. Omit the “\$” sign in your response.)

\$

16.) Partially completed T-accounts and additional information for Pine Ridge Corporation for the month of February follow.

Materials Inventory
________________________________________ ________________________________________
BB (2/1) 56,700
228,400 189,600

Finished Goods Inventory
________________________________________ ________________________________________
BB (2/1) 201,100
345,600 251,000

________________________________________ ________________________________________
155,100

Work-In-Process Inventory
________________________________________ ________________________________________
BB (2/1) 101,900
Labor 186,600

Cost of Goods Sold
________________________________________ ________________________________________

________________________________________ ________________________________________
134,352
________________________________________

Labor wage rate was \$25 per hour.
During the month, sales revenue was \$600,800, and selling and administrative costs were \$103,300.
This company has no indirect materials or supplies.
The company applies manufacturing overhead on the basis of direct labor costs.

Required:
(a) What was the cost of direct materials issued to production during February? (Omit the “\$” sign in your response.)

Cost of direct materials issued \$

(b) What was the over- or underapplied manufacturing overhead for February? (Input the amount as a positive value. Omit the “\$” sign in your response.)

(d) What was the cost of products completed during February? (Omit the “\$” sign in your response.)

Cost of products completed \$

(e) What was the balance of the Work-in-Process Inventory account at the end of February? (Omit the “\$” sign in your response.)

Work-in-Process Inventory account \$

(f) What was the operating profit for February? Any over- or underapplied overhead is written off to Cost of Goods Sold. (Omit the “\$” sign in your response.)

Operating profit \$

CHAPTER 8
1.) Missouri Corporation shows the following information concerning the work in process at its plant:

• Beginning inventory was partially complete (materials are 100 percent complete; conversion costs are 60 percent complete).
• Started this month, 60,000 units.
• Transferred out, 50,100 units.
• Ending inventory, 20,600 units (materials are 100 percent complete; conversion costs are 14 percent complete).

Required:
(a) Compute the equivalent units for materials using the weighted-average method.

Equivalent units

(b) Compute the equivalent units for conversion costs using the weighted-average method.

Equivalent units

2.) Missouri Corporation shows the following information concerning the work in process at its plant:

• Beginning inventory was partially complete (materials are 100 percent complete; conversion costs are 60 percent complete).
• Started this month, 59,000 units.
• Transferred out, 50,600 units.
• Ending inventory, 18,300 units (materials are 100 percent complete; conversion costs are 14 percent complete).

Required:
(a) Compute the equivalent units for materials using FIFO.

Equivalent units

(b) Compute the equivalent units for conversion costs using FIFO.

Equivalent units

3.) Washington, Inc., makes three models of motorized carts for vacation resorts, X-10, X-20, and X-40. Washington manufactures the carts in two assembly departments: Department A and Department B. All three models are processed initially in Department A, where all material is assembled. The X-10 model is then transferred to finished goods. After processing in Department A, the X-20 and X-40 models are transferred to Department B for final assembly, and then transferred to finished goods.

There were no beginning work-in-process inventories on April 1. Data for April are shown in the following table. Ending work in process is 20 percent complete in Department A and 50 percent complete in Department B. Conversion costs are allocated based on the number of equivalent units processed in each department.

Total X-10 X-20 X-40
Units started 550 330 250
Units completed in Department A 390 250 180
Units completed in Department B 230 165
Materials \$ 339,500 \$ 55,000 \$ 90,750 \$ 193,750
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
Conversion costs:
Department A \$ 242,550
Department B 41,250
________________________________________ ________________________________________ ________________________________________
Total conversion costs \$ 283,800
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
________________________________________

Required:
(a) What is the unit cost of each model transferred to finished goods in April? (Do not round intermediate calculations. Round final answers to the nearest dollar amounts and units. Omit the “\$” sign in your response.)

Product Unit Cost
X-10 \$
X-20 \$
X-40 \$
________________________________________

(b) What is the balance of work-in-process inventory on April 30 for Department A? Department B? (Do not round intermediate calculations. Round final answers to the nearest dollar amounts and units. Omit the “\$” sign in your response.)

Department A Department B
Balance of work-in-process ending inventory \$ \$

4.) Additional materials are added in the second department of a four-department production process. However, this addition does not increase the number of units being produced in the second department, but will
increase the equivalent units of production.
increase the total cost per unit.
decrease the value of the transferred-in costs.
decrease the total costs to account for.

5.) Missouri Corporation shows the following information concerning the work in process at its plant:

• Beginning inventory was partially complete (materials are 100 percent complete; conversion costs are 59 percent complete).
• Started this month, 60,400 units.
• Transferred out, 49,700 units.
• Ending inventory, 20,100 units (materials are 100 percent complete; conversion costs are 17 percent complete).

Required:
(a) Compute the equivalent units for materials using the weighted-average method.

Equivalent units

(b) Compute the equivalent units for conversion costs using the weighted-average method.

Equivalent units

6.) Missouri Corporation shows the following information concerning the work in process at its plant:

• Beginning inventory was partially complete (materials are 100 percent complete; conversion costs are 62 percent complete).
• Started this month, 60,600 units.
• Transferred out, 49,500 units.
• Ending inventory, 20,800 units (materials are 100 percent complete; conversion costs are 16 percent complete).

Required:
(a) Compute the equivalent units for materials using FIFO.

Equivalent units

(b) Compute the equivalent units for conversion costs using FIFO.

Equivalent units

7.) Washington, Inc., makes three models of motorized carts for vacation resorts, X-10, X-20, and X-40. Washington manufactures the carts in two assembly departments: Department A and Department B. All three models are processed initially in Department A, where all material is assembled. The X-10 model is then transferred to finished goods. After processing in Department A, the X-20 and X-40 models are transferred to Department B for final assembly, and then transferred to finished goods.

There were no beginning work-in-process inventories on April 1. Data for April are shown in the following table. Ending work in process is 20 percent complete in Department A and 50 percent complete in Department B. Conversion costs are allocated based on the number of equivalent units processed in each department.

Total X-10 X-20 X-40
Units started 570 390 270
Units completed in Department A 400 260 170
Units completed in Department B 225 155
Materials \$ 382,500 \$ 42,750 \$ 117,000 \$ 222,750
________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________
Conversion costs:
Department A \$ 250,250
Department B 40,500
________________________________________ ________________________________________ ________________________________________
Total conversion costs \$ 290,750
________________________________________________________________________________ ________________________________________________________________________________
Required:
(a) What is the unit cost of each model transferred to finished goods in April? (Do not round intermediate calculations. Round final answers to the nearest dollar amounts and units. Omit the “\$” sign in your response.)

Product Unit Cost
X-10 \$
X-20 \$
X-40 \$
________________________________________

(b) What is the balance of work-in-process inventory on April 30 for Department A? Department B? (Do not round intermediate calculations. Round final answers to the nearest dollar amounts and units. Omit the “\$” sign in your response.)

Department A Department B
Balance of work-in-process ending inventory \$ \$