Question: O’Leary Corporation manufactures special-purpose
O’Leary Corporation manufactures special-purpose portable structures (huts, mobile offices, and so on) for use at construction sites. It only builds to order (each unit is built to customer specifications). O’Leary uses a normal job costing system. Direct labor at O’Leary is paid $17 per hour, but the employees are not paid if they are not working on jobs. Manufacturing overhead is assigned to jobs by a predetermined rate on the basis of direct labor-hours. The company incurred manufacturing overhead costs during two recent years (adjusted for price-level changes using current prices and wage rates) as follows:
At the beginning of Year 3, O’Leary has two jobs, which have not yet been delivered to customers. Job MC-270 was completed on December 27, Year 2. It is scheduled to ship on January 7, Year 3. Job MC-275 is still in progress. For the purpose of computing the predetermined overhead rate, O’Leary uses the previous year’s actual overhead rate. Data on direct materials costs and direct labor-hours for these jobs in Year 2 follow:
During Year 3, O’Leary incurred the following direct materials costs and direct labor-hours for all jobs worked in Year 3, including the completion of Job MC-275:
At the end of Year 3, there were four jobs that had not yet shipped. Data on these jobs follow:
Required
a. What were the amounts in the beginning Finished Goods and beginning Work-in-Process accounts for year 3?
b. O’Leary incurred direct materials costs of $57,000 and used an additional 300 hours in Year 3 to complete job MC-275. What was the final (total) cost charged to job MC-275?
c. What was over- or underapplied overhead for Year 3?
d. O’Leary prorates any over- or underapplied overhead to Cost of Goods Sold, Finished Goods Inventory, and Work-in-Process Inventory. Prepare the journal entry to prorate the over- or underapplied overhead computed in requirement (c).
e. A customer has asked O’Leary to bid on a job to be completed in Year 4. O’Leary estimates that the job will require about $92,500 in direct materials and 5,000 direct labor-hours. Because of the economy, O’Leary expects demand for its services to be low in Year 4, and the CEO wants to bid aggressively but does not want to lose any money on the project. O’Leary estimates that there would be virtually no sales or administrative costs associated with this job. What is the minimum amount O’Leary can bid on the job and still not incur a loss?
> Refer to the facts in Problem 8-59. Required a. Prepare a production cost report using FIFO. b. Answer requirement (b) in Problem 8-59. Problem 8-59: Required a. Prepare a production cost report for September using the weighted-average method. b. Manage
> Refer to the data in Exercise 8-56 and Problem 8-74 (Hedwig Optical). The marketing manager cannot believe that the controller wants to treat all binocular models the same. The marketing manager says that in order to understand where to target marketing
> Spokane, Inc. is a manufacturing company that produces parts both for inventory and to custom specifications. Parts produced for inventory are sold at prices determined in the market. Custom parts are sold at a price equal to production cost plus a profi
> Antoine Machining estimated its manufacturing overhead to be $279,000 and its direct materials costs to be $450,000 in Year 1. Three of the jobs that Antoine Machining worked on in Year 1 had actual direct materials costs of $15,000 for Job AM002, $55,00
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> Refer to the facts in Problem 8-64. Required The financial managers at Ambassador Lubricants are trying to decide between whether to continue using the weighted-average method or switch to FIFO. They tell you that the June results are fairly typical. Wha
> On April 1, two jobs were in process at Hartwell Contracting. Details of the jobs follow: The Materials Inventory account on April 1 totaled $7,900. Materials purchased during the month totaled $17,100. Indirect materials of $1,540 were issued from mater
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> Select the best answer for each of the following independent multiple-choice questions. a. Hillger Paints’s production cycle starts in Department A. The following information is available for April: Materials are added at the beginning
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> Refer to the facts in Exercise 11-25. Assume that both Fabricating and Finishing work on just two jobs during the month of March: MP-47 and MP-48. Costs are allocated to jobs based on laborhours in Fabricating and machine-hours in Finishing. The number o
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> Hendricks Mining & Manufacturing is a global mineral resource company. At its Taylor site, the company mines and processes three grades of metal—IA, IB, and II—in fixed proportions. The joint costs of mining total $2,550,000. In a typical month, the comp
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> Longwood Corporation processes a liquid into three outputs: K-2, K-4, and K-5. The sales value of each of these products for a single batch follows: The joint costs total $850,000. There are no separable production costs. If K-5 is accounted for as a by-
> Goldsmith Processors produces two joint products from a special type of ore. Product X-1 sells for $8 per unit at the split-off point. After an additional $90,000 of processing costs are incurred, product X-2 sells for $25 per unit. In a typical period,
> Terry Chemicals processes a single raw material, Clean-Z, in Department 1 of its main production facility. Out of the joint process in Department 1, two products emerge: Azyne and Bethanol. Azyne is further processed in Department 2, which also is a join
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> Lipton Liquids produces three products by a joint production process. Raw materials are put into production in Department 1, and at the end of processing in this department, three products appear. Alpha is sold at the split-off point with no further proc
> Mack Precision Tool and Die has two production departments, Fabricating and Finishing, and two service departments, Repair and Quality Control. Direct costs for each department and the proportion of service costs used by the various departments for the m
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> Filer Fabrication has three service departments (S1, S2, and S3) and two production departments (P1 and P2). Data on service department usage and service direct costs follow. Required Assume that Filer Fabrication uses the reciprocal method of service de
> Refer to the information in Problem 11-58 for Rohns Manufacturing. Required Assume that Rohns uses the reciprocal method of service department cost allocation. What is the total service department cost allocated to Fabrication? To Assembly? (Hint: Use th
> Refer to the facts in Problem 11-65. Required a. If Dunedin Bank outsources both the Transactions Department and the IT Department, the total savings (before considering the fee paid to the outside vendor) will be 1. More than the sum of the savings calc
> Refer to the facts in Problem 11-60. The cost accountant at Dunedin Bank estimates that the cost structures in its departments are as follows: Required a. If Dunedin Bank outsources the Transactions Department, what is the maximum it can pay an outside v
> Refer to the facts in Problem 11-57. Baldwin Enterprises estimates that the cost structure in its operations is as follows: Required a. If Baldwin outsources the Legal Department, what is the maximum it can pay an outside vendor without increasing total
> Lothrop Security Group (LSG) provides consulting and security services to various clients, including government agencies and commercial firms. It has two operating departments, Government and Commercial. The Government Department handles contracts with f
> Hessel Corporation has two operating departments (Domestic and Global) and three service departments: Human Resources (HR), Legal, and Testing. In the most recent period, the following costs and service department usage ratios were recorded: Required All
> Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Requi
> The following data are taken from the production records at the Bay Plant of Charlevoix Chemicals for May. Work-in-process beginning inventory consisted of 43,000 units fully complete with respect to materials and 22 percent complete with respect to conv
> A&R Quality Advisors is a small consulting firm offering quality audits and advising services to small and mid-sized manufacturing firms. Quality audits entail reviewing, checking, and documenting quality practices within a firm. Quality advising ent
> Refer to Integrative Case 9-75 in Chapter 9. Assume that all of the facts in Case 9-75 still hold except that the practical capacity of the machinery is 20,000 hours instead of 10,000 hours. Required a. Recompute the unit costs for each of the cola produ
> WSM Corporation is considering offering an air shuttle service between Sao Paulo and Rio de Janeiro. It plans to offer four flights every day (excluding certain holidays) for a total of 1,400 flights per year (= 350 days × 4 flights per day)
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> Refer to the data in Exercise 8-24. Required a. Compute the equivalent units for materials using FIFO. b. Compute the equivalent units for conversion costs using FIFO. Exercise 8-24: Kronk, Inc. provides the following information concerning the work in
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> Refer to the data in Exercise 8-22. Assume that beginning inventory is 20 percent complete with respect to materials and 40 percent complete with respect to conversion costs. Required a. Compute the equivalent units for materials using FIFO. b. Compute t
> By mistake, the production supervisor at East Manufacturing transposed the digits on the production report and reported a higher percentage of completion for each inventory component. Assume that there was no beginning inventory. Required What is the eff
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> Refer to the facts in Exercise 11-27. Woodstock Binding estimates that the variable costs in the IT Department total $110,000, and in the HR Department variable costs total $140,000. Avoidable fixed costs in the IT Department are $18,000. Required If Woo
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> Refer to the data for Memorial Services, Inc. in Exercise 11-33. Required Use the reciprocal method to allocate the service department costs to the production departments. (Matrix algebra is not required.) Exercise 11-33:
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> Refer to the data for Mack Precision Tool and Die in Exercise 11-25. Required Use the reciprocal method to allocate the service costs. (Matrix algebra is not required.) Exercise 11-25:
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> Which method, weighted-average or FIFO, better reflects the current cost of production when using process costing?
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