Question: The following T-accounts represent November
The following T-accounts represent November activity:
Additional Data
• Materials of $113,600 were purchased during the month, and the balance in the Materials Inventory account increased by $11,000.
• Overhead is applied at the rate of 150 percent of direct labor cost.
• Sales are billed at 180 percent of cost of goods sold before the over- or underapplied overhead is prorated.
• The balance in the Finished Goods Inventory account decreased by $28,600 during the month before any proration of under- or overapplied overhead.
• Total credits to the Wages Payable account amounted to $202,000 for direct and indirect labor.
• Factory depreciation totaled $48,200.
• Overhead was underapplied by $25,080. Overhead other than indirect labor, indirect materials, and depreciation was $198,480, which required payment in cash. Underapplied overhead is to be allocated.
• The company has decided to allocate 25 percent of underapplied overhead to Work-in-Process Inventory, 15 percent to Finished Goods Inventory, and the balance to Cost of Goods Sold. Balances shown in T-accounts are before any allocation.
Required
Complete the T-accounts.
Transcribed Image Text:
Materials Inventory Work-in-Process Inventory BB (11/1) Dir. Materials 86,200 EB (11/30) 56,400 32,600 Finished Goods Inventory Cost of Goods Sold EB (11/30) 101,000 Manufacturing Overhead Control Applied Manufacturing Overhead 264,000 Wages Payable Sales Revenue 725,400
> Is a criminal trial a “job” for costing purposes?
> When is the basic cost flow model used? Give an example.
> Why might the operating profit calculated by CVP analysis differ from the net income reported in financial statements for external reporting?
> Would a dentist, an architect, a landscaper, and a lawyer use job costing or process costing? Explain.
> Interview the manager of a construction company (for example, a company that does house construction, remodeling, landscaping, or street or highway construction) about how the company bids on prospective jobs. Does it use cost information from former job
> Currently, generally accepted accounting principles (GAAP) in the United States require firms to expense research and development (R&D) costs as period costs. Therefore, when the resulting product is sold, R&D costs are not part of reported product costs
> Greg’s Diner has the following information for year 2, when several new employees were added to the waitstaff: Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000 Cost of food serveda . . . . . . . . . . . .
> “Worrying about the choice of an overhead allocation base is a waste of time. In the end, all the overhead is charged to production.” Do you agree? Why?
> What are the costs of a product using normal costing?
> TechMaster is an information technology (IT) consulting company offering services to small firms. TechMaster bills clients for its various services based on the hours its professionals spend. In August, IT professionals billed 875 hours to clients and wo
> Chuck’s Brokerage Service (CBS) is a discount financial services firm offering clients investment advice, trading services, and a variety of mutual funds for investment. Chuck has collected the following information for October: Requi
> Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 440 hours for Massive Airframes and 660 hours for Gigantic Drydocks. AB bills clients at the
> For August, Royal Consulting and Mediation Practice (RCMP) worked 900 hours for Alberta Company and 2,100 hours for Ontario Corporation. RCMP bills clients at the rate of $400 per hour; labor cost for its consulting staff is $200 per hour. The total numb
> When designing a cost system, what points should you consider before starting the design?
> IYF Corporation manufactures miscellaneous parts for building construction and maintenance. IYF uses a normal job costing system. The system applies manufacturing overhead on the basis of direct labor cost. For managerial purposes, over- or underapplied
> Ross Enterprises maintains a fleet of agricultural equipment for rental to local farmers. Ross maintains all its equipment in a company-owned facility. Data on maintenance costs and operating hours of the equipment have been collected for the past 24 mon
> At the beginning of the month, Arthur’s Olde Consulting Corporation had two jobs in process that had the following costs assigned from previous months: During the month, Jobs SY-400 and SY-403 were completed but not billed to customer
> Carmen Beverages reports the following information for July: Units produced and sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,800 Per unit revenue and costs: Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> Tony’s Textiles uses a predetermined factory overhead rate based on machine-hours. For May, Tony’s budgeted overhead was $210,000 based on a budgeted volume of 35,000 machine-hours. Actual overhead amounted to $227,500 with actual machine-hours totaling
> Turco Products uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for September: Turco applies overhead to production at a predetermined rate of 120 percent based on direct labor cost. Job 9-27, the only
> Mary’s Landscaping uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for August: Mary’s applies overhead to production at a predetermined rate of 80 percent based on d
> Prepare a scattergraph based on the overhead and labor-hour data in Exercise 5-30. In Exercise 5-30 Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhea
> Refer to the information in Exercise 7-27. Prepare an entry to allocate over- or underapplied overhead to: a. Work in Process. b. Finished Goods. c. Cost of Goods Sold. In Exercise 7-27 Aspen Company estimates its manufacturing overhead to be $625,000 a
> Aspen Company estimates its manufacturing overhead to be $625,000 and its direct labor costs to be $500,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $195,000. Job 2-2, wh
> Refer to the information in Exercise 7-25. Prepare an entry to allocate the under- or overapplied overhead. Overhead applied in each of the inventory accounts is as follows: Work-in-process inventory . . . . . . . . . . . . . $10,125 Finished goods inven
> “Cost allocation is arbitrary, so there is nothing gained by it. We should report only the costs that we know are direct.” Do you agree? Why?
> Mark Corporation estimates its manufacturing overhead to be $90,000 and its direct labor costs to be $200,000 for year 1. The actual direct labor costs were $50,000 for Job 301, $75,000 for Job 302, and $100,000 for Job 303 during year 1; the actual manu
> The following balances are from the accounts of Hill Components: Direct materials used during the year amount to $59,800, and the cost of goods sold for the year was $68,900. Required Find the following by completing a cost of goods sold statement: a.
> Old Port Shipyards does work for both the U.S. Navy and private shipping companies. Old Port’s major business is renovating ships, which it does at one of two company dry docks referred to by the names of the local towns: Olde Town and
> It is your first day at a new job and you talk about the themes of cost system design. One of your new colleagues asks, “If different cost information is used for different purposes, does that mean we do not know what something costs? I thought that was
> What is the difference between product costs and period costs?
> Kim’s Asphalt does driveway and parking lot resurfacing work for large commercial clients as well as small residential clients. An inventory of materials and equipment is on hand at all times so that work can start as quickly as possibl
> 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
> Partially completed T-accounts and additional information for Pine Ridge Corporation for the month of February follow: Additional information for February follows: • Labor wage rate was $25 per hour. • During the mon
> Selected information from the Blake Corporation accounting records for June follows: Additional information for July follows: • Labor wage rate was $35 per hour. • During the month, sales revenue was $1,020,000, and
> Partially completed T-accounts and additional information for Cardinals, Inc., for the month of November appear on the following page: Additional information for November follows: • Labor wage rate was $30 per hour. •
> The following transactions occurred in January at Tarnsdale Fabricators, a manufacturer of custom tools: 1. Purchased $17,000 of materials. 2. Issued $16,800 in direct materials to the production department. 3. Issued $1,200 of supplies from the material
> Prepare a scattergraph based on the overhead and machine-hour data in Exercise 5-30. In Exercise 5-30 Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overh
> Apple, Inc. is developing a new product (the iWhatever). Managers at Apple are interested in estimating the impact of learning on the cost of producing the iWhatever. They plan to use data from previous products, such as the iPod and the iPad, to estimat
> Brighton Services repairs locomotive engines. It employs 100 full-time workers at $20 per hour. Despite operating at capacity, last year’s performance was a great disappointment to the managers. In total, 10 jobs were accepted and compl
> The following data are from the accounting records of Fremont Products for year 2: Units produced and sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500 Total revenues and costs Sales revenue . . . . . . . . . . . . . . . . . . . . . .
> On September 1, two jobs were in process at Pete’s Patios. Details of the jobs follow: Materials Inventory on September 1 totaled $11,040, and $1,392 worth of materials was purchased during the month. Indirect materials of $192 were w
> For the month of January, Bay Accountants worked 2,000 hours for Lake Lumber, 600 hours for Marty’s Marina, and 1,000 hours for the State Prison System. Bay bills clients at $160 an hour; its labor costs are $60 an hour. A total of 4,000 hours were worke
> What are some important assumptions commonly made in CVP analysis. Do these assumptions impose serious limitations on the analysis? Why or why not?
> Youth Athletic Services (YAS) provides adult supervision for organized youth athletics. It has a president, William Mayes, and five employees. He and one of the other five employees manage all marketing and administrative duties. The remaining four emplo
> A new computer virus (AcctBGone) destroyed most of the company records at Backups RntUs. The computer experts at the company could recover only a few fragments of the company’s factory ledger for February as follows: Further investiga
> UCD Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to apply overhead to individual jobs. An estimate of overhead costs at different volumes was prepared for the cur
> The following transactions occurred in June at Fast Wheels, Inc., a custom bicycle manufacturer: 1. Purchased $20,000 of materials. 2. Issued $1,000 of supplies from the materials inventory. 3. Purchased $25,000 of materials. 4. Paid for the materials pu
> Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different
> What is each component of the basic cost flow model? Describe each component.
> Simple regression results from the data of Adriana Corporation (Exercise 5-30) are as follows: Equation: Overhead = $217,610 + ($88.61 × Labor-hours) Statistical data Correlation coefficient . . . . . . . . . . . . . . . . . . . . . . . . . . .610 R2 .
> Terracotta, Inc., provides you with the following data for their single product: Sales price per unit ......................................................................................... $ 25 Fixed costs (per month): Selling, general, and administra
> The following T-accounts represent September activity: Required Compute the missing amounts indicated by the letters (a) through (i). Materials Inventory Work-in-Process Inventory BB (9/1) BB (9/1) 22,300 180,500 121,000 94,000 8,000 (a) 4,300 (b)
> The accounting records for Frankie’s Fixtures report the following production costs for the past year: Direct materials . . . . . . . . . . . . . . . . . . . . . $420,000 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000 Variable o
> Valley Corporation estimated that direct labor for the year would be 58,500 hours. Valley’s overhead (all fixed) is applied on the basis of direct labor-hours. The company estimates its overhead costs at $234,000. During the year, all overhead costs were
> Write out the profit equation and describe each term.
> Sydney Corporation estimated that machine-hours for the year would be 20,000 hours and overhead (all fixed) would be $80,000. Sydney applies its overhead on the basis of machine-hours. During the year, all overhead costs were exactly as planned ($80,000)
> Describe the predetermined overhead rate. What is the role of the predetermined overhead rate in product costing?
> What are the three criteria for the design of cost management systems?
> Is it possible for a company to have a two-stage allocation system but use, for example, direct labor-hours to allocate costs from all pools in the second stage? Will the resulting product costs be the same as if it used a single-stage system?
> The following transactions occurred in October at Pawnee Workshops, a custom manufacturer of furniture: 1. Purchased $16,000 of materials. 2. Issued $800 of supplies from the materials inventory. 3. Purchased $11,200 of materials. 4. Paid for the materia
> Refer to Exercise 2-44. In Exercise 2-44 Larcker Manufacturing’s cost accountant has provided you with the following information for January operations: Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21 per unit Fixed
> Place the number of the appropriate definition in the blank next to each concept. Concept ____ Period cost ____ Indirect cost ____ Fixed cost ____ Opportunity cost ____ Outlay cost ____ Direct cost ____ Expense ____ Cost ____ Variable cost ____ Full abs
> Identify a particular support function in a business school (the library, for example). Discuss possible allocation bases that might be used to allocate costs in the function to programs (degrees) or students.
> What is continuous flow processing? Give at least three examples of products that might use continuous flow processing.
> Ideally, what does an allocation base reflect between the overhead cost and the activity (production of a product, for example)?
> Old Tyme Soda produces one flavor of a popular local soft drink. It had no work in process on October 31 in its only inventory account. During November, Old Tyme started 10,000 barrels. Work in process on November 30 is 1,200 barrels. The production supe
> The following data apply to the provision of psychological testing services: Sales price per unit (1 unit = 1 test plus feedback to client) ...................... $ 600 Fixed costs (per month): Selling and administration .................................
> What is the purpose of having two manufacturing overhead accounts, the Manufacturing Overhead Control and Applied Manufacturing Overhead?
> Cray-Z Consultants provides management accounting advice to not-for-profit firms. It employs three levels of consultants, based on experience and education: partner, senior, and associate. When Cray-Z considers bidding on jobs, it estimates the costs usi
> 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> Big City Bank processes the checks its customers write at Riverdale Operations Center (ROC). ROC processed 2,800,000 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 Sep
> The typical cost-volume-profit graph assumes that profi ts increase continually as volume increases. What are some of the factors that might prevent the increasing profits that are indicated when linear CVP analysis is employed?
> Pogue’s Pops produces a popular beverage. Operating data for October follow: Materials . . . . . . . . . . . . . . . . . . . $ 650,000 Labor . . . . . . . . . . . . . . . . . . . . . . . . . 110,000 Manufacturing overhead . . . . . . 2,940,000 Pogue pro
> Why is control of materials important from a managerial planning perspective?
> Enviro Corporation manufactures a special liquid cleaner at its Green plant. Operating data for June follow: Materials . . . . . . . . . . . . . . . . . . . . $714,000 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . 61,200 Manufacturing overhea
> ABC Consultants works for only two clients: a large, for-profit corporation and a small environmental not-for-profit agency. The fee charged for work is based on cost. In deciding how to allocate overhead, the CFO of ABC decides to use the base that allo
> Fill in the missing items for the following inventories: A. B Beginning balance.... Ending balance . $ 30,000 $ 260,000 $21,000 31,000 110,000 120,000 Transferred in. 18,000 Transferred out. 27,000 920,000
> Fill in the missing items for the following inventories: A B Beginning balance... $ 7,100 $156,000 $250,000 260,000 Ending balance 6,200 22,000 128,000 Transferred in Transferred out 270,000 280,000
> Fill in the missing items for the following inventories: A B. Beginning balance Ending balance . Transferred in... $51,000 48,000 $28,400 24,800 88,000 $ 67,000 56,000 . Transferred out. 57,000 170,000
> Assume that the following events occurred at a division of Generic Electric for March of the current year: 1. Purchased $45 million in direct materials. 2. Incurred direct labor costs of $24 million. 3. Determined that manufacturing overhead was $40.5 mi
> Why are cost flow diagrams useful in describing product costing systems?
> How are product costing and cost allocation related?
> 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 use
> Brunswick Parts is a small manufacturing firm located in eastern Canada. The company, founded in 1947, produces metal parts for many of the larger manufacturing firms located in both Canada and the United States. It prides itself on high quality and cust
> I don’t understand this. Last year [year 1], we decided to drop our highest-end Red model and only produce the Yellow and Green models, because the cost system indicated we were losing money on Red. Now, looking at the preliminary numbe
> Owl-Eye Radiologists (OR) does various types of diagnostic imaging. Radiologists perform tests using sophisticated equipment. OR’s management wants to compute the costs of performing tests for two different types of patients: those who
> What are the three categories of product cost in a manufacturing operation? Describe each element briefly.
> Mets Products produces baseball caps and T-shirts. Most of the production is done by machine. Data on operations and costs for October follow: Management asks the firm’s cost accountant to compute product costs. The accountant first a
> Refer to the data in Exercise 6-34. The president of Tiger Furnishings is confused about the differences in costs that result from using direct labor costs and machine-hours. In Exercise 6-34 Tiger Furnishings produces two models of cabinets for home th
> Are learning curves likely to affect materials costs per unit?
> Refer to the data in Exercise 6-34. Compute the individual product costs per unit assuming that Tiger Furnishings uses machine-hours to allocate overhead to the products. In Exercise 6-34 Tiger Furnishings produces two models of cabinets for home theate
> Star Buck, a coffee shop manager, has two major product lines—drinks and pastries. If Star allocates common costs on any objective basis discussed in this chapter, the drinks are profitable, but the pastries are not. Star is concerned that her boss will
> Assume that Limitless Labs, Inc., offers three basic drug-testing services for professional athletes. Here are its prices and costs: Variable costs include the labor costs of the medical technicians at the lab. Fixed costs of $390,000 per year include
> Larcker Manufacturing’s cost accountant has provided you with the following information for January operations: Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21 per unit Fixed manufacturing overhead costs . . . . . . .
> Refer to the data in Exercise 6-34. Compute the individual product costs per unit assuming that Tiger Furnishings uses direct labor costs to allocate overhead to the products. In Exercise 6-34 Tiger Furnishings produces two models of cabinets for home t
> For each of the following costs incurred in a manufacturing operation, indicate whether they are included in prime costs (P), conversion costs (C), or both (B): a. Property taxes on the factory. b. Direct materials used in the production process. c. Tran
> Organic Grounds produces two brands of coffee: Star and Bucks. The two coffees are produced in one factory using the same production process. The only difference between the two coffees is the cost of the unroasted coffee beans. The following data are av
> S. Lee Enterprises produces two models of lawn tractor: SL1 and SL2. The models are both produced in the company’s Louisville factory and go through identical assembly operations. The difference is in the quality (hence, cost) of the pa
> The Office Mart store in South Beach experienced the following events during the current year: 1. Incurred $400,000 in marketing costs. 2. Purchased $1,200,000 of merchandise. 3. Paid $40,000 for transportation-in costs. 4. Incurred $400,000 of administr
