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1 Cost Accounting

Tauseef Ahmed Qureshi


Problem No 1 Consider the following account balances (in thousands) for the BPL Company. Beginning of current year $22,000 21,000 18,000 End of current year $26,000 20,000 23,000 75,000 25,000 15,000 9,000 11,000 4,000 93,000 29,000

Direct materials inventory Work-in-process inventory Finished goods inventory Purchase of direct materials Direct manufacturing labor Indirect manufacturing labor Plant Insurance Depreciation-plant building Repairs and maintenance - plant Marketing and Distribution costs General & Administrative costs

1. Prepare a schedule of cost of goods manufactured for current year. 2. Revenues in current year were 300 million. Prepare the income statement, current year. Problem No 2 A distraught employee, Guy Arson, put a torch to a manufacturing plant on a blustery Feb 26. The resulting blaze completely destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building. They revealed the following for the period from Jan 1, 2000 to Feb 26, 2000. Direct Material purchased $160,000 WIP, Jan 1, 2000 34,000 Direct Materials, Jan 1, 2000 16,000 Finished goods, Jan 1, 2000 30,000 Indirect Manufacturing costs 40 % of conversion cost Revenue 500,000 Direct manufacturing labor 180,000 Prime costs (all direct mfg cost) 294,000 Gross Margin % based on sales 20 % Cost of goods available for sale 450,000 The loss was fully covered by insurance .The insurance company wants to know the historical cost of inventories as one factor considered when negotiating a settlement.

Required: 1. Finished goods inventory, Feb 26, 2000. 2. WIP inventory, Feb 26, 2000. 3. Direct materials inventory, Feb 26, 2000 Problem No 3 Shaw Tool Company produces and sells high-quality automotive tool sets. Each set of tools is contained in a wooden case that is purchases from an outside supplier. The wooden carrying cases are held as raw materials inventory until they are placed into production and combined with the related tool sets. The firms accountant has provided the following information for the month of July: 1. Beginning raw materials inventory included 2,100 wooden cases at a cost of $94,500. 2. The company purchased 4,000 additional cases at $45 each. 3. A total of 4,400 cases were transferred into production. 4. 400 cases were given for promotional purposes to managers of prospective retail outlets. Of the cases placed into production, 65% were combined with tool sets that were completed and transferred to finished goods inventory. Of the cases transferred to finished goods inventory during July, 70% had been sold by month-end. There was no beginning inventory of wooden case in finished goods inventory or in work in process inventory. Required: Determine the cost of the wooden cases that would be included in the following accounts as of July 31: A. Raw material inventory B. Work in process inventory C. FG inventory D. Selling expenses E. Cost of goods sold Problem 4: Williams, Inc submits the following for July. Direct labor cost .. $ 30,000 Cost of goods sold .. 111,000 Factory overhead is applied at the rate of 150% of direct labor cost Marketing expenses . 14,100 General & administrative expenses 22,900 Sales for the month .. 182,000 Purchases of material 42,300 Inventories July 1 July 31

Finished Goods .. $15,000 WIP 9,600 Materials .. 7,000 Required: Prepare an income statement with schedule showing cost of goods manufactured. $17,500 13,000 7,400

Problem No 5 Beta Corporation experienced a fire on December 31, 1990. The fire destroyed a significant portion of the firm's accounting records, and the controller is currently trying to prepare a reliable income statement for the year. She has gathered the following information from various sources: 1. Sales $300,000 2. Beginning inventories for 1990: Work in process $20,000 Finished goods 45,000 3. Raw materials inventories are not maintained by the firm as materials are purchases as needed for production. 4. Manufacturing overhead cost is three times as much as direct labor cost. 5. Direct materials used in production are one half as much as direct labor cost. 6. The firm's gross profit percentage is 40% of sales. 7. Selling and administrative expenses are $80,000 each year. 8. The work in process inventory increased $5000 during 1990. 9. The finished goods inventory decreased by an unknown amount during 1990. 10. Direct labor cost amounting to $40,000 was recorded in 1990. Required: Prepare the income statement and cost of goods manufactured statement for the firm's 1990 performance based on the data above. Problem No 6 Hickey Company, a manufacturing firm, produces a single produce. The following information has been taken from the companys production, sales, and cost records for last year. Production in units .. 30,000 Sales in units ,.. ? Ending finished goods inventory in units ? Sales in dollars .. $650,000 Costs: Advertising . $50,000 Direct labor 80,000 Indirect labor .. 60,000 Raw materials purchased 160,000 Building rent 50,000 (production uses 80 % of the space, administrative and sales office uses the rest) Utilities, factory .. 35,000 Royalty paid for use of production patent .. ? $1 unit produced Maintenance, factory . 25,000

Rent for special production equipment, $ 6,000 per year plus $ 0.10 per unit produces Selling and administrative salaries Other factory overhead costs .. Other selling & administrative expenses .. ? 140,000 11,000 20,000

January 1 December 31 the year) Inventories: Raw materials: 10,000 Work in process: 40,000 Finished goods: (Beginning of the year) $ 20,000 30,000 0 ? (End of $

The finished goods inventory is being carried at the average unit production cost for the year. The selling price of the product is $ 25 per unit. 1. Prepare a schedule of cost of goods manufactured for the year. 2. Compute the following. a. The number of units in the finished goods inventory on December 31. b. The cost of the units in the finished goods inventory at December 31. 3. Prepare an income statemen

Problem 7 The Klaassen Company reports the following data for Sept: Product A B Production Per unit production costs Direct Material Direct Labor Applied overhead Sales Price per unit Beginning inventories Ending Inventories 10,000 units $4 10 7 $ 21 $ 30 1,000 units 2,000 Product 8,000 units $3 20 14 $ 37 $ 50 900 units 100

Actual factory overhead was $ 180,000; factory overhead is applied at a rate of $ 0.70 per direct labor dollar. Over or under applied factory overhead is closed to the costs of goods sold account. Marketing and Administrative expenses were $ 100,900. Required: 1. over or under applied factory overhead 2. Cost of goods manufactured

3. Cost of goods sold . 4. Operating income.

Problem No 8

For each company, fill in the missing data. Each company is independent of the others. Compa ny A $108,00 0 14,000 38000 a 40000 b 30000 c d 14000 13000 16000 18000 Compa ny B e f 80000 36000 74000 85000 g 50000 21000 30000 18000 24000 h Compa ny C $120,00 0 30000 i 42000 j k 46000 l 24000 42000 34000 30000 60000

Sales Finished goods, beginning inventory Cost of goods manufactured Finished goods, ending inventory Cost of goods sold Gross profit Operating expenses Net income Work in progress, beginning inventory Direct labor cost Raw materials used Manufacturing overhead Work in process, ending inventory Problem No 9

Regina Office equipment manufactures and sells metal shelving. It began operations on January 1, 2000. Costs incurred for 2000 are as follows. (V stands for variable and F stands for fixed) Direct material used costs Direct manufacturing labor costs Plant energy costs Indirect manufacturing labor costs $140,000 V 30,000 V 5,000 V 10,000 V

Indirect manufacturing labor costs Other Indirect manufacturing costs Other Indirect manufacturing costs Marketing ,distribution, and customer service costs Marketing ,distribution, and customer service costs Administrative costs 16,000 F 8,000 V 24,000 F 122,850 V 40,000 F 50,000 F

Variable manufacturing costs are variable with respect to units produced. Variable marketing, distribution, and customer services costs are variable with respect to units sold. Inventory data are as follows Beginning, Jan Ending, Dec 1,2000 31,2000 Direct materials 0 Kilograms 2,000 Kilograms 0 Units 0 Units Work in process 0 units ? Units Finished goods Production in 2000 was 100,000 units. Two kilograms of direct materials are used to make one unit of finished product. Revenues in 2000 were $436,800. The selling price per unit and the purchase price per kilogram of direct materials were stable throughout the year. The companys ending inventory of finished goods is carried at the average unit manufacturing costs for 2000. Finished goods inventory, at December 31,2000 was $20,970. Required:

1. 2. 3. 4.

Direct materials inventory, total costs, December 31, 2000. Finished goods inventory, total units, December 31, 2000. Selling price per unit, 2000. Operating income,2000.Show your computations.

Problem No 10 An auditor for Revenue Canada is trying to reconstruct some partially destroyed records of two taxpayers. For each of the cases in the accompanying list, find the unknowns designated by capital letters figures are assumed to be in thousands)

Accounts receivable, December 31,2000 Cost of goods sold Accounts payable, January 1,2000 Accounts payable, December 31,2000 Finished goods inventory, December 31,2000 Gross Margin Work in process, January 1,2000

CASE 1 $6,000 A 3,000 1,800 B 11,300 0

CASE 2 $2,100 20,000 1,700 1,500 5,300 C 800

Work in process, December 31,2000 Finished goods inventory, January 1,2000 Direct material used Direct manufacturing labor Indirect manufacturing costs Purchase of direct material Revenues Accounts receivable, January 1,2000 0 4,000 8,000 3,000 7,000 9,000 32,000 2,000 3,000 4,000 12,000 5,000 D 7,000 31,800 1,400

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