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Solution Manual Managerial Accounting Hansen Mowen 8th Editions CH 6 PDF
Solution Manual Managerial Accounting Hansen Mowen 8th Editions CH 6 PDF
1. Job-order costing accumulates costs by ship makes sense not only to the business
jobs, and process costing accumulates costs but also to the customer. By comparing the
by processes. Job-order costing is suitable cost of the individual job with the price
for operations that produce custom-made charged, the firm can determine the profit at-
products that receive different doses of tributable to each job. Then, the firm can de-
manufacturing costs. Process costing, on cide whether the profit is sufficient to contin-
the other hand, is suitable for operations that ue offering the product or service under the
produce homogeneous products that receive current terms.
equal doses of manufacturing costs in each
process. 6. Materials requisition forms serve as the
source documents for posting materials
2. More paperwork is required. Labor and ma- usage and costs to individual jobs. Time or
terials are assigned to departments in a work tickets serve a similar function for la-
process-costing system. In a job-order cost- bor. Predetermined overhead rates are used
ing system, labor and materials must be to allocate overhead to jobs.
tracked to each job, requiring time tickets
and more use of materials requisitions. Addi- 7. In sequential processing, products pass
tionally, a job-order costing system requires through a series of processes, one after
another (i.e., in a given sequence). In paral-
a separate job-order cost sheet for each job.
lel processing, products pass through two or
3. Job-order costing is appropriate for many more different sequences at the same time,
service firms. The key factor is that differing merging eventually at the final process.
amounts of resources must be used for dif-
ferent jobs. Examples of service firms that 8. Equivalent units are the number of whole
use job-order costing are law firms, account- units that could have been produced, given
the amount of materials, labor, and over-
ing firms, dentists, automobile repair, and
architectural firms. head used. Equivalent units are the meas-
ure of a period’s output, a necessary input
4. Unless all your jobs (lawns) are the same for the computation of unit costs in a
size and require the same services, you will process-costing system.
need to use a job-order costing system. At
minimum, you will need job-order cost 9. In calculating this period’s unit cost, the
weighted average method treats prior-period
sheets for each customer. You will need la-
bor time tickets to record the amount of time output and costs carried over to the current
period as belonging to the current period.
spent on each job, both to cost the job and
The FIFO method excludes any costs and
to pay the individual doing the work. A mate-
rials requisition form may be needed if ferti- output carried over from this period’s unit
cost computation.
lizer or weed control products are used (al-
ternatively, it may be possible to just list the 10. If the per-unit cost of the prior period is the
amount of product used directly on the job- same as the per-unit cost of the current pe-
order cost sheet). The more complicated riod, there will be no difference between the
your business becomes (e.g., mowing, results of the weighted average and FIFO
trimming, fertilizing, trimming shrubbery, and methods. Additionally, if no beginning work-
planting shrubs and trees), the more source in-process inventory exists, both the FIFO
documents will be needed to keep track of and weighted average methods give the
time, materials, and use of capital equip- same results.
ment (e.g., trimmers and brushhogs).
11. Separate equivalent units must be calcu-
5. The cost of a job is often strongly related to lated for materials and conversion costs.
the price charged. Logically enough, the
higher the cost of the job, the higher the 12. Transferred-in units represent partially com-
price charged to the customer. This relation- pleted units and are clearly a material for the
145
receiving department. To complete the uses the unit cost to value goods transferred
product (or further process it), additional ma- out and those remaining in work in process.
terials and conversion costs are added by The final step checks to see if the costs as-
the receiving department. signed in step 4 equal the total costs to ac-
13. The work-in-process account of the receiv- count for.
ing department is debited, and the work-in- 15. The weighted average method uses the
process account of the transferring depart- same unit cost for all goods transferred out.
ment is credited. The finished goods ac- The FIFO method divides goods transferred
count is debited, and the work-in-process out into two categories: units started and
account of the final department is credited
completed and units from beginning work in
upon completion of the product.
process. The period’s unit cost is used to
14. The first step is the preparation of a physical value goods started and completed. The
flow schedule. This schedule identifies the cost of goods transferred out from beginning
physical units that must be accounted for work in process is obtained by (1) assigning
and provides an accounting. The second them all costs carried over from the prior pe-
step is the equivalent unit schedule. This riod and (2) using the current period’s unit
schedule computes the equivalent whole cost to value the equivalent units completed
output for the period. The schedule’s com- this period.
putations rely on information from the physi-
16. Service firms generally do not have work-in-
cal flow schedule. The next step is computa-
process inventories, and so equivalent units
tion of the unit cost. To compute the unit
of production are not needed. An important
cost, the manufacturing costs of the period
factor in process costing for services is de-
for the process are divided by the period’s
termining just what constitutes a unit of out-
output. The output is obtained from the
put.
equivalent unit schedule. The fourth step
146
EXERCISES
6–1
Job-Order Process
a. Paint manufacturing X
b. Auto manufacturing X
c. Toy manufacturing X
d. Custom cabinet making X
e. Airplane manufacturing X
f. Personal computer assembly X
g. Furniture making X
h. Custom furniture making X
i. Dental services X
j. Hospital services X
k. Paper manufacturing X
l. Auto repair X
m. Architectural services X
n. Landscape design services X
o. Light bulb manufacturing X
6–2
147
6–3
2. Ending balance in Work in Process = Job #614 + Job #616 + Job #617
= $17,280 + $1,240 + $4,430 = $22,950
6–4
3. Ending balance in Work in Process = Job #266 + Job #267 + Job #268
= $90,170 + $6,825 + $17,000 = $113,995
148
6–5
3. Jordan would need to prepare a simple form that included columns for the
date, the beginning time, the ending time, the total number of hours worked,
and the job name (or number). She could have a separate page for each day.
This would be especially helpful if she hired other employees from time to
time to work on jobs.
6–6
1. Ending balance in
Work in Process = Job #902 + Job #906 + Job #908 + Job #909
= $400 + $750 + $700 + $905 = $2,755
2. Ending balance in Finished Goods = Job #901 + Job #903 + Job #905 + Job #910
= $650 + $550 + $860 + $803 = $2,863
3. Cost of Goods Sold = Job #904 + Job #907 = $695 + $180 = $875
149
6–7
6–8
Bosserman Company
Income Statement
For the Month Ended July 31, 20XX
Sales ($60,050 × 1.40) ................................................. $ 84,070
Cost of goods sold ..................................................... 60,050
Gross margin .............................................................. $ 24,020
Selling expenses (0.10 × $84,070 + $4,100) .............. 12,507
Administrative expenses ........................................... 3,900
Operating income ....................................................... $ 7,613
150
6–9
151
6–10
6–11
152
3. Unit cost = $14,625/600 = $24.38* per pair
*Rounded
6–12
6–13
153
6–14
154
6–15
1. Department 1:
a. Units transferred to Department 2 = Total units* – Ending WIP
= 6,480 – 3,600
= 2,880
*Total units = Beginning WIP + Units started = 0 + 6,480 = 6,480
b. Materials Conversion
Units completed 2,880 2,880
Add: Units in ending work in process:
3,600 × 100% 3,600
3,600 × 50% 1,800
Equivalent units of output 6,480 4,680
2. Department 2:
a. Units transferred out = Total units* – Ending WIP = 4,080 – 600 = 3,480
*Total units = Beginning WIP + Units transferred in = 1,200 + 2,880 = 4,080
b. Materials Conversion
Units completed 3,480 3,480
Add: Units in ending work in process:
600 × 0% 0
600 × 40% 240
Equivalent units of output 3,480 3,720
155
6–16
156
6–17 Cocolots Company
Mixing Department
Production Report
For the Month of June 20XX
(Weighted Average Method)
Unit Information
Physical flow:
Units to account for: Units accounted for:
Units in beginning WIP 60,000 Units completed 240,000
Units started 220,000 Units in ending WIP 40,000
Total units to account for 280,000 Total units accounted for 280,000
Equivalent units:
Units completed 240,000
Units in ending work in process 8,000
Total equivalent units 248,000
Cost Information
Costs to account for:
Beginning work in process $ 390,600
Incurred during March 1,171,800
Total costs to account for $1,562,400
Cost per equivalent unit $ 6.30
157
6–18
A B C D
Completed 16,200a 24,000c 31,000d 60,000f
Ending WIP 1,000b 0 900e 2,500g
Equivalent units 17,200 24,000 31,900 62,500
a e
(3,200 + 17,000 – 4,000) (9,000 × 0.10)
b f
(4,000 × 0.25) (30,000 + 40,000 – 10,000)
c g
(1,000 + 23,000 – 0) (10,000 × 0.25)
d
(40,000 – 9,000)
6–19
A B C D
Completed* 16,200 24,000 31,000 60,000
Add: Ending WIP* 1,000 0 900 2,500
Less: Beginning WIP** 960 400 0 22,500
Equivalent units 16,240 23,600 31,900 40,000
*See solution to Exercise 6–18.
**Beginning WIP for A: 3,200 × 0.30 = 960
Beginning WIP for B: 1,000 × 0.40 = 400
Beginning WIP for C: 0 × 0 = 0
Beginning WIP for D: 30,000 × 0.75 = 22,500
6–20
158
6–20 Concluded
2. Materials Conversion
Units completed 60,000 60,000
Add: Units in ending WIP ×
Fraction complete (20,000 × 100%; 20,000 × 60%) 20,000 12,000
Equivalent units of output 80,000 72,000
159
6–21
Equivalent units:
Materials Conversion
Units completed 60,000 60,000
Units in ending work in process 20,000 12,000
Total equivalent units 80,000 72,000
Cost Information
Costs to account for:
Materials Conversion Total
Beginning WIP $ 49,000 $ 2,625 $ 51,625
Incurred during August 351,000 78,735 429,735
Total costs to account for $400,000 $ 81,360 $481,360
Cost per equivalent unit $ 5.00 $ 1.13 $ 6.13
160
6–22
1. b
2. d
3. b
4. b
5. a
6. c
7. c
8. e
Supporting computations:
Materials Conversion
Units completed 92,000 92,000
Units in ending WIP
(24,000 × 90%) 21,600
(24,000 × 40%) 9,600
Equivalent units (WA) 113,600 101,600
Less EU in BWIP
(16,000 × 60%) (9,600)
(16,000 × 20%) (3,200)
Equivalent units (FIFO) 104,000 98,400
Unit cost:
FIFO: $468,000/104,000 $573,040/98,400
$4.50 $5.82
WA: ($468,000 + $54,560)/113,600 ($573,040 + $35,560)/101,600
$4.60 $5.99
EWIP:
FIFO: ($4.50 × 21,600) + ($5.82 × 9,600) = $153,072
WA: ($4.60 × 21,600) + ($5.99 × 9,600) = $156,864
161
6–23
162
6–24
Nogaleen Company
Blending Department
Production Report
For the Month of August 20XX
(FIFO Method)
Unit Information
Physical flow:
Units to account for:
Units in beginning work in process 120,000
Units started during August 370,000
Total units to account for 490,000
Cost Information
Costs to account for:
Beginning work in process $ 340,600
Incurred during August 1,516,500
Total costs to account for $1,857,100
Cost per equivalent unit $ 4.50
163
6–25
1. Job #64:
Direct materials $ 1,240
Direct labor 6,150
Overhead ($12 × 410) 4,920
$12,310
Unit cost = $12,310/50 = $246.20
164
PROBLEMS
6–26
3. Since the Fazel and Myron jobs were completed, the others must still be in
process. Therefore, the ending balance in Work in Process is the sum of the
costs of the Patton, Raider, and Willis jobs.
Patton $3,605
Raider 2,535
Willis 1,895
Ending Work in Process $8,035
Cost of Goods Sold = Fazel job + Myron job = $3,890 + $2,804 = $6,694
4. Aldrin Company
Income Statement
For the Month Ended June 30, 20XX
Sales (1.4 × $6,694) ................................................................... $9,372
Cost of goods sold.................................................................... 6,694
Gross margin ............................................................................. $2,678
Marketing and administrative expenses ................................. 1,200
Operating income...................................................................... $1,478
165
6–27
Job #1 Job #2
Direct materials $4,500 $ 8,600
Direct labor 1,000 2,000
Overhead:
Purchasing ($6 × 15); ($6 × 20) 90 120
Setups ($15 × 2); ($15 × 3) 30 45
Engineering ($40 × 25); ($40 × 10) 1,000 400
Other ($2.50 × 200); ($2.50 × 200) 500 500
Total manufacturing cost $7,120 $11,665
Plus 30% markup 2,136 3,500
Bid price $9,256 $15,165
166
6–28
2. Job #703
Beginning balance, Work in Process $13,000
Direct materials 12,500
Direct labor 11,700
Overhead applied 7,800
Total $45,000
Job #704
Direct materials $14,500
Direct labor 16,500
Overhead applied 11,000
Total $42,000
4. a. Materials:
Beginning balance $ 6,070
Add: Purchases 44,200
Less: Materials requisitioned (27,000)
Ending balance $ 23,270
167
6–28 Concluded
b. Work in Process:
Beginning balance $ 13,000
Add: Materials requisitioned 27,000
Direct labor 28,200
Overhead applied 18,800
Less: Jobs completed (45,000)
Ending balance $ 42,000
c. Finished Goods:
Beginning balance $ 6,240
Add: Jobs completed 45,000
Less: Jobs sold (6,240)
Ending balance $ 45,000
6–29
168
6–29 Concluded
3. Kearney Company
Statement of Cost of Goods Manufactured
For the Month Ended April 30, 20XX
Direct materials:
Beginning materials inventory ...................... $1,400
Purchases of materials .................................. 3,000
Total materials available ................................ $4,400
Ending materials ............................................. 2,700
Materials used ................................................. $1,700
Direct labor ........................................................... 1,200
Overhead............................................................... $1,230
Less: Underapplied overhead ............................. 105
Overhead applied ................................................. 1,125
Current manufacturing costs .............................. $4,025
Add: Beginning work in process ........................ 0
Total manufacturing costs .................................. $4,025
Less: Ending work in process ............................ 2,750
Cost of goods manufactured .............................. $1,275
169
6–30
Debroux Company
Assembly Department
Production Report
For the Month of February 20XX
(Weighted Average Method)
Unit Information
Units to account for: Units accounted for:
Units in beginning WIP 12,000 Units completed 34,600
Units started 28,000 Units in ending WIP 5,400
Total units 40,000 Total units 40,000
Equivalent units:
Units completed 34,600
Units in ending WIP (5,400 × 70%) 3,780
Total equivalent units 38,380
Cost Information
Costs to account for:
Costs in beginning WIP $142,760
Costs added by department 333,152
Total costs to account for $475,912
Cost per equivalent unit ($475,912/38,380) $ 12.40
170
6–31
Debroux Company
Assembly Department
Production Report
For the Month of February 20XX
(FIFO Method)
Unit Information
Units to account for: Units accounted for:
Started and completed 22,600
Units in beginning WIP 12,000 From beginning WIP 12,000
Units started 28,000 From ending WIP 5,400
Total units 40,000 Total units 40,000
Equivalent units:
Started and completed 22,600
To complete beginning WIP (12,000 × 40%) 4,800
Units in ending WIP (5,400 × 70%) 3,780
Total equivalent units 31,180
Cost Information
Costs to account for:
Costs in beginning WIP $142,760
Costs added by department 333,152
Total costs to account for $475,912
Cost per equivalent unit ($333,152/31,180) $10.6848
171
6–32
4. Cost reconciliation:
Costs to account for: Costs accounted for:
Beginning WIP $ 260,000 Transferred out $10,500,000
August costs 10,780,000 Ending WIP 540,000
Total to account for $11,040,000 Total accounted for $11,040,000
172
6–33
Equivalent Units
Transferred In Materials Conversion
Units started and completed 148,500 148,500 148,500
Units in BWIP (to complete) — — 36,000
Units in EWIP 31,500 31,500 6,300
Total units accounted for 180,000 180,000 190,800
Cost Information
Costs to account for: Transferred In Materials Conversion Total
Beginning WIP $ 45,600 $ 6,432 $ 14,400 $ 66,432
Incurred during quarter 230,400 33,500 72,640 336,540
Total costs to account for $276,000 $39,932 $ 87,040 $402,972
Equivalent units 180,000 180,000 190,800
Cost incurred during quarter
÷ Equivalent units $ 1.28 $ 0.1861 $ 0.3807 $ 1.8468
173
6–34
Cost Information
Costs to account for: Transferred In Materials Conversion Total
Beginning WIP $ 45,600 $ 6,432 $ 14,400 $ 66,432
Incurred during quarter 230,400 33,500 72,640 336,540
Total costs to account for $276,000 $ 39,932 $ 87,040 $402,972
÷ Equivalent units 324,000 324,000 298,800
Cost per equivalent unit $ 0.852 $ 0.12 $ 0.291 $ 1.27
174
6–35
1. Department A
a. Physical flow schedule:
Units in beginning WIP 5,000
Units started in November 25,000
Total units to account for 30,000
Units completed and transferred out:
Started and completed 23,000
From beginning WIP 5,000
Units in ending WIP 2,000
Total units accounted for 30,000
Costs charged to the department:
Materials Conversion Total
Beginning WIP $10,000 $ 6,900 $ 16,900
Incurred during November 57,800 95,220 153,020
Total costs $67,800 $102,120 $169,920
175
6–35 Continued
2. Journal entries:
Work in Process—Dept. A ....................... 57,800
Materials Inventory .............................. 57,800
Work in Process—Dept. A ....................... 95,220
Conversion Costs—Dept. A ............... 95,220*
Work in Process—Dept. B ....................... 159,880
Work in Process—Dept. A .................. 159,880
*When conversion costs are not broken into labor and overhead components,
a control account for conversion costs is used. Some firms now combine
overhead and direct labor costs into one category. This practice is develop-
ing because direct labor is becoming a small percentage of total manufactur-
ing costs.
176
6–35 Continued
3. Department B
a. Physical flow schedule:
Units in beginning WIP 8,000
Units started in November (transferred in) 28,000
Total units to account for 36,000
Units completed and transferred out:
Started and completed 25,000
From beginning WIP 8,000
Units in ending WIP 3,000
Total units accounted for 36,000
Costs charged to the department:
Transferred
Materials Conversion In Total
Beginning WIP $ 0 $ 16,800 $ 45,320 $ 62,120
Incurred in Nov. 37,950 128,100 159,880 325,930
Total costs $37,950 $144,900 $205,200 $388,050
177
6–35 Concluded
178
6–36
1. Department A
a. Physical flow schedule:
Units in beginning WIP 5,000
Units started in November 25,000
Total units to account for 30,000
Units completed and transferred out:
Started and completed 23,000
From beginning WIP 5,000
Units in ending WIP 2,000
Total units accounted for 30,000
Costs charged to the department:
Materials Conversion Total
Beginning WIP $10,000 $ 6,900 $ 16,900
Incurred during November 57,800 95,220 153,020
Total costs $67,800 $102,120 $169,920
179
6–36 Continued
2. Journal entries:
Work in Process—Dept. A ....................... 57,800
Materials Inventory .............................. 57,800
Work in Process—Dept. A ....................... 95,220
Conversion Costs—Dept. A ............... 95,220*
Work in Process—Dept. A ....................... 159,776
Work in Process—Dept. A .................. 159,776
*Because conversion costs are not broken into labor and overhead com-
ponents, a control account for conversion costs is used. Some firms are
now combining overhead and direct labor costs into one category. This
practice is developing because direct labor is becoming a small percen-
tage of total manufacturing costs.
180
6–36 Continued
3. Department B
a. Physical flow schedule:
Units in beginning WIP 8,000
Units started in November (transferred in) 28,000
Total units to account for 36,000
Units completed and transferred out:
Started and completed 25,000
From beginning WIP 8,000
Units in ending WIP 3,000
Total units accounted for 36,000
Costs charged to the department:
Transferred
Materials Conversion In Total
Beginning WIP $ 0 $ 16,800 $ 45,320 $ 62,120
Incurred during Nov. 37,950 128,100 159,776 325,826
Total costs $37,950 $144,900 $205,096 $387,946
181
6–36 Concluded
182
6–37
1. a. Molding
Units to account for: Units accounted for:
Beginning WIP 500 Transferred out 1,300
Started 1,000 Ending WIP 200
1,500 1,500
b. Assembly
Units to account for: Units accounted for:
Beginning WIP 0 Transferred out 900
Started 1,300 Ending WIP 400
1,300 1,300
c. Packaging
Units to account for: Units accounted for:
Beginning WIP 150 Transferred out 1,050
Started 900 Ending WIP 0
1,050 1,050
2. Equivalent units:
Molding Assembly Packaging
Mat. Conv. Tr. In Mat. Conv. Tr. In Mat. Conv.
Trans. out 1,300 1,300 900 900 900 1,050 1,050 1,050
EWIP 200 40 400 160 160 0 0 0
1,500 1,340 1,300 1,060 1,060 1,050 1,050 1,050
183
6–37 Concluded
Assembly:
Unit transferred-in cost: (0 + $14,950)/1,300 = $11.50
Unit materials cost: (0 + $487.60)/1,060 = $0.46
Unit conversion cost: (0 + $1,166)/1,060 = $1.10
Packaging:
Unit transferred-in cost: ($1,959 + $11,754)/1,050 = $13.06
Unit materials cost: ($375 + $2,407.50)/1,050 = $2.65
Unit conversion cost: ($225 + $2,977.50)/1,050 = $3.05
4. Molding:
Transferred out: (1,300 × $11.50) = $14,950
Ending WIP: (200 × $5) + (40 × $6.50) = $1,260
Assembly:
Transferred out: (900 × $13.06) = $11,754
Ending WIP: (400 × $11.50) + (160 × $1.56) = $4,849.60
Packaging:
Transferred out: (1,050 × $18.76) = $19,698
Ending WIP: 0
184
6–38
1. Equivalent units:
Molding Assembly Packaging
Mat. Conv. Tr. In Mat. Conv. Tr. In Mat. Conv.
Started and
completed 800 800 900 900 900 900 900 900
BWIP 0 350 0 0 0 0 0 75
EWIP 200 40 400 160 160 0 0 0
1,000 1,190 1,300 1,060 1,060 900 900 975
2. Molding:
Unit materials cost: $5,000/1,000 = $ 5.000
Unit conversion cost: $7,660/1,190 = 6.437
Total unit cost $11.437
Assembly:
Unit transferred-in cost: $14,950/1,300 = $11.500
Unit materials cost: $487.60/1,060 = 0.460
Unit conversion cost: $1,166/1,060 = 1.100
Total unit cost $13.060
Packaging:
Unit transferred-in cost: $11,754/900 = $13.060
Unit materials cost: $2,407.50/900 = 2.675
Unit conversion cost: $2,977.50/975 = 3.054
Total unit cost $18.789
3. Molding:
Transferred out:
Started and completed (800 × $11.437) $ 9,149.60
Prior-period cost 3,550.00
Complete beginning WIP (350 × $6.437) 2,252.95
Total transferred out $ 14,952.55
Ending WIP: (200 × $5) + (40 × $6.437) $ 1,257.48
185
6–38 Concluded
Assembly:
Transferred out:
Started and completed (900 × $13.06) $ 11,754.00
Prior-period cost 0.00
Complete beginning WIP 0.00
Total transferred out $ 11,754.00
Ending WIP: (400 × $11.50) + (160 × $1.56) $ 4,849.60
Packaging:
Transferred out:
Started and completed (900 × $18.789) $ 16,910.10
Prior period cost 2,559.00
Complete beginning WIP (75 × $3.054) 229.05
Total transferred out $ 19,698.15
Ending WIP: $ 0
4. Cost reconciliation:
Costs to account for:
BWIP + Current = Total
Molding $3,550.00 $12,660.00 $16,210.00
Assembly 0.00 16,603.60 16,603.60
Packaging 2,559.00 17,139.00 19,698.00
Costs accounted for:
Trans. Out + EWIP = Total
Molding $14,952.55 $1,257.48 $16,210.03*
Assembly 11,754.00 4,849.60 16,603.60
Packaging 19,698.15 0.00 19,698.15*
*Difference due to rounding.
186
MANAGERIAL DECISION CASES
6–39
187
RESEARCH ASSIGNMENT
6–40
6–41
188