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    Chapter3 Summary hehe

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    © All Rights Reserved
    Download as PDF or read online from Scribd
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    89 views10 pages

    Chapter 3 Exercises

    Uploaded by

    Abi Neri
    Chapter3 Summary hehe

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 10
    fel eee: 4, Whats te sl anu of martin 5. Whats the total manafaeturing cost aided WP pleted the year? 6, What jamotenes etd stot ox 0 Ooch? 1. What isthe ending balance in Workin POS yerhead ear? BY 8, What isthe total amount of actual manalCtOrE gf hy above? 9. 1s manufacturing overhead underapli ing e tO 10. Whats the cos of goods avaiable for sle so J to Cost of Goods Soy of 11, What isthe journal entry to record be 2st 5 12, Whats the ending balance in Finished ied oF 13, Assuming thatthe company closes 2 year? what isthe adjusted cost of goods sold 4 What ste gros margin ft Ye 15. What isthe net operating income for 103-4 1SE3-1,/ Prepare Journal Entries for the. Camel Copran ene elon as unt. 2. $8,000 in aw materials were purchased on EON, . $71,000 in raw materials: were used in poles ‘and the remainder was for indirect materia eS of ¢. Total labor wages of 12.000 wee sd in ‘the remainder was for indirect oe d. Depreciation of $175,000 was incurred on factory sequipmer amount, $62,000 was for direct materia, this amount, $101,000 a8 for det labo ang Record the above transactions in journal entries. EXERCISE 3-2 Prepare T-Accounts LO3-2, 103-4 Jurvin Enterprises recorded the following transactions forthe, beginning inventories. $94,000 in aw materials were purchased for cash 4 '. $89,000 in raw materials were used in production. Of this amount, $78,000 was for direct materials ‘and the remainder was for indirect materials. Toul bor wags of $132,000 were incurred and paid. Of this amount, $112,000 was for direct labor and the remainder was for indirect labor. 4 Additional manufacturing overhead costs of $143,000 were incurred an! pid. Manufacturing overhead of $152,000 was applied to prxtuction using the company’s predetermined overhead rate. All ofthe jobs in proces atthe end of the month were complete. 8. Allof the completed jobs were shipped to customers ‘Any underppidoroveraplied overhead for the peti was closed to Cost of Goods Sold, Required: |. Post the above tansactions to T-accounts, Determine the suse cost of gos sod fo the prio just completed month. The company had na Dovel the Temnatuttetured and Cost of Goods Sold L03-3 operations. 'n8 data concerning last month’s manufacturing Purchases of raw materia Indirect materials ine “paw materials... ‘work in process Fished goods Diente $56,000 i " erin : $65, } rg 325000 $0000 t rote ea schedule of cost 8f good: ce \ were a schedtle of com of ge ao TY forthe ron, 2 areal closed 0 Cost of Gogg gl! fr 3-4 Underapplied and ove 0 ManulBcHFNg USS a predetermype Pe! Overhead Lo, 4 ore vas based On a cost formula thay et Fale of $18 39 ted avi Tevel of 12,000 direct abo pets S218400 $215,000 of anutactring Pet direct labor-hour. This predeter- ‘tal manufacturing overhead for an 2 sme that the company’s underappid ere atHrng ote forthe period r he underpaid overhead is closed to Con of Coeds Sol the company’s gross margin? By how much) P?4 oF overapplied over ch head increase or decease peRCSES-5 Journal Entries and Taccounts io; ‘he Polaris Company uses a job-order costing system, The tng ‘aw materials purchased on account, $210,000, Raw materials used in production, $190,009 i materials) ($178,000 direct materials and $12,000 indirect ‘Accrued direct labor.cost of $90,000 and indirect bor Depreciation recorded on factory equipment, $40,000, °° 811.000. (per manufacturing overhead costs accrued during Oetober $7000 ‘Tie company applies manufacturing overhead cox to predict a $8 per machine-hout. A total of 30,000 machine-hours were used in Outer mes HE of kbs costing $520,000 according to their job cost sheets were er urusfered to Finished Goods. Se eee Jt that had cost $480,000 to complete sccoring to thee ob cos shets were shipped to customer durig the month. These jobs were sold on account at 25% above cost ng transactions occurred in October Feu: |. Prepare journal entries to record the transactions given above. 2 Pepare T-aecounts for Manufacturing Overhead and Work in Process. Post the relevant transactions ffom above to each account, Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $42,000. MERCISE 3-6 Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Satement 103-3 ge Bs fing data from the just completed year ae take fom the acouting esos of Mason Sales .. AN ak Mee cenategretige 28 ae Direct labor cost ... er tie See oena Raw material purchases .. 140,000 E Selling expenses ...... $63,000 » Administrative expenses .. AN eat eos E Manufacturing overhead applied to workin PrOresS-<°"""" ' — ge9. 990 | Actual manufacturing overhead costs Sorrcrrenaesernata sae Tah 10,000 $35,000 Workin process. : $20.00 ee Finished goods em Teemeaymeewraenensress seen ayeiats used i production were aw a Required! sume all rnderapplied oF overapplied peg - $ ‘57,000 $5,000 | 1. Preparea schedule of cost of goods manufactured SS dlircet materials. i 2. Prepare a schedule of cost of goods sold. Assume Ih ‘overhead i closed to Cast of Goods Sod 3. Prepare an income statement pure 02-3102 EXERCISE 3-7 Applying Overhead; Cost of Goods MarUfec eT rany dri Ses of Cha The following cost datarcatc othe manufacturing setiites oF he company’s © 3-4 103 pejustcompleted year; $ 15,000 Manufacturing overhead costs incurred: Cee cere sae Indirect materials ...-....4+.rcsee8e000 adetemnit! 8,000 Indrectlabor.2aesseesverssnrnert see Sree Property taxes, factory. ers. 2001+ sfonde Fo col Utes, factory... Fe ae Depreciation, factory .oeeee-ceessesenseesee""7""""" 49,000 Insurance, factory pete pds ‘Total actual manufacturing overhead costs incu Other costs incurred: $400,000 Purchases of raw materials both direct and indirect $60,000 { Direct ADOT COs... sssaesessseseseeeetseroetstt I Inventories: $20,000 | Raw materils, beginning , : $30,000 | Raw materials, ending. i akin pees bei sobs) Workin process, ending Reseed encima ‘The company uses a predetermined overhead rate of $25 per machine-hour to apply overhead c A total of 19,400 machine-hours were used during the year. Required: 1. Compute the amount of underapplied or overappied overhead cost forthe year, 2. Prepare a schedule of cost of goods manufactured for the year, EXERCISES-8 Applying Overhea Journal Ente; Disposing of Underappled of Overapplied Overhead 103-1, 103-2, 103-4 ‘The following information is taken from the summaries of the transactions that affected tl E e accounts of Latta Company. The entries in the T-accounts are hose accounts during the year, ‘Manufacturing Overhead ‘Worn Process Ba 15.000 | ic) 260,000 85.000 710,000 Bal. 9 Bal. : i a eee iPro com Paste hd een pli wo rodeo inthe yrs dsb among Woe i ‘Goes, and Cos af Goad Sold ofthe end athe yea as fellows: For e aig yo MUD cdi sce in Wc in Pcs $1950 waa al en Required: : Anite cis gh 8 necessary journal entry, Sr overppid ovethed slowed wo Cot of Goods Soll. Prepare the 3. Assume that the overhead is Finished Goods. ani a? PHCE oc oven Tosed proportionally to Work in Process, compet #84 Cot of Gah Sed. Prepare the cesar joural entry. Provide superting wel ap "Sigurt Jura rain 103-1, 103-2, loa d sbeonder «sting system applies overhead cost to jobs om the basis of con treme The Bo oa rine! ovethead rate of $2.40 per machite-hour we stoma sstimates $192, ‘manufacturing overead for an estimate activity level of 1+ Assume that during the year the company wks 75.000 machine-o the fi ‘ows inthe Manuf turing Onrhead and Wot a Rene Sante eee (Maintenance) Andirect materieis) (ndirect iabor) (Utilities) (insurance) Wepreciation) Copy the data in the T-accounts shove onto your answer sheet. Compute the amount of overhead cost that would be applied wo Woe in Process forthe year and make the eat in your Taceceae Compute the amount of oF overapplied overhead for the year and sb the balance in your Manufacturing Overhead T-sccount Prepate journal entry to close the company’s underapplied ‘or overapplied oethead to Cost of Goods Sold. Explain why the manufacturing overhead was underappicd or overapplie fir the year EXERCISE 3-10 Applying Overhead; Journal Entries: T-accounts (03-1. 103-2 Dillon Products mamafactures various machined parts to customer specification, ‘The company uses a Job-order costing xystem and applies overhead cos to jobs on the bass of machine-hours Atthe beginning of he yea, the company used cos formula estimate that it woe incu 4.80.00 in mar. ctrng ‘overhead cost at an activity level of 240,000 machine-bours. ‘The company spent the entire month of January working on a large onder for 16,000 custom-mude machined parts. The company ad ao woek in process at the beginning of January Cost data teatng to January follow: ‘matenals purchased on account, $325,000. b Has crs cn icin S00 eet end Eh a) ¢. Labor cost accrued in the factory, $180,000 (one-third direct labor and two-thirds indirect labor), a PROBLEMS ib eeeenaldiinraared Me ‘Chapter 3 \ine-hours : snachine 662000 of 18.00 4. Depreciation recorded on factory xin 1 $00 ai af. ee «ier manufacturing overhead cosine yt ste 8 t Oi mating a ed ag or esr a setualy worked during the mom". machined oat ‘ie om al, cirect 1abOr The completed job for 1.000 cus et vaca ia ne thiseniry, remember! applied overhead.) a moment]. ove ino ce) revit fom Secu co es. POS! 1 ean ei eis WOR 2 coun for Manuatuing Os ye ea “acco case ebruary, how mu aiconnect ‘your journal entries 10 these 3 wea journal entry for item (g) above. : es Pe a ere Acs wil einen com 103-3408 2 propiem 3-11, TAccount Anais of CoM L082 ice ered -acouns of Moore Company ate BD belo anutecrng vetted paw Mater ‘ fe ae its 3 730900 | bal. 15000 | ces 7, Bebls Deb 120900, ee gaast 25000 Wrkin Process fav. 20000 | Create 7o000 Debs Drecmaieas 90000 % Drecuber 150000 Ovetead. 240000 z bal 1231 ? Fished Goods Cox of Goods Sold bai sn 9000 | Create > fal 0 Debi ; gal 128i 0000 [ ae Requires " ‘What was the cost of aw materi used ater wed in How nf be nasi () oss tn Now cho ie taylor rte arsed at asthe of gos mam eee ntetihe! al as the unadjusted cow of goa 5 orrpcd one iyoaraecr YE YEA? Do no ink : ude any underappli pied or rout during the ear? ical pe Tonnes el em a ing balance in Work i y soos faa eo 35 Applied overhead cos? is diet labor cog, ea oO < iss entirely of goods 10W much of it ch of it is direct materials 2e0-Order Coning: Cont Hows end Estenal Reporting 129 a states $910.00 of tonal manaactring nears Cun ‘emo me she ete in cui buck pction and yen “impeny Con recon revealed the following Seling expenses Purchases ofa mates Sle eames Direct labor Bs catego ‘ : Administrative expenses. HT etope Mansfecturing overhead applied to work h process $285.00, ‘Actual manufacturing ovemead coxt Se ne HD {ventory balances atthe beginning and end ofthe year were as fellows | : 7 Begionng ag Raw materiats $40,000, $10,000 ‘Work in process . ? $35,000 Finished goods ‘$50,000 2 The total manufacturing costs for the year were $683,000; the cost of goods available forsale totaled ‘$740,000; the unadjusted cost of goods soid totaled $6604); and the ‘net operating income was $30,000, ‘The company's underapplied or overapplied overhead is closed to Cost of Goods Sold. Prepare schedules of cost of goods manufactured and cost of goods sold and an income statement. (int: Prepare the income statement and schedule of cost of goods sold first followed by the schedule of cost of Boods manufactured.) Chapter 3 PROBLEM 3-14 Schedule of Cost of Goods Mor Gitano Products operates ajob-oder costing yr ‘materials used in production (nor te basis a ance aa tht exited S800 Mn base of $50,000 direct materia dollars 01° Towing data forthe just completed eat Purchase of row materia « Direct labor cost Manufacturing over Inlrect labor Property taxes Depreciation of equipment» ‘Maintenance ead Insurance Rent, building tnead co r —r Beginning Fat es mee oe pow Mates os a 3.200 eat eget Sty | See Finished Goods sshead rate for the year serhead forthe YER ed overhead forthe Yo ay materials are used in Required: ‘Compute the predetermined ove forthe year. Assume care the amount of underapplied oF eT Prope a schedule of cost of goods manufactured production as direct materials. 2 4, Ponpute the unadjusted cst of goodssofrthe ya". not inchide any a your answer, What options are avaiable for disPosn of w overhead? . 5, Assume thatthe $70,000 ending balance ia Work in Process includes $24, Given this assumption, supply the information missing below: 1 3 underapplied or overapplied mderapplied or overapplied 000 of direct materials. Direct materials. Direct abor « 5 Manufacturing overhead . Workin process inventory. Crain Ae ged F-Accounts; Financial Statements LO3-1, LO3-2, LO3-3, LO: for use in North Sea oil fields he com bbe Corea oe ; ie ‘xs ‘overhead cost to jobs on the basis of di ene ins free tao ies manu elo wh ie ai et labo fin pcdosateh a applies manufacturing ra at exited 6 of mbvacturing cyecneaa ke overhead rate was based on a “Te faloig anasto kp er ited lleation bse of 90 a. Raw materials purchased on account, hs t, $200,000, © tips icwrrrn sens} 1 jon account, $7 been e to selling and administrative activities), (OPE laed factory operat . ions, and the remai he remainder related d. Accrued salary and wage costs: Direct labor (975 hours) Indirect labor... 3.” Selling and administra VE salariog oO +ob-Order Costing: Cost Flows and Exteel Reporting f & account, $136,000. < : and administrative equipment) SI {esi 0 ES related to factory fails, nd the remainder eed rk in Process. Finished Goods. oe s $60,000 } Required: eaters ee, F 1. Prepare journal al entries to 2 st Your ent record the preceding transactions. DBermine thong fat (DO Trt a he being inventory balances 3. Pare a schedule of cost of pond aveRtory accounts, ‘and in the Manufacturis £0 bea) 4. st of goods ‘manufactured, ing Overhead account. Prepare a schedule of i of cost of 5. Prepare anincome statement gn on PROBLEM 3~ rei Cord Neat Comprehensive Problem O31, 03-2, 103-4 China ars Pay of Geng is tna 3 frily-cwned enterprise that makes birdcage fhe South connate, Te compan indages through an extensive network of sue! Venton aie oe “i Te company pred ntet Costing system which ovethead i applied to jobs on the basis of Ianufcting ovethead ee ea Ps aed on acon fe ata St overhead for an estimated activity level of Sor labor dallas. At the beginn ofthe Year, the inventory balances were 35 fllowsy DO Met abo dela. At he begining Raw materials. Work in process $10,000 | Finished goods . $40,000 | a. Raw materials purchased for cash, $275,000. b. Raw materials used in production, $280,000 (materials costing $220,000 were charged directly to Jobs; the remaining materials were indirect), Cash paid to employees as follows: Direct labor $180,000 Indirect labor . $72,000 » Sales commissions ... $63,000 Administrative salaries .... $90,000 | soneanieempemnmnseeeneent” camromnmmnensnensenn on oma Cash paid for rent during the year was $18,000 ($13,000 of this amount related to factory operations, and the remainder related to selling and administrative activities) €. Cash paid for utility costs in the factory, $57,000. id for advertising, $140,000. : : : Defeat mesa ‘on equipment, $100,000, ($8,000 of this amount elated to equipment used * in factory operations; the remaining $12,000 related to equipment used in selling and administrative activities.) sie it was applied to jobs, $2. {Goats trhacos S500 mance ord tio ht nee ome Soles for he ‘year (all paid in cash) totaled S1,250.000, The total cost to manufacture these ws i. cording to thet job cost sheets was $700,000. ‘an income statement (Do not PEP 8 She alot domain ad rt coe une you have prepared.) 3,L03-4 2,109-3 OE ompany’s Balane PROBLEM 3-17. Cost lows; Accounts; income Ststemeet OT outs. ThE Supreme Videos, Inc., produces short musical videos for Ste 1° sheet accounts as of January I. are given below. ‘ Gain 102,000 Accounts recenable Invectones 5 30000 Raw materia im, costes) eenseeenencs SB Videosin process ...---ce0--eseeenet ‘1000 «186,000 Fished videos awaiting sale... .------+ = 9000 | Prepaid insurance series 330000 | Tota! curent assets 730000 ‘Studio and equipment ... 710,000 $20,000 | Less accumulated depreciation ——~ $850,000 } Tota assets seed Lapa: ont i $160000 Accounts payable ciao ; Capita stock ... 4200000 f Retained eamings ........ 270.000 _690,000 5 Total fables and stockholders equty $250000 5, enn PR EE API ER Because the videos differ in length and in complexity of production, the company uses a job-order ‘costing system to determine the cost of each video produced. Studio (manufacturing) overhead is charged to videos on the basis of camera-hours of activity. The company's predetermined overhead rate for the year is based on a cost formula that estimated $280,000 in manufacturing overhead for an estimated allocation ‘base of 7,000 camera-hours. The following transactions occurred during the year: a Film, costumes, and similar raw materials purchased on account, $185,000. b. Film, costumes, and other raw materials used in production, $200,000 (85% of this material was ‘considered direct tothe videos in production, andthe ther 15% was considered indirect). cc. _ Utility costs incurred in the production studio, $72,000, si 4. Depreciation recorded on the studio, cameras, and ther equipment, $84,000. Three-fourts of tis depreciation related to production of the videos, andthe remainder related to equipment used ia marketing and administration, Advertising expense incurred, $130,000, Costs for salaries and wages were incuted as follows: Direct labor (actors and directors) oe intel or erent tbl es, costme desea so) ‘Administrative salaries... Job-Order ‘Ser Costing: Cost Flows and Exteral Reporting prep insurance exe rng the yar, §7 lated to marketing and administra cacti (80% related to production of videos, and 20% Miscellaneous marketing and administrative expen io (manufacturing) overhead was app i eehours during the year eos that 0st $550,000 o produce according to he jes warehouse f0 avait sale and shipment 6/9 Cos sheets were transfered to the finished es forthe yea totaled $925,000 and : ‘ ae tothet job cost sheets was $600,000, SUN: The total costo produce these videos 1, Colton nae the year totaled $850,000, is to st ant durin ain . ws ‘$285,000, 'ing the year, $500,000; payments to employees for salaries and Fes incurred, $8,600, ‘© Videos in production. The company used 7.250 pei 1 ner T-account for each account on the Company's balance sheet and enter the beginning Record the trabactions directly into the T-acco centes tothe letters (a) through (mm) above. Com, Isihe Studio (manufacturing) Overhead accou an enry in the T-accounts to close any balan: Sold. Prepare a schedule of cost of goods manufactured. If done correctly, the cos of goods manufactured from your schedule should agree with which of the above transactions? Prepare a schedule of cost of goods sold. If done correctly, the unadjusted cost of goods sold from your schedule should agree with which ofthe above transactions? 4. Prepare an income statement for the year, ,unts. Prepare new T-accounts as needed, Key your pute the ending balance in each account. int underapplied or overapplied for the year? Make ice in the Studio Overhead account to Cost of Goods connect BUILDING YOUR SKILLS ETHICS CHALLENGE LO3-4 Teri Ronsin had recently been transferred to the Home Security Systems Division of National Home Prout. Shorly after taking over her new position as divisional controller, she was asked to develop tte divisions predetermined overhead rate forthe upcoming year. The accuracy ofthe rae is important because itis used throughout the year and any underapplied or overapplied overhead is closed out to Cost of Goods Soldat the end of the year. National Home Products uses direct labor-hours in allo ts divisions ‘sthe allocation base for manufacturing overhead. ‘To compute the predetermined overhead rate, Teri divided her estimate of the total manufacturing cvetead forthe coming year by the production manager's estimate of the total direct labor-hours for the ‘oming year. She took her computations tothe division's general manager for approval but was quite sur rived when he suggested a modification in the allocation base. Her conversation with the general manager fhe Home Security Systems Division, Harry Irving, went like this: Ronsin: Here are my calculations for next year's predetermined overhead rate. If you approve, we can enter the rate into the computer on January 1 and be up and running in the job-order costing system right away this year, Tring: Thanks for coming up with the caleulations so quickly, and they lok just Fine. Theres, however, 0eslght modification I would like to see. Your estimate of the total direct labor-hours for the year is 2 hours. How about cutting that to about 420,000 hours? ee a im: I don't that, The production manager says she will n 1t 440,000 direct, ict ig a ce ee the year. Besides, thero are going to be over 430,000 Ait aborhours during the current year and sales are projected tobe higher next year. ting: ei non al ofthat. 1 would stil ike to reduce the direct abo-hours in the allocation base to Something like 420,000 hours. You probably don’t know that Ihad an agreement ‘with your predecessor { ivisional controller to shave 5% or 90 off te estimated diectIabor-hours every yea. That way, ‘We kept a reserve that usually resulted ina big boost to net operating incume atthe ‘end fe yea in bet, We called it our Christmas bonus. Corporate headquarters oe, — se

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