Reynaldo Burgos

COST ACCOUNTING (ACTG 3151)

OCTOBER 29TH, 2019

1) Friesen Company manufactured 100,000 units in 2018 and reported the following
costs:

Sandpaper $ 32,000 Leasing costs-plant $ 384,000

Materials handling 320,000 Depreciation-equipment 224,000
Coolants & lubricants 22,400 Property taxes-equipment 32,000
Indirect manufacturing labor 275,200 Fire insurance-equipment 16,000
Direct manufacturing labor 2,176,000 Direct material purchases 3,140,000
Direct materials, 1/1/18 348,000 Direct materials, 12/31/18280,000
Finished goods, 1/1/18 672,000 Sales revenue 12,800,000
Finished goods, 12/31/181,280,000 Sales commissions 640,000
Work-in-process, 1/1/18 96,000 Sales salaries 576,000
Work-in-process, 12/31/18 64,000 Advertising costs 480,000
Administration costs 800,000

Required:

a. What is the amount of direct materials used during 2018? (10PTS)

Direct Materials + Direct Materials purchases – Indirect Manufacturing Labor =

Direct Materials Used
$348,000 + $3,140,000 = $3,488,000
$3,488,000 - $275,200 = $3,212,800

b. What manufacturing costs were added to WIP during 2018? (30 PTS)

Direct Material used + Direct Manufacturing Labor + Sandpaper + Materials

handling + Coolants & Lubricants + Indirect manufacturing labor + Direct
materials + Depreciation Equipment + Property taxes equipment + Fire insurance
equipment = Total Manufacturing Cost.

$3,212,800 + $2,176,000 + $32,000 + $320,000 + $22,400 + $275,200 + $348,000 +

$224,000 + $32,000 + $16,000 = $6,658,400

c. What is cost of goods manufactured for 2018? (15PTS)

Total Manufacturing Cost + Beginning Work in process – Ending Work in process

= Total Cost of Goods Manufactured
$6,658,400 + $96,000 = $6,562,400
$6,562,400 - $64,000 = $6,690,400
 d. What is cost of goods sold for 2018? (15PTS)

Total Cost of Goods Manufactured + Beginning Finished Goods – Ending Finished

Goods
$6,690,400 + $672,000 = $7,362,400
$7,362,400 - $1,280,000 = $8,642,400

2) Santander Sugar Manufacturing uses departmental cost driver rates to apply

manufacturing overhead costs to products. Manufacturing overhead costs are
applied on the basis of machine-hours in the Machining Department and on the
basis of direct labor-hours in the Assembly Department. At the beginning of 2018,
the following estimates were provided for the coming year:

Machining Assembly
Direct labor-hours 10,000
dlh 90,000
dlh
Machine-hours 100,000
mh 5,000
mh
Direct labor cost $ 80,000 $720,000
Manufacturing overhead costs $250,000 $360,000

The accounting records of the company show the following data for Job #846:

Machining Assembly
Direct labor-hours 50 dlh 120 dlh
Machine-hours 170 mh 10 mh
Direct material cost $2,700 $1,600
Direct labor cost $ 400 $ 900

Required:
a. Compute the manufacturing overhead allocation rate for each department. (5PTS)

Machining Department
Manufacturing Overhead cost / Machine hours = Overhead allocation rate
$250,000/100,000 mh = $2.50 dlh

Assembly Department
Manufacturing Overhead cost / Direct labor hours = Overhead allocation rate
$360,000 / 90,000 mh = $4 dlh

b. Compute the total cost of Job #846. (5PTS)

 Direct Materials + Direct Labor + Machining Manufacturing Overhead cost +
Assembly Manufacturing Overhead cost = Total cost of Job
($2,700 + $1,600) + ($400 + $900) + (170 mh x $2.50) + (120 dlh x $4)
$4,300 + $1,300 + $425 + $480 = $6,505.
c. Provide two possible reasons why Santander Sugar Manufacturing uses two
different cost allocation rates. (20 PTS)
Santander Sugar Manufacturing uses two different cost allocation rates because:
1. It is a manufacturing plant therefore machinery will be subject to wear and tear
therefore; the machines will be the main reason for overhead costs such as
depreciation and repairs in the machining department.
2. Since Santander Sugar needs workers to operate the machinery; they will view
Direct labor-hours as the main cause of manufacturing overhead costs in the
Assembly Department.