Problem I

1 Unit Value of each product

PRODUCT L
Cost 700.00
Net Realizable Value
Estimated selling price 800.00
Less: Cost to sell 150.00 650.00

LCNRV 650.00

PRODUCT M
Cost 475.00
Net Realizable Value
Estimated selling price 950.00
Less: Cost to sell 205.00 745.00

LCNRV 475.00

PRODUCT N
Cost 255.00
Net Realizable Value
Estimated selling price 300.00
Less: Cost to sell 50.00 250.00

LCNRV 250.00

PRODUCT O
Cost 450.00
Net Realizable Value
Estimated selling price 1,000.00
Less: Cost to sell 260.00 740.00

LCNRV 450.00

LCNRV 1,825.00
LESS: COST 1,880.00
INVENTORY WRITE-OFF 55.00

2 Journal entries
 COST OF GOODS SOLD 55.00
INVENTORY 55.00

OR

INVENTORY WRITE-OFF 55.00

INVENTORY 55.00

Problem II
1

MATERIAL W LEDGER CARD ( FIFO method)

PURCHASES ISSUES
DATE QTY UNIT PRICE AMOUNT QTY
JANUARY 5,000 40.00 200,000.00
FEBRUARY 3,000
APRIL 12,000 45.00 540,000.00

MAY 2,000
7,000
NOVEMBER 17,000 50.00 850,000.00

5,000
5,000
DECEMBER 10,000 60.00 600,000.00

7,000.00

44,000 2,190,000.00 29,000

MATERIAL W LEDGER CARD ( Average method)

PURCHASES ISSUES
DATE QTY UNIT PRICE AMOUNT QTY
JANUARY 5,000 40.00 200,000.00
 FEBRUARY 3,000
APRIL 12,000 45.00 540,000.00
MAY 9,000
NOVEMBER 17,000 50.00 850,000.00
10,000
DECEMBER 10,000 60.00 600,000.00
7,000.00

44,000 2,190,000.00 29,000

Problem III

1. Total annual inventory cost for 3,650 at a time

95,000.00 x 16.50 + 3,650.00 x .60

3,650 2.00

26.03 x 16.50 + 1,825.00 x.60

429.50 + 1,095.00

1,524.50

EOQ = √ ((2 x Demand per year x Cost per order)/ carrying cost)

2 x 95,000 x 16.5

√ .60

√ 3,135,000
.60
 √ 5,225,000.00

2286 units

3. Times to place an order in one year

= Annual requirement / EOQ

= 95,000.00
2,286

41.6 times

Problem IV

1
Penoy Manufacturing Company
Cost of Goods Manufactured Statement
For the period ending December 31, 2012

Materials Inventory, beg. 60,000.00

Add: Purchases 160,000.00
Materials Available for use 220,000.00
Less: Materials Inventory, end 20,000.00
Materials used 200,000.00
Direct Labor 120,000.00
Manufacuring overhead 80,000.00
Manufacuring Cost 400,000.00
Add: Work in process, beg -
Cost of goods placed in process 400,000.00
Less: Work in process, end 25,000.00
Cost of goods manufactured 375,000.00

2
Penoy Manufacturing Company
Statement of Comprehensive Income
 For the period ending December 31, 2012

Sales 516,667.00
Less: Sales returns 10,000.00
Net Sales 506,667.00
Cost of goods sold
Materials Inventory, beg. 60,000.00
Add: Purchases 160,000.00
Materials Available for use 220,000.00
Less: Materials Inventory, end 20,000.00
Materials used 200,000.00
Direct Labor 120,000.00
Factory overhead 80,000.00
Total Manufacuring Cost 400,000.00
Add: WIP, beg (given) -
Cost of goods placed in process 400,000.00
Less: WIP, end 25,000.00
Cost of goods manufactured 375,000.00
Add: Finished goods, beg 25,000.00
Cost of goods available for sale 400,000.00
Less: Finished goods, end 100,000.00
Cost of goods sold 300,000.00
GROSS MARGIN 206,667.00
Less:
Selling Expenses 101,333.60
General Expeses 25,333.40
Net income before tax 80,000.00
Income Tax 28,000.00
Net income after tax 52,000.00

Problem V

Direct Materials 25,000.00

Direct Labor
Department 1 8,000.00
Department 2 12,000.00 20,000.00

Manufacturing overhead
Department 1 (8,000 x 600,000/200,000) 24,000.00
Department 2 (12,000x 400,000/800,000) 6,000.00 30,000.00
Total Manufacturing costs 75,000.00
L W LEDGER CARD ( FIFO method)
ISSUES BALANCE
UNIT PRICE AMOUNT QTY UNIT PRICE AMOUNT
5,000 40.00 200,000.00
40.00 120,000.00 2,000 40.00 80,000.00
12,000 45.00 540,000.00
14,000 620,000.00
40.00 80,000.00
45.00 315,000.00 5,000 45.00 225,000.00
17,000 50.00 850,000.00
22,000 1,075,000.00
45.00 225,000.00
50.00 250,000.00 12,000 50.00 600,000.00
10,000 60.00 600,000.00
22,000 1,200,000.00

50.00 350,000.00 5,000 50.00 250,000.00

10,000 60.00 600,000.00
15,000 850,000.00
1,340,000.00

W LEDGER CARD ( Average method)

ISSUES BALANCE
UNIT PRICE AMOUNT QTY UNIT PRICE AMOUNT
5,000 40.00 200,000.00
40.00 120,000.00 2,000 40.00 80,000.00
14,000 42.50 595,000.00
42.50 382,500.00 5,000 42.50 212,500.00
22,000 46.25 1,017,500.00
46.25 462,500.00 12,000 46.25 555,000.00
22,000 53.13 1,168,750.00
53.13 371,875.00 15,000 53.13 796,875.00

1,336,875.00
ny
ement
1, 2012