Cost bookkeeping

Q1. Madtack Company's beginning and ending inventories for the month of November are:
November 1 November 30
Direct materials $67,000 $62,000
Work-in-process $145,000 $171,000
Finished goods $85,000 $78,000
Production data for the month of November:
Direct labor $200,000
Actual factory overhead 132,000
Direct materials purchased 163,000
Transportation in 4,000
Purchase returns and allowances 2,000
Madtack uses one factory overhead control account and charges factory overhead to production at 70%
of direct labor cost. The company does not formally recognize over/under applied overhead until year-
end.
a. Madtack Company's prime cost for November is
A. $170,000 B. $363,000 C. $370,000 D. $168,000
b. Madtack Company's cost of goods transferred to finished goods inventory for November is
A. $469,000 B. $484,000 C. $495,000 D. $477,000
c. Madtack Company's cost of goods sold for November is
A. $502,000 B. $491,000 C. $476,000 D. $484,000

MATERIAL
opening balance 67000 return 2000
purchases 163000
transportation in 4000 WIP (DM issued) 170000
closing balance 62000

WORK IN PROCESS
opening balance 145000
material account 170000
direct labour 200000 FG (completed output) 484000
manufacturing OHD 140000
closing balance 171000

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 FINISHED GOODS
opening balance 85000
WIP 484000
COGS 491000

closing balance 78000

Q2. Granger Products recorded the following transactions for the just-completed month. The company
had no beginning inventories:
a. $75,000 in raw materials was purchased for cash.
b. $73,000 in raw materials was requisitioned for use in production. Of this amount, $67,000 was for
direct materials and the remainder was for indirect materials.
c. Total wages of $152,000 were incurred and paid. Of this amount, $134,000 was for direct labour and
the remainder was for indirect labour.
d. Additional manufacturing overhead costs of $126,000 were incurred and paid.
e. Manufacturing overhead costs of $178,000 were applied to jobs using the company’s predetermined
overhead rate.
f. All of the jobs in process at the end of the month were completed and shipped to customers.
g. Any overhead under or over applied in the period, it is closed out to cost of goods sold.
Required:
1. Post the above transactions to T-accounts.
2. Determine the cost of goods sold for the period.

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 MATERIAL
opening balance 0
purchases 75000 prod ohds 6000
WIP (DM issued) 67000
closing balance 2000

WORK IN PROCESS
opening balance 0
material account 67000
direct labour 134000 FG (completed output) 379000
manufacturing OHD 178000
closing balance 0

FINISHED GOODS
opening balance 0
WIP 379000
COGS 379000

closing balance 0

Prod ohd

material 6000 absorb overheads (WIP) 178000

labour 18000
overheads 126000
over absorb 28000
178000 178000

COGS

COGS 379000 production overheads 28000

P&L 351000

profit -351000

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Q3. Hogle Company is a manufacturing firm that uses job-order costing. On January 1, the beginning of
its fiscal year, the company’s inventory balances were as follows:
$
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Finished goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
The company applies overhead cost to jobs on the basis of machine-hours worked. For the current year,
the company estimated that it would work 75,000 machine-hours and incur $450,000 in manufacturing
overhead cost. The following transactions were recorded for the year:
a. Raw materials were purchased on account: $410,000.
b. Raw materials were requisitioned for use in production: $380,000 ($360,000 direct materials and
$20,000 indirect materials).
c. The following costs were incurred for employee services: direct labour, $75,000; factory indirect
labour, $110,000; sales commissions, $90,000; and administrative salaries, $200,000.
d. Sales travel costs were incurred: $17,000.
e. Utility costs were incurred in the factory: $43,000.
f. Advertising costs were incurred: $180,000.
g. Depreciation was recorded for the year: $350,000 (80% relates to factory operations, and 20% relates
to administrative activities).
h. Insurance expired during the year: $10,000 (70% relates to factory operations, and the remaining 30%
relates administrative activities).
i. Manufacturing overhead was applied to production. Due to greater than expected demand for its
products, the company worked 80,000 machine-hours during the year.
j. Goods costing $900,000 to manufacture according to their job cost sheets were completed during the
year.
k. Goods were sold on account to customers during the year at a total selling price of $1,500,000. The
goods cost $870,000 to manufacture according to their job cost sheets.

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 MATERIAL
opening balance 20000
purchases 410000 Prod ohd 20000
WIP (DM issued) 360000
closing balance 50000

WORK IN PROCESS admin overheads

opening balance 15000 admin salaries 200000
material account 360000 Depn (asset) 70000
direct labour 75000 FG (completed output) 900000 insurance 3000
manufacturing OHD 480000 P&L 273000
closing balance 30000

FINISHED GOODS sales and marketing overheads

opening balance 30000 sales commission (cash) 90000
WIP 900000 sales travel (cash) 17000
COGS 870000 advertising 180000
P&L 287000
closing balance 60000

wages P&L

cash 75000 WIP 75000 COGS 870000 sales 1500000

cash 110000 Prod OHD 110000 Over absorb (Prod OHD) 20000
amin overheads 287000
sales overheads 273000

Prod ohd

material account 20000

wages account 110000 absorb overheads (WIP) 480000
cash (utility) 43000
Depn (asset) 280000
insurance (cash) 7000
over-absorb 20000

480000 480000

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Q4. The following data from the just-completed year are taken from the accounting records of
Eccles Company:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $643,000
Direct labour cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Raw material purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,000
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Administrative expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,000
Manufacturing overhead applied to work in process . . . . . . . . ……... . . . . . . .210,000
Actual manufacturing overhead costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .… 220,000

Beginning of year End of year

Inventory $ $
Raw materials . . . . . . . . . . . . . . . . . . . . 8,000 10,000
Work in process. . . . . . . . . . . . . . . . . . . 5,000 20,000
Finished goods. . . . . . . . . . . . . . . . . . . .70,000 25,000
Required:
1. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were
direct materials.
2. Prepare a schedule of cost of goods sold and an income statement.

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 MATERIAL
opening balance 8000
purchases 132000
WIP (DM issued) 130000
closing balance 10000

WORK IN PROCESS
opening balance 5000
material account 130000
direct labour 90000 FG (completed output) 415000
manufacturing OHD 210000
closing balance 20000

FINISHED GOODS
opening balance 70000
WIP 415000
COGS 460000

closing balance 25000

Prod ohd

actual ovehreads 220000 absorb overheads (WIP) 210000

under absorb (P&L) 10000

P&L

COGS 460000 sales 643000

Production overheads 10000
amin overheads 43000
sales overheads 100000

profit 30000

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Q5.

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