32. a.

Work in Process Inventory 1,000

Supplies Inventory 1,000
To record supplies usage for audit engagements

b. Travel Expense 2,000

Cash 2,000
To record travel expenses for partner

c. Fixed Overhead Control 6,500

Accumulated Depreciation – laptops 6,500
To record laptop depreciation

d. Depreciation Expense 1,620,000

Fixed Overhead Control 180,000
Accumulated Depreciation – building 1,800,000
To record depreciation on NYC building
 e. Work in Process Inventory 200,000
Salaries Payable 200,000
To accrue partner salaries

f. Work in Process Inventory 150,000

Salaries Payable 150,000
To accrue audit salaries

g. Work in Process Inventory 9,400

Cash 9,400
To record audit-related travel costs

h. Fixed Overhead Control 17,300

Cash 17,300
To record insurance and tax on downtown building

i. Variable Overhead Control 3,400

Wages Payable 3,400
To accrue secretarial wages

i. Salaries Payable 350,000

Wages Payable 3,400
Cash 353,400
To pay accrued salaries and wages

31. a. Beginning WIP Inventory $ 272,000

Raw material used $512,000
Direct labor 648,000
Manufacturing overhead 464,000 1,624,000
$1,896,000
Ending WIP Inventory (336,000)
Cost of goods manufactured $1,560,000

Note: The beginning and ending balances of Raw Material

Inventory are not used because no information is given on raw
material purchases for the month.

b. Beginning FG Inventory $ 124,000

Cost of goods manufactured 1,560,000
Cost of goods available for sale $1,684,000
Ending FG Inventory (96,000)
Cost of goods sold $1,588,000
34. a. It’s Kinda China
Schedule of Cost of Goods Manufactured
For the Month Ended July 31, 2008

Beginning WIP Inventory $ 73,200

Beginning RM Inventory $ 46,600
Raw material purchased 164,000
Raw material available $210,600
Ending RM Inventory (34,800)
Raw material used $175,800
Indirect material used (plugged) (47,800)
Direct material used (given) 128,000
Direct labor ($197,000 x 0.85) 167,450
Overhead:
Various (given) $150,000
Indirect material (from above) 47,800
Indirect labor ($197,000 x 0.15) 29,550
227,350
Total cost to account for $596,000
Ending WIP Inventory (60,000)
Cost of goods manufactured $536,000

b. It’s Kinda China

Schedule of Cost of Goods Sold
For the Month Ended July 31, 2008

Beginning FG Inventory $ 36,000

Cost of goods manufactured 536,000
Goods available for sale $572,000
Ending FG Inventory (52,400)
Cost of goods sold $519,600
33. a. Raggae Rocks Co.
Cost of Goods Sold Schedule
For the Month Ended March 31, 2008

Beginning FG Inventory $ 125,000*

Cost of goods manufactured 2,199,000
Cost of goods available for sale $2,324,000
Ending FG Inventory (24,000)*
Cost of goods sold $2,300,000*
*Items given in information

b. Raggae Rocks Co.

Cost of Goods Manufactured Schedule
For the Month Ended March 31, 2008

Beginning WIP Inventory $ 90,000*

Direct material:
Beginning DM Inventory $ 30,000*
Direct material purchased 1,182,000
Direct material available $1,212,000
Ending DM Inventory (42,000)*
Direct material used 1,170,000
Direct labor 300,000
Overhead 675,000
Total cost to account for $2,235,000**
Ending WIP Inventory ($90,000 x .40) (36,000)
Cost of goods manufactured (from part a) $2,199,000
*Items given in information
**
Total cost to account for = Beg. WIP + DM used + DL + OH
$2,235,000 = $90,000 + $1,170,000 + DL + OH
DL + OH = $2,235,000 - $90,000 - $1,170,000
DL + OH = $975,000
OH = 225% of DL = 2.25 DL
DL + 2.25 DL = $975,000
3.25 DL = $975,000
DL = $300,000
OH = $300,000 x 2.25 = $675,000

c. Prime cost = DM + DL
= $1,170,000 + $300,000
= $1,470,000

d. Conversion cost = DL + OH
= $300,000 + $675,000
 = $975,000
35. Direct labor ($36,000 + $12,600) $48,600
Overhead:
Supplies ($4,800 - $2,200) $2,600
Utilities ($2,700 x 0.80) 2,160
Office salaries ($7,800 x 0.20) 1,560
Depreciation 1,800
Building rental ($2,100 x 0.70) 1,470 9,590
Cost of services rendered $58,190

PROBLEMS

37. Type of
Cost Variable Fixed Direct Indirect Period Product
Paint X X X
Spirits X X X
Brushes X X X
Overalls X X X
Ad X X
Assistant X X X
Oper. Costs* X X X
Map X X X
Tolls X X X
Bid X
Phone X X
*
Some variable costs would be direct if miles to and from particular
jobs are recorded.

36. a. At 40,000 boxes per month:

Material and labor costs ($49,500 ÷ 500) $ 99.00
Overhead ($204,000 ÷ 40,000) 5.10
Total cost per box $104.10

b. At 60,000 boxes per month:

Material and labor costs ($49,500 ÷ 500) $ 99.00
Overhead ($204,000 ÷ 60,000) 3.40
Total cost per box $102.40

c. Material and labor (excluding labor design) $ 59.00

Overhead 3.40
Total $ 62.40

Cost at 40,000 boxes $104.10

Cost at 60,000 boxes (excluding labor design) (62.40)
Maximum labor design costs $ 41.70
 d. At 40,000 boxes:
Sales ($150 x 40,000 boxes) $6,000,000
Cost of sales ($104.10 x 40,000 boxes) (4,164,000)
Gross margin $1,836,000

Desired gross margin $1,836,000

Cost of sales ($102.40 x 60,000 boxes) 6,144,000
Sales needed $7,980,000

$7,980,000 ÷ 60,000 boxes = $133 sales price per box

e. No, the variable costs per box are constant and the fixed costs
remain the same in total at any level of production.

39. a. At 300,000 meals per month:

Material and labor costs ($4,660 ÷ 1,000) $ 4.66
Overhead ($2,400,000 ÷ 300,000) 8.00
Total cost per meal $12.66

b. At 400,000 meals per month:

Material and labor costs ($4,660 ÷ 1,000) $ 4.66
Overhead ($2,400,000 ÷ 400,000) 6.00
Total cost per meal $10.66

c. Material and labor (excluding meat) $ 2.86

Overhead 6.00
Total $ 8.86

Cost at 300,000 meals $12.66

Cost at 400,000 meals (excluding meat) (8.86)
Maximum meat cost per meal $ 3.80
Current meat cost ($1,800 ÷ 1,000) (1.80)
Potential increase in meat cost $ 2.00

d. $21.92 ÷ 2 = $10.96 maximum cost per meal

Maximum meal cost $10.96
Current costs for material and labor (4.66)
Cost per unit for overhead $ 6.30

Overhead ÷ Cost per unit = Total meals

$2,400,000 ÷ $6.30 = 380,952 or 381,000 if meals must be
produced in 1,000 unit batches
 e. The firm would be less profitable if the manager decided to
produce 381,000 dinners, but could only sell the same 300,000
the company is currently selling. The manager might accept
retain the business to boost his reputation as a “deal-maker”
so as to obtain another position before the financial results
were reported.

Current profitability:
Sales (300,000 x $25.32) $7,596,000
Variable cost of meals (300,000 x $4.66) (1,398,000)
Fixed overhead (2,400,000)
Profitability $3,798,000

Raise production; don’t increase sales:

Sales (300,000 x $21.92) $6,576,000
Variable cost of meals (381,000 x $4.66) (1,775,460)
Fixed overhead (2,400,000)
Profitability $2,400,540

38. a. cost of printing invitations: step fixed

preparing the theater: step fixed
postage: variable
building stage sets: fixed
printing programs: fixed
security: fixed
script: fixed

b. Attendance estimate= (200 x .75) + [2 x (200 x .75)]

= 150 + (2 x 150) = 450 people

Fixed and step fixed costs = $260 + $1,000 + $1,215 + $250 +

{3 x [$110 + (5 x $30)]} + $1,000 = $3725 + $780 = $4,505
Variable cost = $.40 x 450 = $180
Total cost = $4,505 + $180 = $4,685

c. $4,685 ÷ 450 = $10.41 (rounded)

d. Attendance estimate= (200 x .90) + [2 x (200 x .90)]

= 180 + (2 x 180) = 540 people

Fixed and step fixed costs = $280 + $1,200 + $1,215 + $250 +

{3 x [$110 + (5 x $30)]} + $1,000 = $4,725
Variable cost = $.40 x 540 = $216
Total cost = $4,725 + $216 = $4,941

Cost per person = $$4,941 ÷ 540 = $9.15

The reduction in per-person cost is caused by the fact that the
fixed costs are spread over more attendees.