Chapter 5 Raiborn Solutions Manual

Bachelor of Science in Accountancy (BSA)

1 0
104 Chapter 5

CHAPTER 5

JOB ORDER COSTING

QUESTIONS

. Th
1 etwochoic
esforcos
taccumulat
ionarethej
obord erandproces
sc o
s t
ing
s
yst
ems.A c
omp a
nyshoul
du s
ejobo r
dercosti
ngwhenitisneces
saryandp oss
i-
b
letotr
acecos
tstop
roduct
sma deforindi
vidua
lcus
tome r
s,an
dwh e
nt heprod-
u
ctsmadeforonecust
omera r
ev e
ryd i
ffe r
entf
romt hosemadef orothercus-
t
omers
.

Aproc
essco
stin
gsyste
mi sapp
ropr
iat
efo
rproduc
tio
nenvi
ron
me nt
sthatma
keho-
mog
eneousproduc
ts,us
uall
yinlar
gequant
it
ie
s,inbat
chorcon
tinuou
sflo wsys-
t
ems.

2
. Theth r
eeval
uati
onme t
hodsareact
ual,normal,a
nds t
andar
dc os
ti
ng.I
na ct
ual
co
sting,theact
ualamountsofmater
ial
,labor,andoverhea
dc os
tsareass
ignedto
pr
od u
ction.Innormalcost
ing,t
hea ct
ualamou nt
sofma t
eri
alandlaborareas-
s
ignedt op r
oduc
tio
n;howe v
er,o
verheadisap pl
iedtoproduct
su s
ingap r
edete
r-
minedo v
e r
headra
te(r
ath
erthanusin
gthea ct
ualamo un
t).

I
ns t
andardco s
ti
ng,st
andard(or“expect
ednorm”)a mo
untsareest
abli
shedfor
mat
erial
,lab
or,andover
headcost
sand /
orqua
nti
ti
esa n
darechar
gedtoproduct
ion
r
athe
rthant heact
ualcost
s.Thesta
nda r
dforover
headisthepred
eter
minedrate
(
orrate
s)forthecompany
.Ac t
ualco
stsareacc
umulatedi
nas t
andar
dcosti
ngsys-
t
ems othatt
heyma ybecomp a
redwit
hs ta
ndar
dcoststode
ter
minedfavor
abl
ea nd
un
favora
blevari
ances
.

. Th
3 epri
ncip
aldocumentsarejobo r
dercostsheet
s,materi
alrequi
sit
ionforms,
a
nde mploy
eetimesheet
s.Aj obordercostshe
etprovide
sa l
ldetai
lsforaspeci
fic
j
obandisu s
edtotrac
kthea c
tualcost
so fdir
ectmateri
alandd i
rectl
abor,andei-
t
heractu
alo rappl
ie
dma n
u f
actur
ingo ve
rheada s
socia
tedwi t
hap art
ic
u l
arjob;
s
ucha mount
sma ybec o
mp ar
edt obudgetedcost
s.Ma t
eria
lrequis
iti
onf or
msa re
u
sedtoinit
iat
etheremovalofthema ter
ialfr
omi nvent
oryforu s
ei nap art
ic
ular
j
ob.Employeeti
mesheet
sa r
eu se
dtot r
ackthetimewo rk
edb yindi
v i
dualemploy-
e
estospeci
ficj obs
.

. J
4 obord
e rc
osti
nginf
orma t
ional
lowsma na
ger
stob et
teres
ti
ma t
ethecos
tsof
p
rodu
cin
gp roduc
tsando fservi
ngspecificc u
sto
me rs
.Thisinfor
mati
oncanbe
u
sedtomanagecost
s,i
dent
i f
ywhichcust
ome r
sgener
atethemostpr
ofitabl
ebusi-
n
ess
,andsetpr
ice
sforpro
d uct
sandserv
ices
.

. I
5 fnor
malspoil
ageisgenera
llyant
ici
pat
edo nal
ljobsinaj obo rd
e rcost
ing
s
yst
em,thees
timate
do ver
headus e
dins et
ti
ngthepredet
erminedoverheadr a
te
s
houl
dincl
udeana mountforthenetcos
tofthespoil
age.Thistr
eatmen tal
lows
t
hecostofnor
ma lspo
ila
get obes pr
eadoveral
ljobsproduced.Inc ontr
ast
,if
s
poi
lag
eisrel
at
e dtoasingl
ejob,thecostoft
hatsp
oila
ges houl
db eassignedto

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
105 Chapter 5

t
hej
obt
hatg
aver
iset
othes
poi
la
ge.

. No
6 rma ls
poil
ageref
erstoane xp e
ctedreduct
ioninp r
oducti
onq uanti
tyb as
ed
onac o mpany’
sp r
oduct
iontechnology,qual
it
yo fma teri
alandl a
bo rused,and
pr
od u
ctionpract
ice
s.Thelevelofs uchal os
sma ybee st
abl
ishe
df rom ma nage-
mento rengi
neeri
ng;give
nc ost
/benefita nal
y s
is,ma na
gementh asge ne
rall
yc o
n-
cl
udedth a
tac e
rtai
nlev
elofd e
fectsisles
sexpensi
v etha
nt r
yin
gt opreventallde-
f
ectsfr
om o c
curri
ng.Becaus
eno rmalspoil
ageisexpecte
d,anesti
ma t
ef orthelos
s
i
sge ne
rall
yincl
udedinthedevel
op mentofthepredete
rminedoverheadrate.
Alt
ern
ati
vel
y,ab
normalspoi
lageref
erst
oalossl
eve
labov
ethatwhi
chisn
ormal
ly
ex
pect
ed.Suchlosse
sa remorelikel
ytobep r
event
abl
eand,th
us,nee
dtob e
br
oughtt
oma nage
me nt
’sat
te
ntio
nb yshowi
ngtheamounto
fthelos
sasaper
iod
cos
t.

7
. Whens tan dar
dsa r
eu se
di najobo r
d ercost
ingsyst
em,c ostandquant
itystan-
d
ardsma yn o tbea bl
et obede ter
minedf orma t
eri
alandl a
bor.Standa
rdsca nonly
b
eu sedife l
eme ntsofth ejobsproducedh av
es omecommo ncharact
eri
st
ic
s .Thus,
i
fma nyjob sus ethesamed i
rectma t
eri
al,ap r
icest
andardmi ghtbedevel
op edfor
t
hatma t
erial.Ho wever,thejobsma yu s
ev erydiffe re
n tquanti
ti
esofthatma ter
ial
,
a
ndt hus,n oq uanti
tys tandar
dc anb ed evel
oped.Alternat
ivel
y,ac ompanyma y
p
ayt hesa mewa geratet oallwo rk
ersp erf
ormingtasksinas pecificde p a
rtment
a
nda llj
o bsflo wthr oughthatd e
partme n
t;insuchac as
e,al a
borwa ges t
andard
c
anb edetermi nedb u
tp ossibl
yn otalaborhourquant
itys t
andard.

8
. I
nas t
a ndar
dc os t
ingsyst
em,v ar
ianc
esidenti
fythearea
sofe ffic iencyandin-
effic i
e ncyinp roducti
ono per
ati
ons.Ma nag
ers,usi
ngtheco n
cepto
fma nagement
byexcep
tion,focust hei
ratt
enti
onont hesigni
fic antvari
ancesandat
te
mp ttode-
t
erminecauseso fthosev ar
iance
s( b
othfavor
ableandu nf
avor
able)
.Addit
ional
ly,
manager
swi lllo
o kf orint
erac
tionsbet
we e
no ramo ngthevari
ances
.Byc once
n-
t
rat
ingont hesigni
fic antvar
iances
,ma nage
rsarea b
letois
olat
etheas
pectsofop-
er
ati
onsthatare“ou tofcontr
ol”andtrytocorr
ectthecau
ses.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 106

EXERCISES

9
.a .j
obord
er
b. joborde
r
c. proc
ess
d. joborde
r
e. joborde
r
f
. j oborde
r
g. joborde
r
h. proc
ess
i
. j oborde
r
j
. p roc
ess
k. joborde
r
l
. p roc
ess
m. proc
ess
n. joborde
r
o. joborde
r
p. joborde
r
q. proc
ess

1
0. Twocharac
ter
ist
ic
so ft
hepropos
alarecri
ti
calinadvis-
i
ngLo ndo
na boutacost
ingsyst
em:theexpec
tedhi
ghsale
sv ol
umea ndtherepet
i-
t
iv
en at
ureofp r
oduct
ionimplie
db ytha
th i
ghsal
esvolu
me .Thesechar
acte
rist
ic
s
i
ndic
atethatLondon’
sb e
stchoicewoul
db etouseap r
ocesscost
ingsyst
ema nd
s
tandar
dco s
tvalua
ti
ons.Stan
dardcost
ingwouldbenefitLon do
nb eca
useitwo ul
d
he
lpident
ifyineffic i
enci
esinp r
oduct
ionoper
ati
onsandhelpherident
ifywaysto
r
educeproduct
ioncos
ts.

Thehomoge
neo
u snat
ureoft
hepro
ductma
kest
heu
seofj
obo
rde
rco
sti
ngu
nne
c-
es
sar
y(it
shi
ghercos
tisno
tjus
ti
fie d
).

1
1.Eac
hs t
ude n
twillh av
ead iffere
nta ns
we r
,dependin
go nthepart
ic
ularyach
tse-
l
ect
ed.Somewi lldisc
us sthey
acht
’ssiz
e;other
swi l
ldiscussthei
nter
iorfin i
she
s;
ot
herswilldi
scussthen avi
gat
ionequi
pme nt
.Th e$23.9mi ll
ionRic
hmo ndLady
Hull#52 008( ht
tp:
//ri
chmondyac
hts.
com/pdf/
142-RICHMOND- LADY- BOAT-
SHOW- PRICE.p
d f)provid
esnumerousfea
ture
su po
nwh i
chs t
udent
scanfocu
s.

1
2.a
.Emp l
oyeet
imec
ard
b
. Wo
rki
nPr
oce
ssI
nve
nto
ryCo
ntr
olo
rFi
nis
hedGo
ods
I
nve
ntor
y
c
. RawMa t
eri
alInv
entor
y
d
. Jobordercos
tsheet
e
. Ma nuf
actu
ringOverhe
adContr
ol
f
. Jo
bo rdercos
tsheet
g
. RawMa t
eri
alInv
entor
y
h. Fi
n i
shedGo odsI
nvent
oryorCostofGo
odsSol
d
i
. Ma nuf
actu
ringOverhe
adContr
ol
j
. Wo r
kinPr oc
essInv
entor
yContr
o l

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
107 Chapter 5

1
3.a
.Th edir
e ctmater
ialcha
rgeof$ 658,
000ishig
herthanthees
timateby$ 158,
000.
Assumingt h
attherewe r
en oe r
ror
sintheesti
ma t
edandactualamou nts
,then
ei
therthep r
icepaidforthema t
eri
alorthequant
ityofmateri
alu s
e dwassub-
st
anti
allyhighertha
ne xpect
ed.Tob eg
inthev a
li
dati
onp r
ocess,detai
lsofthe
or
iginalest
imatetoident
if
yp ric
esandquanti
ti
esofma t
eri
alforthisjo
bwo uld
needtob eexamined.
Thestar
tin
gp oi
n ttovali
datethemater
ialpr
icesandq uanti
ti
esp ur
chasedisto
exa
minev end
orin voi
cesbil
ledtoQuindo.Theseinvoi
c e
swi l
lvalida
tema t
eri
al
pur
chasequanti
ti
e sandp r
icespaidbyQu in
do.Ad dit
ionall
y,ma te
rialreq
uis
i-
t
ionformsshouldb eexaminedtoval
idat
ethequantit
yo fma t
eri
alactual
lyused
i
np r
oducti
on.Ne xt,a
ne xaminat
ionoft
hema te
rialcost(mater
ialquanti
tymul-
t
ipl
iedb yma t
eri
a lpri
ce)ont hejobordercostsheetsh o
uldre co
nciletothe
quant
it
yofma te
rialshowno nthemater
ialr
equisi
tio
nf orms.

b
. Th edi
rectlaborchar
geo f$625,
000ish i
ghert
hanth e
est
imateby$ 225,
000 .Assumingthatt
he r
ewe r
en oer
rorsinth
ee st
ima
tedan d
act
uala mounts,the
ne i
therthehourlyratepai
dt oort henumb e
rofho urs
workedbye mp l
oyeeswa ssub
stant
ial
lyhighert
hanexpect
ed.Tob e
gint
hev a
li-
dat
ionp r
ocess,det
ai
lso ftheori
gin
alesti
ma t
etoident
if
yr a
tesandhour
sforla-
boronthisjobwo ul
dn eedtobeexamin e
d.
Thestar
ti
ngp oi
nttovali
dat
et h
el aborrat
esandhou r
swo rkedistoexamine
employ
eeti
mes heet
s(orot
herlaboraccumula
tio
ndocume nts)
.Theti
mes heet
s
wil
lvali
dat
ewh i
chemp l
oyee
swo rkedonthejobandforwh atper
iodofti
me.A
di
scuss
ionwit
ht hepay
rol
lma nage
rs houl
dh e
lpasc
ertai
nth eact
ualoraver
age
wagerat
espaidtoemploy
ees.Poss
iblysomeofQu i
ndo ’
se mploy
eeswh owere
l
ist
edaswo r
kingonthejobshoul
db einter
vie
wedtod e
terminetheaccu
racyof
t
hetimesheet
s.
c
. Thepredet
erminedoverheadratecoul
dha v
eb eenma -
nip
ulat
edtoah ighe
rra t
ebyu si
ngal owerd en
o minat
orleve
lofa c
ti
vitythan
wasappropr
iat
e.Addit
ional
ly
,inapprop
riat
ecosts(suc
ha sper
iodcost
sina dd
i-
t
iontop r
oductover
headc o
sts
)c oul
dh avebeenincludedinthenumerato
r.A
l
argeest
imatef
orspoil
ageandd e
fectcost
smighta l
sohavebeeninc
ludedinthe
numera
torwhen,infac
t,suc
hc os
tsrare
lyoccuratQu i
ndoIndust
ri
es.

d
. Thecompany’sbehavi
orisatbestquest
ion
a b
le.Given
th
atthed i
ffe rencebet
weenact
ualande s
ti
ma t
eddir
ectma t
eri
alcostwasli
kely
knowna tthepointofpur
chas
e,Qu i
ndoshouldhavenot
ifie dSalem Corp.i
m-
mediat
el
yo ft h
ee x
ces
siv
eincre
aseinc ost
.Simil
arnotificati
ons houl
dh ave
beenprovi
dedwh enitwasse
enthatdi
rec
tlaborandmachineti
meswe reh
igher
th
ane x
pe c
ted.

1
4.a
.Ra
wMa t
eri
alI
nve
ntor
y 2
04,
000
Ac
count
sPaya
ble 2
04,
000

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 108

Wo
rkinProc
essInv
e n
tory—#4
263 1
63,
800
Wo
rkinProc
essInv
e n
tory—#4
264 1,
870
Ma
nufac
tur
ingOverhead 12,
460
Ra
wMa t
eri
alI
n v
entor
y 1
78,
130

Wo
rkinProc
essI
nve
ntor
y—#4
263 54,
000
Wo
rkinProc
essI
nve
ntor
y—#4
264 1
,800
Cas
h(3,
720 $15
) 55
,80
0

Ma
nu f
act
urin
gOv er
hea
d 6
8,7
00
Cash($18,
000+$7,2
00+$ 9
,50
0) 34,
700
Accumulat
edDepr
ecia
tio
n 21,
500
WagesPayabl
e 1
2,500

Wo
rkinProc
essI
nve
nto
ry—#42
63 64,
800
Wo
rkinProc
essI
nve
nto
ry—#42
64 2
,160
Manu
fact
uri
ngOver
hea
d 6
6,9
60

b
.RM I
nve
nto
ry=$
4,3
00+$2
04,
000 $
163
,80
0 $
12,
460 $
1,8
70=$
30,
170
c
. Beca
uset
hecompa
nywor
kedonl
yonJo
b# 4263un
til
t
heendo
fApri
l,a
llco
stsi
nbeg
inn
ingWIPf
orot
herj
obsa
res
til
linth
atac-
c
oun
tatt
hee
ndofthemont
h.

Be
ginni
ngWI P $11
,400
Le
sscost
sassoci
at
e dwithJob#4
263 (800)
Cos
tsass
oci
atedwitho t
herjo
bs $10,
600
Cos
tsfo
rJob# 4264($1,
8 7
0+$ 1,
800+$
2,1
60) 5,830
En
dingWI P $
16,430
d
.CGM =Be gi
nni
ngWIP+Cu rr
entper
iodco
sts–End
ingWIP
=$11,
400+$163
,80
0+$ 1,8
70+$ 55,
800+$66,
960 $
16,
430
=$28
3,400
Un
itc
o s
t=$283,
400÷10,
000=$ 28.
34

e
.Ap pl
ie
dOH–Ac
tua
lOH=$
66,
960 ($12,460 + $68,700) =$
14,
200u
nde
r-
a
ppli
ed

1
5.a
.OHr
ate=$
134
,40
0÷$
96,
000=1
40% ofdi
rec
tla
bor

b
.En
din
gWI Pbal
ance:
DM $
37,725
DL 1
8,100
OH($18,
100 1.40
) 25,340
Endi
ngbal
ance $81,
165

c
. CGM =Beg
.WI P+Cu rre
ntcos
ts–Co
stofj
obsc
om-
p
let
ed
=$0+$ 13
8,6
00+$9
6,00
0+$ 1
34 ,
400 $81,
165
=$28
7,835
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
109 Chapter 5

1
6.a
.Ra
wMa t
eri
alI
nve
ntor
y 7
6,0
00
Ac
count
sPaya
ble 76
,00
0

WI
P—J ob#217 44,
800
WI
P—J ob#218 7,
200
WI
P—o the
rjo
bs 53,
600
Di
rectMat
eri
alI
nve
nto
ry 1
05,
600

WI
P—J ob#217 10,
400
WI
P—J ob#218 14,
000
WI
P—o the
rjo
bs 19,
600
Ca
sh(orWa g
esPa
yab
le) 4
4,0
00

Ma
n u
fact
uri
ngOver
hea
d 2
20,
000
Vari
ousacc
ount
s 2
20,
000
WI
P—Job#217 51,
480
WI
P—Job#218 69,
300
WI
P—othe
rjobs 97,
020
Ma
nufa
cturi
ngOv
erh
ead 2
17,
800
(
Act
ualr
atep
erDL$=$
44,
000 $
4.95
)

Fi
nis
hedGoodsI
nve
ntory 1
17,
880
WI PI
nve
ntor
y—J ob#21
7 1
17,
880
(
$11
,20
0+$ 44
,80
0+$1
0,4
00+$
51,
480
=$117,
880
)

Ca
sh 15
9,1
38
Sal
es 1
59,
138
(
$11
7,8
80×1
.35=$
159,
138
)

Co
stofGood
sSol
d 1
17,
880
Fi
nis
hedGoo
dsIn
ven
tor
y 1
17,
880
b
. End
ingWIP=Beg
.WIP+Curr
entcost
s–Cos
tofJ
ob
#
217c
omp
let
ed
=$16,
800+$105,
600+$
44,
000+$
217
,800 $
117,8
80
=$26
6,320
En
dingbal
anc
einJ
ob#
218=$
5,6
00+$
7,2
00+$
14,
000+$
69,
300
=$96
,10
0

1
7.a
.OHr
ate=$
127
,68
0÷7
,60
0=$
16.
80p
erDLH
b
.Av
era
geDLr
ate=$
159
,60
0÷7
,60
0=$2
1pe
rDLH

c
.15
,20
0 (
$21.
00+$16.8
0)=15,
200 $37
.80=$574
,560
DL& OH$91
6,65
0 $
574,5
60=$342
,090DM inb
eginn
ingWI
P
d
.Ifwo
rke
rsont
hej
obi
nen
din
gWI
Par
eas
sume
dtob
epa
idt
hea
ver
ageDLr
ate
,
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 110

t
hent
hee
ndi
ngWI
Pba
lan
cei
s:

DM $7 3
,250
DL(2,
850 $21
) 59,85
0
OH(2,8
50 $16.
80) 47,880
End
ingbal
anc
e $1
80,980

e
.CGM =Beg.WIP+Curr
entper
iodc
ost
s–En
d.WIP
=$9
16,65
0+$ 5
89,670+$159
,60
0+$127
,68
0 $
180
,98
0
=$1,
612,
620

1
8.a
.CGSist
heamo
untcr
edi
te
dtoFi
nis
hedGo
odsI
nve
nto
ryf
ort
hey
ear
.
CGS=$
1,8
90,
000
b
.Be g.FG+CGM –En d.FG=CGS
$90
,000+CGM  $57
,000=$1,
890
,00
0
CGM +$33,
000=$ 1,89
0,0
00
CGM =$1,
857,
00 0

c
.Ap
pli
edOH=$
395
,000×1
.40=$
553
,00
0
d
.Be g.WIP+DM u
sed+DL+OH–En d.WIP=CGM
$56
,00
0+DM +$395,
000+$55
3,0
00 $2
7,64
0=$1
,85
7,0
00
DM +$976
,36
0=$1,
857,
000
DM =$880
,64
0
e
.Be g.
DM +P–DM u s
ed=End.DM
$24,
600+P $8
80,64
0=$ 4,
100
P $
856,04
0=$4,1
00
P=$ 860
,140

1
9.a
.CGS=0
.75 Sa
les=0
.75
($1
,598
,00
0)=$1
,19
8,5
00

b
.Be g.FG+CGM –En d.FG=CGS
$68
,900+CGM  $16
5,600=$1
,19
8,5
00
CGM  $
96,70
0=$ 1,
198,
500
CGM =$1 ,
295,
200

c
.Jo bB3 25
:Appli
edOH=85
%ofDL$=0.
85(
128 $1
2.90)=0.
85
$
1, 6
51.20=$1,403
.52
J
o bQ4 28:Ap
pli
edOH=85%o
fDL$=0.
85(
240 $12.
90)=0.
85
$3,096
.00=$2,631.
60

d
. J
o bB325 Q428
DM $21,9
8 0
.00 $1
4 ,
700.
00
DL 1,6
5 1
.20 3,096.
00
OH 1,403.
52 2,
631.
60
$25,034.
72 $20,
427.
60

e
.CGM =Be
g.WI
P+DM u
sed+DL+OH–En
d.WI
P

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
111 Chapter 5

$1,
295,
200=$14,600+DM u sed+$ 12.
90(2
5,7
60)+0.8
5($12.
90 2
5,76
0)
–($25,
034.
72+$ 20,427.
60)
$1,
295,
200=$14,600+DM u sed+$ 3
32 ,
304+$282
,458.
40 $
45,
462.
32
$1,
295,
200=$583 ,
90 0.
08+DM u s
ed
DM used=$711,
2 99.
9 2
Beg.DM +Purc
ha s
es DM u s
ed=En d .
DM
$19,
500+$843,
27 6 $711,
299.
92=En d.DM
End.DM (
dest
royed)=$ 151,
476.0
8

2
0.a
. Cas
e#1 Cas
e# 2 Case#3 Ca
se#4
DM $4 80 $8 ,
800 $3,700 $8 50
DL($19
0perho
ur) 7,
600 17,
100 1 3,
300 2,
850
OH($150p
ercour
thou
r) 1,
800 9,
750 1 8,
000 6,000
To
tal
s $9,
880 $3
5,650 $35
,000 $9,
700
b
. DM $
10,100
DL( 1
7 4 $1
90) 33,060
OH( 72 $150) 10,
800
To
talcost $53
,960
Markup(45%) 24,
282
To
talbill
edt
oc l
ien
t $78,
242
2
1.a
.Over
headrat
e=Bu dg
etedOH÷Bu dge
tedDL$
$4.
25=$ 1
,275,
000÷Bu dget
edDL$
Budge
tedDLc o
st=$ 1,
275,
000÷$4.
25
Budge
tedDLc o
st=$ 30
0 ,
000
Over
headrat
e=$ 1
,275,
000÷$300,
000=$4.25p
erDL$

b
. Worki
nPr
oce
ssI
nve
nto
ry 9
6,4
75
Ma
nuf
act
uri
ngOv
erh
ead 96
,47
5
(
$22
,70
0 $
4.2
5=$
96,
475
)

c
. $
4.25 3
,900=$
16,
575

d
.Beginni
ngb a
lan
ce $18,
350
Di
rec
tma t
eri
al 29,
600
Di
rec
tlabor 3,900
Manufa
ctu
ringove
rhe
ad 16,
575
En
dingbala
nce $6
8,425

2
2.a
.Directma t
eri
al $2,
850
Di
rectla
b or($8
00÷$ 20=40DLHs
) 800
Appl
iedo ver
head($
17 40
) 680
To
talcostofJob#920 $4
,330

b. BIofWI
P[$8
,25
0+$
500+(
$17 2
5)] $9
,17
5

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 112

Di
rec
tmate
ria
l $
21,650
Di
rec
tla
bor($6,
300÷$2
0=3 1
5DLHs
) 6
,300
Ap
pli
edover
head($1
7 31
5) 5,355 3 3,
305
$42,
480
EIofWI
P (4,
330)
Cos
tofg
ood
sma
nuf
act
ure
d $
3 8,
150

c
. Ac t
ualo
ver
hea
d $5,
054
Ap
pli
e dover
hea
d (
5,3
55)
Ov
erappli
edOH $ 301
2
3.a
.Mixi
ng:$480,
000÷60,
000=$8pe
rMH
Pa
ving:$70
0,000÷2
8,000=$2
5perDLH

b
.Mixi
ng(290MHs $8) $2 ,
320
Pa
ving(340DLHs $2
5) 8
,500
To
talov
e r
hea
dappl
ie
d $
10,820
c
.($48
0,0
00+$7
00,0
00)÷(60
,000+12,
000)=$1,
180
,00
0÷7
2,0
00=$
16.
39
$
16.
39 3
34=$5,
474.
26appl
iedt
oJob#220

Aplant
wider
atewoul
dn otha
v ebeeni
ndi
cat
iveoftheact
ualco
stofeac
hjob
b
ecauseth
eMixin
gd e
part
me ntisv
erymachi
ne-i
nte
nsiv
ewh i
lethePa
vin
gde-
p
art
me nti
sve
rylab
or-
int
ensi
ve.

2
4.a
.De
partme
nt1=$465
,000÷30
,000MHs=$1
5.50pe
rMH
Depa
rtment2=$
380,
600÷22,
000DLHs=$17.
30pe
rDLH

b
.Ra
wMa t
eri
alI
nvent
ory 34
6,0
00
Ac
count
sPaya
ble 3
46,
000

Wo
rki
nPr
oces
sInv
ento
ry—Jo
b# 4
62 19
,000
Wo
rki
nPr
oces
sInv
ento
ry—ot
herj
obs 3
21,000
RawMat
eri
alI
nvent
ory 3
40,
000

Wo
rki
nPr
oce
ssIn
vento
ry—Jo
b# 4
62 275
Wo
rki
nPr
oce
ssIn
vento
ry—ot
herj
obs 2,
860
Cas
h(2
85 $11) 3
,13
5

Wo
rki
nProce
ssIn
ve n
tory—Jo
b# 462 4,9
6 0
Wo
rki
nProce
ssIn
ve n
tory—ot
herjob
s 3
2,240
Over
hea
dCo n
trol(2,
400 $15
.50) 3
7,2
00

Wo
rki
nPr
oces
sIn
ven
tor
y—Jo
b# 4
62 2,8
4 4
Wo
rki
nPr
oces
sIn
ven
tor
y—ot
herj
obs 2
2,896
Cas
h(1
,43
0 $18
) 2
5,7
40
Wo
rki
nProce
ssIn
ve n
tory—Jo
b# 462 346
Wo
rki
nProce
ssIn
ve n
tory—ot
herjob
s 2,
768
Over
hea
dCo n
trol(18
0 $17.3
0) 3,
114
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
113 Chapter 5

Fi
nis
hedGood
sInv
ent
ory
—J ob#
462 2
7,4
25
Wo r
kinPr
oce
ssIn
vent
ory
—Job#46
2 2
7,4
25
(
$19
,00
0+$
275+$
4,9
60+$
2,8
44+$3
46)

Ac
countsRece
ivab
le—Power 3
2,91
0
Sa
les($2
7,425 1.
20) 3
2,9
10

Co
stofGood
sSold 2
7,4
25
Fi
nis
hedGoo
dsInv
ent
ory
—Jo
b#46
2 27
,42
5

c
.Cos
tperuni
t=$ 27
,425÷500=$
5 4
.85
Se
ll
ingpri
ceperuni
t=$65
.82
Rawma t
eri
al=$19,
000÷500=$38

d
.TotalRM issued $340
,000
To
taluni
ts(500+20
,00
0) ÷20,
500
RM cos
tp e
ru ni
t $ 1 6.
59(r
oun
ded
)
To
talcos
tperu
nit=$54
.85 $
38.
00+$
16.59=$33.
44
Se
ll
ingpri
ceperun
it=$33.
44 1.
2=$40
.13(r
oun
ded)
Sa
leswit
houterr
or $32,
910
Sa
leswit
herror(
500 $40.
13) (
20,
065)
To
tal“s
avi
ngs”ofth
eerr
or $12,
845

2
5.a
.Cu r
rent
ly,Bo ni
voh a
snod at
aonth eact
ualcostofbui
ldi
nganyo ft
hec omput-
e
rsbeingc onfig ur
ed.Conseq
uently
,thecomp an
yisunabl
etod et
erminetheac-
t
ualprofit( loss
)genera
tedona nysal
estransa
cti
on.Thejobordercost
ingsys-
t
em wou lda l
low Boni
votob et
terunders
tandwh atf
act
orsdriv
ec ost
sint he
firm,me asur
etheprofitons alestr
ansac
ti
o ns
,andiden
tif
ywa ystobett
erman-
a
gec o
stsan drev
enues.

b
. Ap ric
ingpoli
cythatign
oresthec o
stsofd i
rectl
abor
a
ndo ve
rhead(i
na ddi
ti
ontoma r
ket
ingandadmini
st
rat
ivecost
s)isfla wed.Onl
y
i
fDLa ndOHa r
estri
ct
lypropor
ti
onaltodi
rec
tmater
ialcoul
dtheircos
tsnotbe
c
onside
redind e
termini
ngthepric
ea ndprofitofea c
hc omputer
.Ho weve
r,i
n
t
hiscas
e,thes
ec os
tsareli
kel
yama jorpor
ti
onofthec os
tofb u
ildi
ngama de-
t
o-or
dercomputer
.

2
6.a
.Secreta
ry($4,800÷160hrs.35hrs.
) $ 1,
050
Copi
es(1,450pages $0
.06perpa
ge) 87
Ph
o necal
ls 145
Over
h ea
d($9 ,
600÷1 6
0h r
s.3 5hr
s.
) 2,
100
At
torney’
stime($190 95hrs
.) 18,
050
To
talcharg
es $21,
432

Th
isme
ansCon
roewo
uldb
ech
arg
ing$
21,
432÷9
5=$2
25.
60o
r$2
30pe
r
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 114

hour(
rounde
d).
Tot
albil
ltoOli
vgr
a=9
5ho
urs $
230=$
21,
850

b
.Directcos
ts(
$87+$ 145+$ 18,
050) $18,
282
Al
locat
edsecr
eta
ria
lc o
sts 1,
050
Al
locat
edover
head 2
,100
Margi
n[($18
,282+$ 2,
100)×0.40
] 8,153
To
talbi
ll
ing $
29,585

c
. A flatchar
geperhourwouldb emo r
elike
lytobeac-
cept
abl
etoc l
ie
ntsbec
ausesuc
hac har
geismo reunders
tanda
blethanbei
ng
char
gedanhourl
yra
tepl
usacharg
efort
heti
met h
atisnotrea
ll
yb e
ingspe
nton
th
eirca
ses
.

2
7.Eachstudentwil
lh a
vead iffe ren
ta nswer
,butth
eme mos hou l
da ddre
ssthefol
low-
i
ngi ss
ue:Bu dge
tedc ostisfarbel
owe ac
hjob’sactua
lcost,wh ichindi
catest
hat
t
hec omp a
nyisno tusi
n gpas
tjobinformati
onasab asi
sforeit
he rcont
roll
ingcos
ts
orincr
easin
gf ut
ureb i
dp ri
ces.Byn otusi
ngavail
ablehi
stor
icalinfor
ma t
iontoad-
j
ustoperat
ions
,thecomp anyisacce
ptingmargi
nalj
obs.Alt
hou ghe a
chjobg e
nera
ted
aposit
ivegros
sma r
gin,th
ea ct
ualgrossmargi
niso nl
yas mallfract
ionofthebud-
get
edgrossmargi
n .I
tisimportan
tthatacompanylea
rnfrompa s
t mist
akes.

2
8.a
.Someo ft
hecompani
est
hath
avebee
nfou
ndtoen
gageint
hisp
rac
ti
cea
reFa
m-
i
lyDo
llar
,Pe
pBo y
s,Tac
oBell
,To
ys-
R-Us,a
ndWalmar
t.
b
. I
tiseasi
ertodoct
ortherec
ordsno
wt ha
ninthepas
tbe-
caus
er e
cord
sarecomputer
izedandma nag
ersgener
all
yhaveacc
esst
othefiles.
Prev
iousl
y,man
a g
erswouldhaveh a
dtoc o
nspir
ewithpayr
ollc
ler
ksora
ccoun-
ta
ntstochan
gepaperorpunch
-cardrec
ords.
c
. Eachs t
udentwillhavead i
ffe rentanswer
.Ho weve
r,
mosts
tudent
swillpro
b a
blyindi
cat
ethatst
oremanager
sma kingsuc
hc ha
nges
woul
db efir e
d( s
hortrun)
.Forthel
ongrun,eth
icstr
ain
ingwo ul
dprobabl
yb e
r
ecomme n
deda ndpossi
blyachangeinthewa yst
orema nag
ers’bonu
sesare
co
mp ut
ed.

2
9.a
.Ma
nufa
ctur
ingOver
head 1
,15
0
Ra
wMa t
eri
alI
nve
ntor
y 2
50
Wage
sPayabl
e 900

b. WI
P—J
ob#BA4
68 1
,15
0
Ra
wMa t
eri
alInv
ent
ory 250
Wage
sPa
yable 9
0 0

Giv
ent ha
tthereworkc
ost
swe renotneces
saryt
othecomplet
ionoft
hejob,Sa
n
AngeloCorp.shoul
dprob
a bl
yn o
tc har
geitsmark
upp er
cent
ageonthe$1,15
0
ofr
ewo r
kc o
stsunle
sst
hec us
tomerh a
da l
rea
dybeenin
formedtha
tsuchcha
rges
mightbechar
geda n
dthecust
omerh adagree
dtosuchcha
rges
.

c
.Lo
sso
nAb
nor
malRe
wor
k 1,
150

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
115 Chapter 5

Ra
wMa t
eri
alInv
ent
ory 250
Wage
sPa
yable 9
00

3
0.a
.Pr
ede
ter
min
edOHr
ate=$
1,4
21,
000÷1
45,
000=$
9.8
0pe
rMH

Di
rectmater
ial $
47,5
00
Di
rectla
bor 2
1,800
Over
head(325×$9
.80
) 3,185
To
talcost $
72,485

Pe
r-u
nitc
ost=$
72,
485÷1
,50
0=$
48.
32(
rou
nde
d)
b
. Th
e$75
0re
wor
kco
sti
sin
clu
dedi
n Ma
nuf
act
uri
ng
Ov
erh
eadCo
ntr
ol.

c
. To
talo
rig
ina
lcos
t $
72,
485
Cos
tofnew30unit
s 1,
390
Les
ssal
eofdef
ect
iv
eunit
s (
240)
To
talc
ostofJ
ob#876 $73,
635

3
1.a
.Th ees
ti
mate
dc os
tofthes
poil
agesho
uldbeinc
lude
dincal
cul
at
ingt
hepred
e-
t
ermi
nedover
headrat
e.Thi
sappro
achspre
adsthecos
tofspoi
la
geacr
ossall
g
oodunit
sprod
uced.

b
. Thecostofthisspoi
lagesho
u ldbecha
rgedtothespec
ificjob.
Sinc
eth
e r
ei snos a
lva
gev alueforthespoi
la
ge,noj o
urnalent
rywo ul
db enec
-
ess
arya
st hecostofthesp o
iledunit
swo ul
db eincl
udedinthep r
iorc
harge
sto
th
ejobfordire
ctma t
eri
al
s ,di
rectlab
o r
,andma nuf
act
uri
ngo v
erhead.

c
. Inthiscase,
thes poi
lageisun e
xpecteda ndthene tcostsho
uld
b
erecord
eda salossofthep e
riodinwh ichitoccurr
e d.Anysalvag evalueass
o-
c
iat
edwiththespoil
agewi l
lreducet heamo untofthel os
s.Tor ecordthetrans-
a
cti
on,worki nproces
s( andthes peci
ficj ob’
sjobo r
d e
rc ostsh ee
t)shouldbe
c
redi
tedfort
hec os
toft h
es poi
lagea n
dth eexpecte
d,n etsal
vageo fthes p
oil
age
s
houldbed e
bite
d(Disp os
alvalueo fdef
ecti
vewo rk).Al ossaccoun t(e
.g.
,Lo s
s
f
rom AbnormalSpoil
age)shouldb edebit
edtob alan
c ethetra
nsa c
tion.

3
2.Astandardcosti
ngs y
stemismo stappropriat
einp r
oducti
ons e
tti
ngsinwh ic
ha c-
t
ivi
ti
esa r
er ep
eti
ti
ve.Th a
tcrite
rionisme tinthecaseofLa t
amo r
eIndustr
ies
.De -
v
elopme ntofsuchs t
andardsrequir
estha trel
iabl
eexpectat
ionsaboutinputcost
a
mo untsandq uant
iti
esbed eter
minedfo rthemo rerouti
nea s
pectsofcli
entser-
v
ices.On cethesta
n da
rdsared ev
elope
d,a c
tualcost
sandi npu
tq uant
it
iescanbe
c
omp aredagains
tthes t
andardstobett
erun derst
andthecausesofc o
stvari
abil
it
y
a
crossthec o
ntrac
ts.Bett
eridenti
fic at
iona ndu nder
sta
ndingofthec au
sesofvari
-
a
nceswi llal
low ma nag
erstoma n a
gec ostsmo reeffe ct
ivel
ya ndp r
icecompany
s
ervi
c e
smo r
eappropri
atel
y.

3
3.MPV=Actu
alcostf
orpap
erpur
chase
d–St
andar
dcos
tfo
rpap e
rp u
rch
ase
d
=($0.
032 980,
000)–(
$0.0
36 98
0,00
0)=$31,
360 $35,
280
=$3,
920.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 116

Si
ncea
ctu
alc
ostwa
sle
sst
hans
tan
dar
d,t
hev
ari
anc
eisf
avo
rab
le.

MQV=Ac tua
lcos
tforpa
peru
sed–Stan
dardcos
tforpa
perthatshou
ldh
aveb
een
us
ed=($0.
036 980
,00
0)–($0.
036 984
,00
0)=$ 35
,280 $
3 5
,424
=$1
44.
Si
nceac
tua
lpa
peru
sag
ewa
sle
sst
hant
hes
tan
dar
dal
lo
wed
,th
eva
ria
ncei
s
fa
vor
abl
e.

3
4.a
.To
talp
ayr
oll=9
,00
0×$
9.6
5=$
86,
850
b
.LRV=Act
ualpa
yro
ll–Standar
dcostf
oract
ualho
urswor
ked=$
86,
850–
($
9.8
5×9
,000)=$86,
850 $
88,65
0=$ 1
,800.
Si
ncedi
rec
tlab
ore
mpl
oye
eswe
rep
aidl
esst
hant
hes
tan
dar
dra
te,t
hev
ari
anc
e
i
sfav
ora
ble.

c
.LQV=St an
dardcostf
orac
tua
lhour
swork
ed–Standar
dc o
stf
orst
and a
rd
hou
rsall
owedforpr
o d
uct
ion=$8
8,650–($9
.85 8
,600)=$88,
650
$84,
710=$3 ,
940.

Sinc
ethen umbero
fhour
swor
kedwa
sgr
eat
ert
hant
hes
tan
dar
dho
ursa
ll
owe
d,
th
ev ar
ian
cei su
nfa
vor
abl
e.
d
.On econcer
nwo ul
db ethereasonthecomp anywa spayi
n gitsworker
slessthan
t
hestand
ardrat
eperh our
.Th eotherconcernwou l
dbet hatthewo r
kers
,recog-
ni
zin
gt ha
ttheywe r
eb ein
gp aidlessthant hestandar
d,c hosetowo rkmor e
s
lowlytha
ntheynorma l
lywou l
d,tocomp ensat
e(rela
ti
vet otot
alwa g
es)forthe
r
educedwage.Ift
hissit
uat
ionisthec a
s e
,thec ompanywo u l
dh a
veb ee
nb et
ter
offp ayi
ngthesta
n d
a r
dratebecausethea ct
ualpayrol
lwa s($86,8
50 $ 8
4,710)
o
r$ 2,
140great
ert
hant h
estandardwouldha vebeen.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
117 Chapter 5

PROBLEMS
3
5.Ra
wMa t
eri
alI
nve
ntor
y 7
90,
000
Ac
count
sPaya
ble 7
90,
000

Wo
rkinPr
oce
ssInv
ent
ory 5
70,
000
Ra
wMa t
eri
alI
nve
ntor
y 5
70,
000

Ma
nufa
ctu
rin
gOv er
head 1
20,
000
Ra
wMa ter
ialI
nve
ntor
y 1
20,
000

Wo
rkinProces
sInven
tory 7
94,
000
Ma
nufac
turi
ngOv e
rhead 80,
000
WagesPaya
ble 8
74,
000

Wo
rkinProc
essI
nve
nto
ry($79
4,0
00 0
.55
) 4
36,
700
Manu
fact
uri
ngOver
hea
d 43
6,7
00

Fi
nis
hedGoodsIn
vent
ory 1,
046
,00
0
Wo r
kinPro
cessI
nvent
ory 1,
046
,00
0

Co
stofGoodsSo
ld 1
,04
6,0
00
Fi
nis
hedGoodsI
nve
nto
ry 1
,04
6,0
00

Ca
sh 1
,34
2,0
00
Sa
les 1
,34
2,0
00

3
6.a
.$8
2,0
00 8
,00
0DLHs=$1
0.2
5pe
rDLH
b
.Di
rec
tMate
ria
lIn
vento
ry 9
0,0
00
Ac
count
sPaya
ble 9
0,0
00

Wo
rkinPr
oce
ssI
nve
nto
ry 7
5,60
0
Ca
sh 7
5,6
00

Ma
n u
fact
uri
ngOver
hea
d 8
2,0
00
Vari
ousacc
ount
s 8
2,0
00

Wo
rki
nProc
essI
nve
nto
ry 8
2,00
0
Ma
nuf
act
uri
ngOver
hea
d 8
2,0
00

Wo
rkinPro
cessI
nventor
y 8
8,50
0
Di
rec
tMa t
eri
alIn
ventor
y 88
,50
0
(
$2,
000+$ 90,
000 $3,
500)

Fi
nis
hedGood
sInv
ent
ory 2
48,
850
Wo r
kinPr
oce
ssIn
vent
ory 2
48,
850
CGM =BWIP+DM +DL+OH–EWI P
CGM =$1
0,5
00+$ 8
8,5
00+$
75,
600+$82
,000–
$7
,75
0=$248,
850

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 118

Ac
count
sRe
cei
vab
le 3
50,
400
Sa
les 3
50,
400

CostofGoodsSol
d 2
43,
700
Fi
nishe
dGo o
dsIn
ven
tor
y 2
43,
700
c
.Begin
n i
ngFG $ 6,500
CGM 248
,850
CGS (2
43,700)
Endin
gFG $1 1,
650

3
7.a
.9/
1Ra
wMa t
eri
alI
nve
nto
ry 1,
940
,00
0
Ac
count
sPay
abl
e 1
,94
0,0
00
9
/4Wor
kinPr o
cessInvent
ory 1
,846,
800
Ma
nu f
act
uringOv e
rhead 53
,200
RawMa ter
ialInve
ntor
y 1
,90
0,0
00
Issuan
cesma detojobsasfol
lows
:
#75,$289,600;#78,$252,
600;
#82,$992,200;#86,$312,
400
9
/15Wor
kinProcessIn
ventor
y 665,
600
Manuf
act
uringOverhea
d 9
1,400
Cash 75
7,0
00
Laborcharge
dtojobsasfol
lows
:
#75,$84,
600;#78,$267,
200;
#82,
$ 2
03,000;#86,$110,
800
9
/15Wor
kinProc
essInv
e nt
ory 8
32,
000
Ma nu
fact
uri
ngOv er
head 8
32,
000
Over
headappl
ie
dt ojob
sa sf
oll
ows
:
#7
5,$120,
750;#78,$329,
000;
#8
2,$253,
750;#86,$128,
500
9
/15Fi
nis
hedGoo d
sInve
ntor
y 1,
081
,35
0
Wo r
kinProc
essIn
vent
ory
($5
86,4
00+$ 289,
600+$84,
600+$
120
,75
0) 1
,08
1,3
50
Ac
count
sRece
iva
ble 1
,40
5,7
55
Sa
les(
$1,
081,
350 1
.3) 1
,40
5,7
55
Cos
tofGoodsSo
ld 1
,08
1,3
50
Fi
nis
hedGoodsI
nve
nto
ry 1
,08
1,3
50
9
/20Manuf
act
uri
ngOver
hea
d 1
10,
200
Ac
count
sPayab
le 1
96,
800
Cash 3
07,
000
9
/24Ra
wMa t
eri
alI
nve
nto
ry 6
24,
000
Ac
count
sPay
abl
e 6
24,
000
9
/25Worki
nProces
sInv
entor
y 7
16,
400
Manuf
act
uri
ngOverhe
ad 55,
800
RawMa t
eri
alI
nvent
ory 77
2,2
00
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
119 Chapter 5

I
ssu
ance
sma d
etojo
bsa sf
oll
ows
:
#
78,$1
54,8
00;#82,$2
12,600
;#86,$
349,
000
9
/30Manuf
acturi
ngOv e
rhead 1
,20
6,80
0
Accumu l
atedDeprec
iat
ion 809
,000
Prepai
dInsura
nce 1
65,400
Taxes& Licens
esPayabl
e 232,
400
9
/30Worki
nPr oces
sInvent
ory 6
49,
400
Manuf
acturi
ngOv e
rhead 65,
000
Cash 7
14,
400
Laborchargedt
ojobsasfol
lows:
#78,$177,
400;#82,$228,
400;
#86,$243,
600
9
/30WorkinPr oce s
sI nventory 4
07,
125
Ma nufactur
ingOv erhead 4
07,
125
Toa pp l
yo verheadt ojobsa sfo l
lows
:
#78, $111,750; #82, $170,625;
#86, $124,750
b
. RawMa t
eri
alI
nven
tor
y
Bal
. 332,
4009 /4 1
,900,
000
9/
1 1,
940,
000 9/25 77
2,200
9/
24 624,
000
Bal
. 224,
200

Wor
kinProc
essIn
ven
tor
y
Bal
. 1,
512,
600 9/1
5 1
,08
1,3
50
9/
4 1,
846,
800
9/
15 665,
600
9/
15 832,
000
9/
25 716,
400
9/
30 649,
400
9/
30 407,
125
Bal
. 5,
548,
575

Costo
fGo
odsSol
d
Bal
. 4
,864,
000
#7
5 1,
081
,350
Bal
. 5
,945,
350

J
ob#7
5
Ba
l. 5
86,400 1
,081
,35
0
DM 289,
600
DL 84
,600
OH 120,
750
Ba
l. 0
J
ob#7
8
Ba
l. 2
66,
600

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 120

DM 25
2,600
DL 26
7,200
OH 32
9,000
DM 15
4,800
DL 17
7,400
OH 111,
750
Ba
l. 1
,559,
350

J
ob#8
2
Ba
l. 65
9,600
DM 992,
200
DL 203,
000
OH 253,
750
DM 212,
600
DL 228,
400
OH 170,
625
Ba
l. 2
,720,
175

J
ob#8
6
DM 31
2,400
DL 11
0,800
OH 12
8,500
DM 34
9,000
DL 24
3,600
OH 12
4,750
Ba
l. 1
,269,
050

c
.Sc
h e
duleo
fJobCos
tReco
rds
Se
pte
mber3
0,201
3
Job#78 $1,
559,
350
Job#82 2,
720,
175
Job#86 1,
269,
050
Total $
5 ,
548,
575

d
.Actualove
rheadfo
rSe p
tembe
r
9/4 $ 53,
200
9/15 91,
400
9/20 110,
200
9/25 55,
800
9/30 1,
206,
800
9/30 65
,000 $1
,58
2,4
00
Appl
iedover
headforSept
ember
9/15 $832,
000
9/30 40
7,125 (
1,2
39,
125)
Un
derappli
edover
head $ 343,
275

3
8.a
.Ra
wMate
ria
lIn
ven
tor
y 5
42,
000
Ca
sh 5
42,
000

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
121 Chapter 5

Ma
nufac
turi
ngOv erhead 54,
000
Wo
rkinProcessInv
e n
tory 6
02,
800
Wages/
Sal
a r
iesPayabl
e(orCa s
h) 6
56,
800
Torec
ordDLf orjobs(Job#247,$17,
400
;
#25
1,$8,800;#253,$21,00
0;
#25
4,$136,600;#255,$145,0
00;
#25
6,$94,600;and# 257,$
179,400)

Ma
nufact
uri
ngOv erhead 76
,000
Wo
rkinProcessIn
v entor
y 466,
400
RawMa te
rialI
n vento
ry 5
42,
400
Torec
ordDM f orjobs(Job#247,$12
,40
0;
#251
,$ 6
,200;#25 3
, $16,
800;#
25 4
,$105,
200;
#255
,$ 1
19,800;
# 256,$72,8
00;
and#257,$133,
2 00)
Ma
n u
fact
uri
ngOv er
head 1
14,
400
Vari
ousacco
unts 1
14,
400
Torecor
dOHc ostsot
hert
han
i
ndire
ctlab
ora n
di n
dir
ect
mater
ial
s($244,
400 $
54,
000 $
76,
000
)
Wo
rkinProcessInv
entory 2
41,
120
Manuf
acturin
gOv erhead 24
1,1
20
Toappl
yOHatar a
teo f$0.
40pe rDL$
(
Job#247,$ 6,
960;#2 5
1, $3,
520;#253
,$8
,40
0;
#25
4,$54,640;#255,$5 8,
000;
#25
6,$37,840;and# 257,$71,7
60 )
Fi
nis
hedGood
sInve
nto
ry 1
,77
9,0
40
Wo r
kinPr
oces
sInve
nto
ry 1
,77
9,0
40
(Se
esc
hedul
ebel
ow.)
Ca
sh 2
,26
4,7
74
Sal
es 2
,264
,77
4
Co
stofGood
sSol
d 1
,77
9,0
40
Fi
nis
hedGoo
dsIn
ven
tor
y 1
,77
9,0
40
Sched
uleo fComple
tedJ
ob s
Job Di
rec
tMa t
eri
al Di r
ectLabo
r Ap p l
ie
dOH To t
al
247 $89 ,
600 $108,
800 $4 3,
520 $ 241,
920
251 182,
800 218,
600 87,
440 488,84
0
253 162,
200 190,
600 76,
240 429,04
0
254 105,
200 136,
600 54,
640 296,44
0
255 119,
800 145,
000 58,
000 322,
800
Tot
als $659,
600 $799,
600 $319,
840 $1,
779,
040

J
ob Di
rec
tMa
ter
ial Di
rec
tLa
bor Ap
pli
edOH To
tal
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 122

256 $72,800 $94 ,

600 $37,840 $205,
240
257 13
3,200 1
79,400 7
1,76
0 3 8
4,360
Tot
als $206,
000 $274,
000 $
109,600 $
5 89,
600

c
.Ac
tualove
rhead $2 44,
400
Appl
iedover
head (24
1,120
)
Unde
rappl
iedover
head $ 3, 280
Una
djust
edcostofj
obsco
mp l
et
ed 1,779,
040
Ad
just
edcostofjob
scomple
ted $
1,782,
320

3
9.a
. Al
uminum Stee
l Othe
r Tota
l
BI $ 8,300 $12,
800 $5 ,
800 $2 6,
900
Purc
hases 98,300 26,
500 23,
550 1 48,
350
Avai
labl
e $1
06,600 $39,
300 $29,
350 $17 5,
250
Is
suance
s (
58,70
0) (3
4,200) (
25,
900) (
1 18,
800)
EI $4 7
,900 $5 ,
100 $3 ,
450 $ 5 6,
450
b
.Direc
tma t
eri
al $ 620
Di
rectl
abor(8×$
15) 120
Over
head(16×$30) 480
To
tal $1,
220
c
.WI P—b eginning* $6 ,
230
Dir
ectma te
rial(t
otali
ssuan
ces) 118 ,
800
Dir
ectlabor(680×$ 1
5) 10,200
Overh
e a
d( 1,2
0 0×$ 30) 36,
000
Tot
alma nufac
tu r
ingcost
s $171,
230
WIP—e nd i
ng (
1 ,
220)
Costofgoodsma nu f
actu
red $17
0 ,
010
FG—b eginning 23 ,
800
Costofgoodsa vai
labl
eforsal
e $193,
810
FG—e nding (
0)
Costofgoodss ol
d $
193,810
*J
ob# Mat
eri
al Lab
or OH To
tal
41
1 $1,
900 $540 $1,
500 $3,
940
41
2 1,
240 150 900 2,
290
$3
,140 $690 $
2 ,
400 $6,
230

4
0.a
.Us i
ngan
yo ft
h ej
obs,oneca
ndeter
minetha
ttherel
at
ion
shi
pbetweendi
rec
tla-
b
orandapp
liedove
rheadist
hato
verhea
dis115perce
ntofd
ire
ctla
borcos
t.For
e
xampl
e,usi
ngjob#67:$15,
916÷$ 13
,840=1.15.
b
.Direc
tmater
ial $2
5 ,
800
Direc
tlab
or 7,
200
Ap pl
ie
doverhe
ad 8,
280
To
tal $41,
280

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
123 Chapter 5

c
.Totaldi
rectmater
ial $5
13,834
Le s
sd i
rec
tma t
eri
alinBI (
25,80
0) $488
,034
To
taldi
rectl
abor $93,720
Les
sd i
rec
tlabori
nBI (
7,200
) 86,520
To
taldi
rectco
staddeddu
rin
gMa
y $5
74,554
d. Wo
rki
npr
oce
ss—b
egi
nni
ng $4
1,28
0
Co
stsadde
dd ur
ingMay:
Di
rectmat
eri
al $4
88,034
Di
rectl
abor 86,520
Appl
iedove
rhea
d( $
86,
520×1
.15
) 99
,498 6
74,05
2
$715
,332
Worki
np roc
ess—endi
ng
[
$308,
430+$ 57,
000+( $57,
000×1.15
)] (4
30,980)
Co s
tofgoodsma n
ufac
ture
d $284
,352
4
1. a.Fabr
icat
ion:$1,
560,
000 104,
000MHs=$ 15perMH
Ass
embly:$1,
760,
000÷3 20,
000DLHs=$ 5
.50perDLH
b
.Jo
b#22
96: Fa
bric
ati
on(
900ho
urs@ $
12) $
10,800
Asse
mbly(8
50hour
s@ $10) 8
,500
Tot
alDL $19,
300
J
ob#
229
7: Fa
bric
ati
on(46
0hour
s@ $1
2) $5,
520
Ass
embly(4
00hou
rs@ $
10) 4,
000
To
talDL $9,
520

c
.Jo
b#2
296
: Fa
bric
ati
on(1,
800hou
rs@ $15) $
27,000
Ass
embly(850hou
rs@ $
5.5
0 ) 4,
675
Tot
alOHa p
plie
d $31
,675

J
ob#
229
7: Fa
bric
ati
on(900hour
s@ $1
5) $13,
500
Ass
embly(400hou
rs@ $
5.50) 2
,200
To
talOHa p
plie
d $
15,700

d
. J
ob# 2296 J
ob# 2297
Directmat
eri
al $118,
500 $1
4 7
,200
Directl
abor 19,
300 9,
520
Ov er
head 31
,675 15,
700
To
tal $169,
475 $172,
420

e
.Fa
bri
cat
ion
: Appl
ied(
103,
200×$1
5) $1,5
48,000
Ac
tual (
1,528,
000)
Ov
e r
appl
ie
d $ 2 0
,000
As
semb
ly: Ap
plie
d( 3
24,00
0×$
5.50
) $1,7
82,000
Ac
tual (
1,790
,000)
Unde
rappl
ied $ ( 8,00
0)

Th
eco
mpa
nyh
aso
ver
app
lie
dov
erh
eado
f$1
2,0
00f
ort
hey
ear
.

4
2.a
. J
obCo
stShe
et—J
ob#5
15

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 124

Cu
sto
me rNameandAddr
ess
: Descr
ipt
ionofJob:Pre
paresi
te,
Ci
tyofGulfSh
ore
s,Al
abama bui
ldandins
tal
lap ede
str
ianove
r-
pas
sinGu l
fShore
s :s
eebidspec
ifi-
ca
ti
onsfordet
ail
s
Contr
actAgreementDate:5/
13
Sched
uledStart
ingDate:7/
13
AgreedUponCo mp l
et
ionDate:1
2/1
5/1
3
Contr
actPri
ce:$3,3
00,000
Actua
lCo mplet
ionDate:_
__
Speci
alIns
tru
ctions
:No ne
Di
rectMat
eri
al(
Est
.$1
,24
0 ,
000
)
Dat
e Sou
rce Co
st
20
13J u
ly31 Summar
yofmate
ria
lre
q. $
121,
800

Di
rectLabo
r(Es
t.$670,000) Over
head(
Est
.$402,000)
Dat
e Sou r
ce Cost Dat
e Source Co
st
20
13J ul
y31 Su mma r
y 20
13J u
ly31 Jo urna
l
oftime e
n tr
yo f
sheetsfor 7
/3 1/
13 $
105
,024
dir
ectlabor$ 17
5,040

Su
mma
ry(a
sof7/
31/
13)
Ac
tual Budg
et Under(
Ove
r)
Di
rectmat
eri
al $
121,
800 $1,
240,
000
Di
rectl
abor 175,
040 670,
000
Over
head 105,
024 402,
000
To
tal
s $
401,
864 $2,
312,
000

b
.Wo
rkinProc
ess
—J o
b# 515 1
21,
800
Wor
kinProc
ess
—o t
herjob
s 4
57,
500
Dir
ectMat
eri
alI
nven
tory 5
79,
300

WorkinProces
s—J ob# 515 1
75,040
WorkinProces
s—o t
h erjobs 4
08,960
Manufac
turi
ngOverhead 55,8
0 0
Sa
lari
esandWa ge
sEx p e
n s
e 3
9,600
Salar
iesandWa gesPayabl
e 6
79,
400

Manu
fact
uri
ngOverhe
ad 2
6,400
De
preci
at
ionExpen
se 7,
800
Accumula
tedDepr
.—Co
nst
.As
set
s 2
6,4
00
Accumula
tedDepr
.—Offic eAss
ets 7
,80
0

Sa
lesPromo
tionExpen
se 11
,10
0
Ac c
ount
sPa y
abl
e 1
1,1
00

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
125 Chapter 5

Ad
ver
ti
sin
gEx
pen
se 6
,600
Cas
h 6
,60
0

Ma
n u
fac
turi
ngOve
rhea
d 1
8,6
00
Supp
lie
sInv
ent
ory 1
8,6
00

Mi
sce
ll
aneo
usExpe
nse 1
0,2
00
Acco
unt
sPay
abl
e 1
0,2
00

Ut
il
it
iesExpense 1,
800
Manuf
actu
r i
ngOverhe
ad 5
,400
Uti
lit
iesPay
able 7
,20
0

Wo
rki
nProc
ess
—Job#515 1
05,
024
Wo
rki
nProc
ess
—othe
rjobs 2
45,
376
Ma
nuf
act
uri
ngOver
hea
d 3
50,
400

Ac
count
sRe
cei
vab
le 1
,22
4,0
00
Sa
les 1
,22
4,0
00

Fi
nis
hedGoodsIn
v e
ntory 8
29,
000
Wo r
kinProc
essInvent
ory 8
29,
000
Cos
tofGoodsSol
d 8
29,
000
Fini
she
dGo odsInv
entor
y 8
29,
000

c. Wo
rki
nPr
oce
ss—be
gin
nin
g $ 87
1,8
00
Pr
oduc
ti
onc o
sts
:
Dir
ectmate
ria
l $
5 79
,300
Dir
ectl
abor 584,
000
Appl
iedover
head 350,
400 1,
513,
700
$2,
385,
500
Worki
nproces
s—endi
ng (1
,556
,500
)
Co
stofgo
o d
sma n
ufa
ctur
ed $ 829,
000

d
. Birmingham Co ntr
act
ors
Inc
omeState
ment
Fo rtheMon thEndedJul
y31,2
01 3
Revenue
sfromc ompl ete
dp r
oject
s $
1,224,
000
Lesscos
tofg oo
dss old (82
9,000)
Grossmargi
no nc o
mp l
etedjobs $ 395,
000
Non-pr
oducti
one xpenses:
Sal
ari
esandwa g e
se xpense $39,
600
Depre
ciat
ionexp ense 7,
800
Uti
li
ti
esexpen s
e 1,
800
Sal
espromotionex pense 11,
100
Adver
tis
ingexpe nse 6,
600
Misce
ll
aneouse xpense 10,
200 (
77,
100)
In
co mebef
o r
eincomet ax
es $3
17,
900

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 126

I
ncometax
es(
40%) (
127
,160)
Neti
ncome $190,
740

4
3. a
.Job#2019:
De s
ign($81
,600×3 0
%) $
24,480
Product
ion(72
0×$ 15) 1
0 ,
800
Inst
all
at
ion($10,
080×9 0%) 9 ,
072
Tot
alover
headappl
ied $44,
352

J
ob#2020:
Desi
gn( $69
,360×3 0
%) $
20,808
Prod
uc t
ion(2,
400×$ 15
) 36 ,
000
In
stal
lat
ion($11,
520×9 0%) 10,
368
Totalover
headappl
ied $67,
176

J
ob#
20 2
1 :
De s
ign($73
,440×3 0
%) $
22,032
Product
ion(96
0×$ 15) 1
4 ,
400
Inst
all
ati
on($15,
200×9 0%) 13,
680
Tot
alover
headappl
ied $50,
112

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
127 Chapter 5

Desi
gn Prod
ucti
on I
nst
all
ati
on
Act
ual $
1 05,
600 $60,
000 $3 1,
200
Appl
ie
d (6
7,320
) (61,
200) (3
3,120)
(
Over)
/un
der
appl
ied $3 8,
280 $( 1,
200) $( 1,
920)
Act
ualOHforco
mp an
y $196,
800
Appl
iedOHforcompany (
161,
640)
To
talcomp
anyunder
appl
iedOH $3 5,
160

b
.Worki
nPr
oces
s( De
sign
)—J ob#
2 0
19 9,6
0 0
Wo
rki
nPr
ocess(Des
ign)—Job#2020 8,200
Wo
rki
nPr
ocess(Des
ign)—Job#2021 1
7,600
Ra
wMa t
eria
lInv
entory 3
5,4
00
Wo
rki
nProc
ess(Des
ign
)—J
ob#
201
9 8
1,6
00
Wo
rki
nProc
ess(Des
ign
)—J
ob#
202
0 6
9,3
60
Wo
rki
nProc
ess(Des
ign
)—J
ob#
202
1 7
3,4
40
Wage
sPayab
le 2
24,
400
Wo
rki
nProc
ess(De
sig
n)—Job#
201
9 2
4,4
80
Wo
rki
nProc
ess(De
sig
n)—Job#
202
0 2
0,8
08
Wo
rki
nProc
ess(De
sig
n)—Job#
202
1 2
2,0
32
Manu
fac
tur
ingOver
hea
d 6
7,3
20
Wo
rki
nPr
ocess(Pr
od.)
—J ob#
201
9 1
16,
400
Wo
rki
nPr
ocess(Pr
od.)
—J ob#
202
0 2
68,
800
Wo
rki
nPr
ocess(Pr
od.)
—J ob#
202
1 2
32,
000
Ra
wMa t
eria
lInve
ntor
y 6
17,
200
Wo
rki
nProc
ess(Pr
od.
)—J
ob#
201
9 3
4,0
00
Wo
rki
nProc
ess(Pr
od.
)—J
ob#
202
0 5
9,6
00
Wo
rki
nProc
ess(Pr
od.
)—J
ob#
202
1 2
1,6
00
Wage
sPayab
le 1
15,
200

Wo
rki
nProc
ess(Pr
od.
)—Job#
201
9 1
0,8
00
Wo
rki
nProc
ess(Pr
od.
)—Job#
202
0 3
6,0
00
Wo
rki
nProc
ess(Pr
od.
)—Job#
202
1 1
4,4
00
Manu
fac
tur
ingOver
hea
d 6
1,2
00

Wo
rki
nPr
ocess(I
nst
.)
—J ob#
201
9 1
0,40
0
Wo
rki
nPr
ocess(I
nst
.)
—J ob#
202
0 3
6,80
0
Wo
rki
nPr
ocess(I
nst
.)
—J ob#
202
1 1
0,40
0
Ra
wMa t
eria
lInv
entor
y 5
7,6
00

Wo
rki
nProc
ess(I
nst
.)
—Jo
b#2
019 1
0,08
0
Wo
rki
nProc
ess(I
nst
.)
—Jo
b#2
020 1
1,52
0
Wo
rki
nProc
ess(I
nst
.)
—Jo
b#2
021 1
5,20
0
Wage
sPayab
le 3
6,80
0

Wo
rki
nPr
oce
ss(
Ins
t.
)—J
ob#
201
9 9
,07
2
Wo
rki
nPr
oce
ss(
Ins
t.
)—J
ob#
202
0 1
0,368

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 128

Wo
rki
nProc
ess(I
nst
.)
—J ob#2
021 1
3,68
0
Manu
fac
tur
ingOverhe
ad 3
3,1
20
c
.Jo
b#20
19:
Dir
ectmate
ria
l $
136,400
Dir
ectl
abor 125,
680
Over
head 4
4,352
Tot
alcos
t $306,
432
J
ob#
2020:
Di
rectmate
ria
l $
313,800
Di
rectl
abor 140,
480
Over
head 6
7,176
To
talcos
t $521,
456
J
ob#
2021:
Di
rectmate
ria
l $
260,000
Di
rectl
abor 110,
240
Over
head 5
0,112
To
talcos
t $420,
352
4
4.a
.Relia
nt:$5,
580÷$45=124DLHswo r
ked
Dumas:$
1 8,
000÷$
4 5=40 0DLHsworked
Omaha:$28,
350÷$45=6 30DLHswo r
ked
Re
lia
nt:124DLHs×$ 58=$ 7,
192OHappli
ed
Dumas:4
0 0DLHs×$ 58=$2 3
,200OHappl
ied
Omaha:630DLHs×$ 58=$ 36,
540OHappli
ed

Re l
ia
nt Duma s Omaha
Di
rectmater
ial $7,800 $
14,200 $19,
800
Di
rectla
bor 5,
580 1
8,000 28,
350
Over
head 7,192 23
,200 36,
540
To
talcost $2
0 ,
572 $
55,400 $84,
690

b
.Re
li
ant
:$20,572÷3=$6
,85
7p e
ra d
Dumas:$
55 ,
400÷10=$5,
540perad
Omaha:$84,
6 9
0÷8=$10,
586perad

c
.Sal
es(21a d
s×$ 8,
600) $ 1
80,
600
Costs:
Dir
ectmate
ria
l $ 41,
800
Dir
ectl
abor 51,
930
Appl
iedover
head 66,
932
Over
appli
edover
hea
d (
16,
932) (1
43,730
)
Ne
tincome $ 3 6
,870

d
.Sa
les:Rel
ia
nt($2
0,5
72×1.
3) $26
,743
.60
Duma s(
$55,
400×1.3) 72,
020.
00
Omah a(
$84,6
90×1 .
3) 110,
097.
00 $20
8,8
60.
60
Cost
s:

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
129 Chapter 5

Di
rectmat
eri
al $41,
800.
00
Di
rectl
abor 51,
930.
00
Appl
iedov
erhea
d 66,
932.
00
Over
appl
ie
do ve
rhe
ad (16
,932.
00) (1
43,730.
00)
Ne
tinc
ome $6 5
,13
0.60

I
ncomeu si
ngac ost
-pl
usbasi
si ssubst
anti
all
yh i
gherthanthatwh i
chisob-
t
aine
dus i
ngafla tra
tesel
li
ngp r
ice
.Du masMa nuf
actur
ingwillbemo r
eple
ase
d
wit
ht h
es y
stem;rath
erthanpayingar a
teof$ 8,
600p e
ra d,Du maswouldbe
pa
ying$7,202
.Ont heo t
herhan
d,Relian
t’sandOma ha
’scostsp
e radwouldi
n-
cr
easefr
om$ 8,6
00p eradto$8,
915a nd$13,762,
res
pecti
vel
y.

Adsshoul
dn’tbebil
le
da tafla tra
tebe
caus
esomema ytakemu c
hlonge
rtode-
ve
lopthanothe
rs.Theeigh
ta d
sforOmahato
ok6 30hour
stod e
vel
op,orabo
ut
79hour
se a
ch.Incontr
ast
,thethr
eeadsf
orRel
iantwe
redeve
lopedin124hour
s
(
41ho ur
seach)andthetena dsforDumasweredev
elo
pedi nonl
y4 00hour
s
(
40h ou
rseach)
.
Anoth
e rpo
ssib
ili
tyf
orLeBl
anci
stobi
llb
ase
donast
andar
dchar
gep e
rlab
or
hour
—e spe
cial
lyifc
li
ent
ste
ndtoch
ang
ethei
rmi
ndsa
fte
rthea
dd ev
elopment
pro
cessbegi
ns.

4
5.aOc
t.1 Ra
wMa t
eri
alIn
vent
ory 1
,15
0,0
00
Ac
countsPay
abl
e 1
,15
0,0
00

1 Wo
rkinProc
ess—P 6
50,00
0
Manu
fac
tur
ingOver
head—P 500
,000
RawMa t
eri
alI
nvent
ory 1
,15
0,0
00
5 Ma
nuf
act
uri
ngOve
rhea
d—C 2
5,0
00
Ac
count
sPa
yabl
e 25
,00
0

8 Ma
nuf
act
uri
ngOv
erh
ead
—P 5
,00
0
Ca
sh 5
,00
0

1
5 Noe
ntr
yne
ede
d.

2
0 Ma
nuf
act
uri
ngOv
erh
ead
—C 6
0,0
00
Ca
sh 6
0,0
00
2
4 Ra
wMa t
eri
alI
nve
ntor
y 1
,48
5,0
00
Ac
count
sPaya
ble 1
,48
5,0
00
3
1 Ma
nuf
actu
ringOve
rhe
ad—P 3
6,320
Wo
rkinProc
ess—P 45,
000
Ca
sh 66
,120
Ac
cumu l
ate
dDepr
.—P 15,
200

3
1 Ma
nufa
ctu
rin
gOv e
rhe
ad—C 1
8,650
Wor
kinProc
ess
—C 16,
300

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 130

Ca
sh 2
6,200
Ac
cumu
lat
edDe
pr.
—C 8,
750

3
1 Ac
cou
ntsPa
yab
le 2
,63
5,0
00
Cas
h 2
,63
5,00
0
3
1 Wo
rkinProces
s—P 1
50,
000
Manufac
tur
ingOv
erhe
ad—P
(
6,00
0MHs×$ 25) 1
50,
000

Oc
t.3
1 Wo
rkinProc
ess
—C 2
6,8
95
Manuf
act
uri
ngOver
hea
d—C
(
$16,
300×1 .
65) 2
6,8
95
No
v.1 Ma
nuf
act
uri
ngOv
erh
ead
—C 5
,00
0
Ca
sh 5
,00
0

4 Wo
rkinProc
ess—P 8
25,00
0
Manu
fac
tur
ingOver
head—P 175
,000
RawMa t
eri
alI
nvent
ory 1
,00
0,0
00

8 Ma
nuf
act
uri
ngOv
erh
ead
—P 5
,00
0
Ca
sh 5
,00
0

1
5 Wo
rkinProces
s—C 2
00,00
0
Ma
nuf
a c
turi
ngOv e
rhead
—C 225
,000
Ra
wMa t
eria
lInve
ntory 4
25,
000

1
8 Noe
ntr
yne
ede
d.
2
4 Noe
ntr
yne
ede
d.
2
9 Noe
ntr
yne
ede
d.
3
0 Ma
nuf
actu
ringOve
rhe
ad—P 54,
050
Wo
rkinProc
ess—P 1
15,
000
Ca
sh 1
5 3
,850
Ac
cumu l
ate
dDepr
.—P 15,
200
3
0 Ma
nuf
actu
ringOve
rhe
ad—C 43,
850
Wo
rkinProc
ess—C 1
34,
300
Ca
sh 1
59,
800
Ac
cumu l
ate
dDepr
.—C 18
,35
0
3
0 Wo
rkinProces
s—P 9
8,75
0
Manufac
turi
ngOv
erh
ead—P
(
3,95
0×$ 2
5) 9
8,7
50
3
0 Wo
rkinProces
s—C 2
21,
595
Manuf
a c
tur
ingOve
rhe
ad—C
(
$134,
3 0
0×1 .6
5) 2
21,
595

No
v.3
0 Co
mpl
et
edPr
oje
ctsI
nve
nto
ry 2
,482
,84
0
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
131 Chapter 5

Wo
rki
nPr
oce
ss—P 1
,883,
750
Wo
rki
nPr
oce
ss—C 599
,090

3
0 Ac
cou
n t
sRecei
vab
le 3
,45
0,00
0
Cons
tru
cti
onReven
ue 3,
450
,00
0
3
0 Co
sto
fCont
rac
tsSol
d 2
,48
2,84
0
Comp
let
edPro
jec
tsI
nve
nto
ry 2
,48
2,84
0

b
.
RawMat
eri
al Pre
castOverh
ead—P Cons
truc
ti
onOv
erh
e a
d—C
1
,15
0,0
00 1,
150,
000 500 ,
000 1 5
0,000 25,
000 26,
895
1
,48
5,0
00 1,
000,
000 5,000 9 8,
750 60,
000 221,
595
425,
000 36,320 18,
650
175,000 5,
000
5,000 225,
000
54,050 43,
850
Ba
l.6
0,00
0 Ba
l.526,620 Ba
l.129,
010

WIP—Pre
cas
t
6
50,
000 1,
883,
750
45,
000
1
50,
000
8
25,
000
1
15,
000
98,
750
Ba
l. 0

WIP—Co n
str
uct
ion
1 6
,30
0 59
9,09
0
2 6
,89
5
2
0 0
,00
0
1
3 4
,30
0
2
2 1
,59
5
Ba
l. 0

Co
mplet
edPro
jec
tsI
nv.
2,
482
,840 2,48
2,8
40
Ba
l. 0

Costo
fContr
act
sSo
ld
2,
482,
840
Ba
l. 2
,482,
840

c
. (
bot
toms
ect
iono
fjo
bco
sts
hee
t)
Pr
eca
stDe
par
tme
nt

DM (
Est
.$1
,55
0,0
00) DL(
Est
.$2
20,
000
) OH(
Est
.$2
75,
000
)
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 132

Da
te Amou n
t Da
te Amo unt Da
te Amo unt
Oc
t.1 $6 50,
000 Oc
t.31 $45,000 Oc
t.31 $150,
000
No
v.4 825,
000 No
v.30 11
5,000 No
v.30 98,
750
$1
,47
5,000 $
160,0
0 0 $
24 8
,750
Co
nst
ruc
ti
onDe
par
tme
nt

DM (
Est
.$3
50,0
00) DL(Es
t.$
130,
000) OH(Est
.$2
14,
500)
Da
te Amount Dat
e Amount Da
te Amo unt
No
v.15 $200,
000 Oct
.31 $1 6,
300 Oct
.31 $2 6,
895
No
v.30 134
,300 No
v.30 22
1 ,
595
$150,
600 $248,
490

d
. Li
nco
lnCo n
str
uct
io
nCo mp a
nyd o
esnotsee
mt o
ha
veag o
ode s
ti
ma t
ionsy
ste
mi npl
acefori
tsbi
dproc
ess,e
spec
ial
lyi
nitsPr
ecas
t
Depa
rtment
.Thecomp a
nyma ybelos
ingasig
nificantnumberofb
idsbeca
useof
i
nfla t
edcoste
sti
mates
.

4
6.a
.Aj o
bo rde
rc os
ti
ngsy
stemisappr
opr
iat
einanye n
vir
onmentinwh i
chcos
tscan
b
er ea
dil
yid e
nti
fiedwi t
hs p
ecificproduc
ts,bat
ches
,contr
act
s,orproj
ect
s.Fo
r
a
dopti
ngt h
issyst
emthereshoul
dbeaj us
ti
fic ati
ono nac o
st-
benefitb a
sist
o
t
rac
ec os
tstothos
espe
cificp r
oduc
ts,
batc
hes,cont
rac
ts,o
rproje
cts
.

b
.Th eo
nlyjobrema i
nin
ginWIPa t5/
31isDRS1
14:
DRS114balance
,4/30 $1,
570,
000
Mayaddi
tion
s:
Ra wma t
e r
ial $
124,000
Purchasedpart
s 87,000
Directl
abor 200,500
Ov er
head(19,500h
rs.@ $
7 .
50*) 14
6,250 557,
750
WIPbal
ance,5/31 $
2,127
,750

*
OHr
ate=$
4,50
0,0
00÷6
00,
000h
rs.
=$7.
50p
erh
our

c
.FGi nv
entor
yo fpl
aypens
,4/
30 19,
400
Uni
tscomple
tedinMa y 15,
000
Uni
tsava
il
able 34,
400
Uni
tsshi
ppedinMa y (
21,
000
)
FGinve
ntor
y,5/31 13,
400

Si
ncePipSq
ueak
susest
heFI
FOinv
ent
oryme
thod
,al
lun
itsr
ema
ini
ngi
nFG
i
nvent
orywer
ecomp
lete
dinMay
.
Worki
np r
ocessinve
nto
ry,4/
30 $
420
,00
0
Mayaddi
tio
ns:
Rawma ter
ial $3 ,
000
Pur
chasedpart
s 10,800
Dir
ectla
bor 43,
200
Over
head(4,400 $7.
50) 3
3,000 90
,000
To
talc
ost $
510,
000

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
133 Chapter 5

Unitc
ost=$51
0,00
0÷1 5,
000u
nit
sco
mpl
et
ed=$
34p
eru
nitFGi
nve
ntor
y=
$34 13,
400=$455,
600

d
. Iftheamo un
to fove
rap
p l
ie
doru nder
appli
edOHi snot
mat
eri
alorth
er es
u l
tofane r
rorintheOH appli
cat
ionra
te,t
hea mounti
snor-
mal
lychar
gedd i
rect
lytoCGS.I ftheamountissi
gnificant
,thea mo
u n
tshoul
d
bep
rorat
edovertherel
eva
n ta
ccounts(i
.e
.,WIP,FG,andCGS).
(CMAa dapt
ed)

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 134

4
7.a
.,b
.App l
iedOHr at
e=$ 3
0 2,
400÷1 00,
800=$
3p e
rDLH
Cos
to fgood sma nufa
cture
d $9
6,0
00
Adden di
ngwo rkinprocess
:
Twojo bso penhaveDM o f $4 ,
800
Twojo bso penhaveDLo f 9,
000
Twojo bso penhaveappli
edOHo f
($3×2 ,
1 44) 6,
432 20,232
To
talcostsacco unt
edfor $1
16,232
Les
sb egi
n n
in gwor kinproces
s (15,
400)
Cos
to fproduc t
ioninputs $100
,832
Les
s:Directlab or $36,
400
AppliedOH( $3.00×8 ,
800) 26,
400 (
62,
800)
Costo fdirec
tma te
ria
lused $38,
032
Costo findir
ectma t
eri
alis
sue
d 11,
600
To
talcostofr awma teri
alused $49,
632

c
.Be gi
nningr
awma te
ria
l $9 ,
600
Ra wma t
eri
alpur
chase
d 56,
000
To
talra
wma te
ria
lavai
lab
le $65,
600
Rawma t
eri
ali
ssued (
49,
632)
Endi
ngrawma t
eri
al $15,
968

d
.Ov
erheadappli
ed($3×8 ,
800
) $2
6,4
00
Ac
tua
lo ve
rheadcharge
s:
I
nd i
rectl
abor $
10,
800
I
nd i
rectmate
rial 11,
600
Allother 5,
000 (27,
400)
Un
derappl
iedoverhe
adinApri
l $(1,
000)
e
.Beginn
ingfini s
hedgo o
ds $1 6,800
Addcostofgoodsma nuf
act
ured 96
,000
Cos
tofg ood
sa vai
la
ble $1
12,800
Le
ssendingfin i
shedgoods (
13 ,
200)
Cos
tofg oodssol
d $99,600

4
8.a
.Profito nthefix e
d-pric
ec ont
ractsi
sc onst
rai
nedb ythecont
ractprice.Pro
fitc a
n
o
nlyb eincr
e as
edifwa ysarefoundt oreducecost
s.On ewayt ha
tc ost
sc anbe
r
educedistos hi
ftthemtoo thercontra
cts.Thisi
sap ar
ti
cula
rl
ye ffe ct
ivestr
at-
e
gyi ftheco s
tsthatareshif
tedtoa not
he rcont
ractcanberecoup e
du n derthe
t
ermso fthatothe
rc ont
ract
.Bys hif
tingso mecost
so fthefix ed-pricecontr
acts
t
oth ecost
-pluscontr
acts
,thep rofito nthefix e
d-pri
cec on
tractsris
e s
,andthe
s
hift
edc ost
sc anber e
coveredu n
dert hetermsoft h
ec ost
-pl
usc ontra
cts.Fur-
t
her,th
iss t
rate
gyma yh avethee ffe cto fincr
easi
ngc ost
su nderthec o
st-
plus
c
ontrac
tsifthosecontr
actsdet
erminep rofita sapercent
ageoftotalcost
s .
b
. Thi
styp eofcos
tshif
ti
ngisdis
hones
tandu ne
thi
cal
.It
ha
stheeffec
tofinc
reas
ingthetot
alpri
cesofcos
t-
pluscont
rac
ts,a
ndifthos
e
co
ntr
act
sar
egove
rnmentr
ela
ted,t
hosepri
cesar
etypi
call
ybornebytaxp
ayer
s.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
135 Chapter 5

I
nasens
eitisawayfort
hestoc
khold
ersa
ndma
nage
rso
fthed
efens
econt
rac
-
t
orst
ost
ealfr
omthetaxp
ayer
s.Iti
sdifficul
ttoi
magi
neaset
ti
nginwhic
hth
is
p
roce
ssc
ouldbel
abel
edethi
cal
.

4
9.a
.Nos
olu
tio
npr
ovi
ded
;ea
chs
tude
ntwi
llh
avead
iffe
ren
tan
swe
r.
b
. Thec omp a
nyi su t
il
iz
ingt hebenefit sofa u
toma ti
ont o
r
educethec os
tsofh andli
ngs oma nyp art
s.Bys t
andardi
zingp r
ocesses
,t he
companyc anasse
mb l
eame sse
ngerbagwi thad i
versesetofpart
sinana mo unt
ofti
met hatissi
milartothatrequi
redforma ss
-producedo ne
s.Accordi
n gl
y,a l
-
t
houghthec omp anyisp r
obablypayin
g ,onave r
age,mo reforpart
sonc ustom
messen
ge rbagsthanma ss-
producedone s
;itisho l
dingthelineond i
rectlabor
andproducti
ono ve
rhead.Byh old
ingcos t
sdownf orlaborando v
erhead,theto-
t
alcostofthec us
tomp roducedme ss
eng erbagsisnotsigni
fic antl
yh igh
e rthan
t
hatofthema ssproducedme ss
engerbags.

c
. Qu a
li
tyasv i
ewedf ro
mt hepers
pect
iveofthec onsume r
s
houldb emu chh igh
e rwiththec us
tom- mademe ss
enge
rb agsb eca
us ec us-
t
ome r
sa r
ea bl
etospecifythevari
ouspartsdesi
red.Byget
tin
gt heexactcomb i-
nat
ionofp a
rtsdesi
red,thecust
omerswillperce
ivethequa
lit
yo ftheprodu c
tto
beveryhighrelat
iv
etot hep r
emiumi npricethe
ypa yoverthema ss
-produc e
d
messen
gerbag s
.

d
. Thea ns
weri smo s
tlyr eve
ale
di n( c).Byc onta
ini
ng
cos
tstol
evel
sc l
osetotho
s eofma s
s-pro
d u
cedme ss
engerbags,butal
lowi
ngthe
cus
tomertochoosethepartsdesi
red,asubst
an t
ialgr
ossprofitc a
nbea chi
eved.
Thehighe
rg r
ossprofitr efle ct
sthecusto
me rs’wil
li
n gne
sstop ayapremiumfor
t
heexactcombinat
ionofpa rt
sdesi
red,eve
nt houghtheco mpany’
sc os
tsar
eno t
si
gnificant
lygreat
erthanthoseinc
urredtoma ssproducemes s
engerbag
s.

5
0.a
.Itisl
ikel
ythatt
heleastpopul
arthou
ghtsandopi
n i
onswou ldnotbehear
do n
campus.Stu
dentswoul
dn atu
ral
lysupportt
hoseidea
sa ndp os
it
ionst
hatwere
consi
st
entwiththei
rowne thi
cs,phi
los
ophi
es,andselfinte
rest
s.Asac ons
e-
quence
,theover
alld
ive
rsit
yofidea
swou l
dprobab
lyd e
cli
n e
.

b
. Assumingd i
versi
tyofop i
nionsu l
ti
ma t
elyb enefitsall
st
u de
nts,t
heUn iv
ersi
tyofWi s
consi
ni spossi
blysupport
ingdiver
sitywiththe
onlyme an
sa v
ail
able
—s tudentdol
lar
s.Ho wever
,thi
sa ppr
oachma yno tbeet
hi-
calbecaus
eitfor
cesstu
d e
n t
stosupportopin
ions,bel
ief
s,andideasthatmayvi-
olat
etheirpers
onalethi
cs.Al t
houghth eSupremeCo urtoftheUni tedSta
tes
willult
imate
lydeter
minewh et
herthi
si salegalpra
cti
ce,eachin d
ividuals
tu-
dentcanreac
hh i
s/he
rownc on c
lusi
ona stowhethe
rthep r
acti
ceisethica
l.

5
1.a
.Ove
rhea
dotherth
ansp
oila
ge $
600
,000
Es
ti
matedspoi
la
gecos
t $50,
000
Le
sssal
vag
ev al
ue (
20,
000) 30
,000
Adj
ust
edest
imate
dover
headc
ost $
630,
000

POR=$
630
,00
0÷4
0,00
0=$
15.
75p
erDLH

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0
Chapter 5 136

b
.Di
spos
alval
ueofc
hemica
l 496
Manu
fact
uri
ngOver
hea
d 1
,23
4
WorkinPr
oces
s—Job#7
88 1
,73
0

5
2.a
.Pr
ede
ter
min
edr
ate=$
925
,00
0÷1
00,
000=$
9.2
5pe
rMH
b
.To
talcos
tofd
irectmat
eri
al $
687,100
Tot
alcos
tofdi
rectl
abor 157,
750
Appli
edOH(3,080×$9.25) 2
8,490
Tot
alcos
tofJ
obB3 16 $873,
340
c
.Th ere
wor
kcos
tisdebi
tedtotheman
ufa
ctu
r i
ngover
hea
da c
cou
ntsi
ncethe
c
ompa
nyus
esap
rede
ter
minedra
teth
ati
ncl
udesrewo
rkcos
tst
oappl
yov
erhe
ad.

Ma
nu f
act
uri
ngOver
head 7
5,5
00
Vari
ousac
coun
ts 75
,50
0

d
.Pr
ede
ter
min
edr
ate=$
850
,00
0÷1
00,
000=$8
.50pe
rMH
To
talc
osto
fdire
ctmat
eri
al $68
7,100
To
talc
osto
fdire
ctl
abo
r 157,750
Appl
ie
dOH( 3,0
80×$8.50) 26,180
To
talc
ostofJ
obB316 $
871,030

e
.Tot
alcos
tofdir
ectma t
eri
al $687,
100
To
talcos
tofdir
ectla
bor 15
7,750
Appl
iedOH( 3,
080×$ 8.50) 26,
180
Rewor
kc os
t($75,
500×0 .
20) 15 ,
100
Sa
leofrewor
kedp i
pe(200×$ 3
.50
) (
700)
Tot
alcos
tofJobB3 16 $
885 ,
430

5
3.a
.Act
ualDM cos
t $11,
600,
000
St
andar
dDM cost(
$56,
000×2
00) (
11,
200
,000)
Mate
ria
lpr
icevar
ian
ce $ 4 00,
000U

Act
ualDLcos
t $6,957,
600
St
andar
dDLcost(
$34,
400×2
00) (
6,88
0,000)
Di
rectl
abo
rra
teva
ria
nce $ 7 7,600U

Act
ualOHcost $14,
800,
000
St
andar
dOHc os
t($
76,
000×2
00) (
15,
200,
000)
OHv a
ria
nce $ (400
,000
)F

b
. Mate
ria
l:
$11,
600
,000÷6,
000,
000=$1.93(r
ounded
)act
ualcos
tperlb.v
s.$
2.0
0st
an-
dar
dcostp
erl
b.
;$0.
07×6,
000,000=$4
2 0,
000Fpri
cevar
ian
ce

6
,00
0,0
00lbs.u
sedvs.(28
,000×200)st
and
ard=6,
000
,00
0–5, 60
0,000=
4
00,
000lb
s.mor
etha
ns t
andar
d;4
00,
000×$2=$80
0,0
00Uquan
tit
yvari
ance

Th
epr
ima
ryc
aus
eoft
heu
nfa
vor
abl
ema
ter
ialv
ari
anc
eise
xce
ssu
sag
e.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly
accessible website, in whole or in part.

1 0