# Problem 13.22 by DI0rR5B

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```									ACCOUNTING: What the Numbers Mean, 9e
Chapter 13 Problem 13.22                                           Name: Enter Name

Step 1:      Review General
Instructions                                               Complete the problem
requirements by
entering appropriate
Step 2:         Review
dollar amounts or
Worksheet                             worksheet cells

Step 3:   Complete
Analysis
Worksheet

Step 4:            Respond to
"What the Numbers Mean"
Worksheet
ACCOUNTING: What the Numbers Mean, 9e
Chapter 13 Problem 13.22                                                                     Name: Enter Name

Problem Description:
Big Thunder Company incurred the following costs during April:

Raw material purchased                                                     \$     99,225
Direct labor (\$15.00 per hour)                                                  123,750
Selling expenses                                                                 67,050
Interest expense                                                                 11,490

Manufacturing overhead is applied on a basis of \$37.50 per direct labor hour. Assume that overapplied or underapplied
is transferred to cost of goods sold only an the end of the year. During the month, 7,500 units of the product were
manufactured and 7,950 units of product were sold. On April 1 and April 30, Big Thunder Co. carried the following
inventory balances:

1-Apr          30-Apr
Raw Materials                                               \$     41,160   \$      37,590
Work in Process                                                  111,720        119,640
Finished Goods                                                    88,000          56,320

Instructions:

Please proceed to the "Analysis" worksheet and complete the basic problem requirements. Complete the problem
requirements by entering appropriate amounts or formulas in shaded worksheet cells:

a. Complete the flow of manufacturing costs analysis
b. Prepare a Statement of Cost of Goods Manufactured for the month of April
c. Calculate the average cost per unit of product manufactured
d. Prepare a Schedule of Cost of Goods Sold
e. Prepare a traditional (absorption) Income Statement for Big Thunder Co. for the month of April. Assume that sales for
the month were \$722,925 and the company's effective income tax rate was 40%

After completing the "Analysis" worksheet, please proceed to the "What the Numbers Mean" worksheet and respond
ACCOUNTING: What the Numbers Mean, 9e
Chapter 13 Problem 13.22                                                                        Name: Enter Name

Flow of Costs Analysis:
Raw Material                                Work in Process                       Finished Goods
BI:                                              BI:
RM Pur:                                  -    RM Used               -              -       CGM            -                -   CGS
DL Cost
EI:                                      OH Applied            -

EI:

Manufacturing OH                                                                   Cost of Goods Sold
Actual OH                                      OH Applied                                                   -

Under              Over                            x Direct Labor Hours:
Applied OH        Applied OH

Complete the Modeling:
Big Thunder Company
Statement of Cost of Goods Manufactured
Big Thunder Company

Raw Materials:
Inventory, April 1
Purchases during April
Raw material available for use
Less: Inventory, April 30
Cost of raw material used
Direct labor cost incurred
Total manufacturing costs, April
Less: Work-in-process, April 30
Cost of goods manufactured, April

Cost per unit, April                                         Units Produced:

Schedule of Cost of Goods Sold
Finished Goods, April 1
Cost of goods manufactured
Cost of goods available for sale
Less: Finished goods, April 30
Cost of Goods Sold

Big Thunder Company
Income Statement
For the Month of April

Sales                                                            Units Sold:
Cost of goods sold
Gross profit
Operating income
Interest expense
Income before taxes
Income tax expense
Net income
ACCOUNTING: What the Numbers Mean, 9e
Chapter 13 Problem 13.22                                                                     Name: Enter Name

What does it mean? Question 1:
Calculate the difference between cost of goods manufactured and cost of goods sold. How will this amount be reported
in the financial statements?
Difference =

What does it mean? Question 2:
Suppose that only 7,050 units of product were sold during April. What changes would you observe in the
Statement of Cost of Goods Manufactured, the Schedule of Cost of Goods Sold, and the Income Statement?

What does it mean? Question 3:
Manufacturing overhead for April is overapplied by \$6,200. Give an example that would explain how this result
is possible. Assume the \$6,200 represented the final total for the year, would the income statement and
balance sheet be correct? What would you do with the overapplied overhead?

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