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					Solutions Guide: This is meant as a solutions guide. Please try reworking the questions and reword the answers to essay type
parts so as to guarantee that your answer is an original. Do not submit as your own.

acob Potter



Brief Exercises



   1. During the year, Coronado Boat Yard has incurred manufacturing costs of 420,000 in building three large sailboats. At year
   end, each boat is about 70 percent complete. How much of these manufacturing costs should be recognized as expense in
   Coronado Boat Yards income statement for the current year? Explain?

Coronado Boat Yard should not recognize any of the manufacturing
costs on their year-end income statement. These are product costs
and as a result, will not appear on the income statement until the
boats are sold and the revenue is earned.
   2. During the current year, the cost of direct materials purchased by a manufacturing firm was $340,000, and the direct materials
   inventory increased by $20,000. What was the cost of direct materials used during the year?

Direct materials used is $340,000 less the $20,000 increase in the
ending balance of direct materials or $320,000.


   3. A company that assembles trucks produces 60 trucks during the current year and incurs $3 million of material, labor, and
   overhead costs. Fifty-three trucks were sold during the year and each is allocated the same amount of costs. How much of the $3
   million assembly costs should appear on the company’s income statement for the current year?

Product costs per truck: $3,000,000 ÷ 60 = $50,000
Costs recognized due to matching: 53 trucks sold × $50,000 =
2,650,000
The company should recognize $2,650,000 in product costs in the
current year income statement.


  4. Hula’s Heavyweights, Inc., is a company that manufactures forklifts. During the year, Hulas purchased $1,450,000 of direct
  materials and placed $1,525,000 worth of direct materials into production. Hula’s beginning balance in the materials inventory
  account was 320,000. What is the ending balance in Hula’s Materials inventory account?




                      Direct Materials Inventory
Balance, 1/1          $
                     320,000

Purchases of                             Direct materials used
                                         $1,525,000
 direct               $
materials            1,450,000

Balance, 12/31        $
                     245,000




  5. A.J.’s Cooling Systems, Inc., assigns $230,000 of direct labor costs to production during the current period. A.J.’s also pays
  employees $200,000 during the period. What are the two journal entries used to record these transactions?

Direct Labor                $200,000
         Cash                                        $200,000
To record payment of direct labor costs.

WIP Inventory               $230,000
         Direct Labor                             $230,000.00
To record usage of direct labor in the production process.


  6. During the Current year, Cherry Electronics incurred $350,000 of indirect labor costs, $10,000 of indirect material costs,
  $130,000 of rent costs, and $260,000 of other overhead costs. How much did Cherry Electronics assign to the work in process
  Inventory account from the Manufacturing Overhead Account?

                       Manufacturing Overhead
Indirect labor        $              Overhead costs
payroll              350,000         assigned to                $
                                     production                750,000
Indirect material        10,000
costs

Rent costs              130,000

Other overhead          260,000
costs




  7. Ardvark Pets, Inc., has three stores in the state. The owner, Ms. Perkins, is having trouble tracking inventory costs in the three
  pet stores. Ms. Perkins knows about your skill in tracking and understanding costs flows and asks you to find the following
  missing items for the three stores:
                    Midwest Ardvark                   Northern Ardvark              Eastern Ardvark

  Beg Inventory         $30,000                   ?                             ?

  Transferred in        $100,000                  $200,000                      $160,000

  Transferred out       $110,000                  $180,000                      $150,000

  Ending Inventory       ?                        $60,000                       $40,000



All amounts debited to the Manufacturing Overhead account during
the year will be assigned to units of product manufactured.
Therefore, at year-end the Manufacturing Overhead account will
have a balance of zero. This means $750,000 must have been assigned
to Work in Process Inventory during the year.
Basic Formula = Beg. Inv. + Tr. In = End. Inv. + Tr. Out
Midwest Ardvark’s = $30,000 + $100,000 = X + $110,000; X = $20,000
Northern Ardvark’s = X + $200,000 = $60,000 + $180,000; X =
$40,000
Eastern Ardvark’s = X + $160,000 = $40,000 + $150,000; X =
$30,000


  8. The work in process inventory account had a beginning balance of $16,200 on April 1. During April, the cost of direct
  materials used was 408,000 and direct labor cost assigned to production was $56,000. A total of $72,000 of overhead was
  assigned to production in April. If the costof finished goods manufactured was $523,500 what was the balance in the work in
  process inventoryaccount on April 30?

                           Work in Process
Beginning Bal. 4/1       $  16,200       Transferred to
                                         Finished
                                         Goods account         $   523,500
Direct material used            408,000

Direct labor applied             56,000

Overhead applied                 72,000


Ending Bal. 4/30            $    28,700




     9. Hapless Repairs Co. does all the repair work for a medium sized manufacturer of handheld computer games. The games are
     sent directly to Hapless, and after the games are repaired, Hapless bills the game manufacturer for costs plus a 30 percent makeup.
     In the month of February, purchases of parts (replacement parts) by Hapless amounted to $90,000, the beginning inventory of parts
     was $40,500, and the ending inventory of parts was $15,250. Payments to repair technicians during the month of February totaled
     $63,000. Overhead incurred was $113,000.

     a.   What was the cost of materials used for repair work during the month of February?
     b.   What was the prime cost for February?
     c.   What was the conversion cost for February?
     d.   What was the total repair cost for February?



a.   $40,500 + $90,000 - $15,250 = $115,250
b.   $115,250 + $63,000 = $178,250
c.   $63,000 + $ 113,000 = $176,000
d.   $115,250 + $63,000 + $113,000 = $291,250
    10. At the end of the year, Johnson’s Manufacturing Corporation had the following balances:

    Work in process………………………………………..$52,000
    Cash and cash equivalents………………………..$346,000
    Finished Goods…………………………………………. $85,600
    Raw materials……………………………………………. $33,000
    Accounts Receivable…………………………………..$237,000

    Prepare a partial balance sheet for Johnson’s showing the above accounts.



                     Johnson’s Manufacturing Corporation
                            Partial Balance Sheet
                              December 31, 200X
Current assets:
  Cash and Cash Equivalents …………………………………………….     $346,000
  Accounts Receivable ……………………………………………………..        237,000
    Inventories:
         Raw Materials
………………………………………………..                       $33,000
         Work in Process
…………………………………………………..                       52,000
         Finished Goods
………………………………………………..                        85,600
         Total Inventories
………………………………………………………..                             170,600
    Total current assets                           $753,600
………………………………………………………………………..

       4 Exercises

       1.   Listed below are eight technical accounting terms introduced or emphasized in the reading

                      Work in process Inventory             Cost of finished goods manufactured
                      Conversion Costs                      Cost of Goods sold
                      Period Cost                           Management Accounting
                      Product Cost                          Manufacturing Overhead

                      Each of the following statements may or may not describe one of these technical terms. For each statement,
                      indicate the accounting term described or answer None if the statement does not describe any of the terms

                      a.    The preparation and use of accounting information designed to assist managers in planning and controlling
                           the operations of a business
                      b.   All manufacturing costs other than direct materials used and direct labor
                      c.   Direct materials and direct labor used in manufacturing a product
                      d.   A manufacturing cost that can be traced conveniently and directly to manufactured units of a product.
                      e.   The account debited at the time that the manufacturing overhead account is credited
                      f.   The amount transferred from the work in process Inventory account to the finished goods Inventory account.

Costs that are debited directly to expense accounts when the costs are incurred



a.   Management accounting
b.   Manufacturing overhead
c.   None (These are prime costs.)
d.   None (The statement describes direct manufacturing costs.)
e. Work in Process Inventory
f. Cost of finished goods manufactured
g. Period costs




      4. The following information was taken from the accounting Records of Reliable Tool Corporation:

      Work in process inventory, beginning of year………………………….$35,000

      Cost of direct materials used…………………………………………………….245,000

      Direct labor costs applied to production…………………………………..120,000

      Cost of finished goods manufactured……………………………………….675,000



      Overhead is assigned to production at $300,000. Compute the amount of work in process inventory on hand at year-end.

Work in process inventory, beginning of the year                             $
………………………..                                                             35,000
Manufacturing costs applied to production:
 Direct materials used
 …………………………………..                                      $245,000
 Direct labor ……………………………………….
                                                        120,000
  Manufacturing overhead
  ………………………………………………..                                  300,000
       Total manufacturing costs
  ……………………………………………….                                                  665,000
Total cost of all goods in process during the year
……………………..                                                        $700,000
Less: Cost of finished goods manufactured                           675,000
…………………………
Work in process inventory, end of the year                         $25,000
……………………………….


      5. The Accounting records of NuTronics, Inc., include the following information for the year ended Dec. 31, 2009.

                                                                        Dec.31   Jan 1

      Inventory of materials…………………………………………………………………………… $24,000                                             20,000

      Inventory of work in process………………………………………………………………… 8,000                                           12,000

      Inventory of finished goods………………………………………………………………….. 90,000                                         80,000

      Direct materials used……………………………………………………………………………. 210,000

      Direct labor……………………………………………………………………………………………. 120,000

      Selling Expenses……………………………………………………………………………………. 170,000

      General and administrative expenses…………………………………………………… 140,000



      Overhead is assigned to production at $192,000.

      a. Prepare a schedule of the cost of finished goods manufactured. (not all the data given above are used in this schedule)
      b. Assume that the company manufactures a single productand that 20,000 units were completed during the year. What is the
         average per-unit costs of manufacturing this product?



                             NuTronics, Inc.
           Schedule of the Cost of Finished Goods Manufactured
                 For the Year Ended December 31, 2007

Work in process, January 1, 2007                                 $12,000
………………………………….
Manufacturing costs assigned to production:
    Direct materials used                        $210,000
………………………………..
    Direct labor                                    120,000
………………………………….
    Manufacturing overhead                          192,000
……………………….
          Total manufacturing costs                              522,000
………………………………….
Total cost of all goods in process during the year              $534,000
………………………..
Less: Work in process inventory, December 31, 2007                 8,000
…………………….
Cost of finished goods manufactured                         $526,000
…………………………………………..

b. $26.30 per unit ($526,000 cost of finished goods manufactured,
divided by 20,000 units)


6. Stone Tools, Inc., had the following account balances as of Jan. 1

Direct Materials inventory………………………………………$8,700

Work in Process Inventory………………………………………76,500

Finished Goods inventory………………………………………..53,000
Manufacturing overhead…………………………………………. -0-



During the month of Jan. all of the following occurred:

     1. Direct labor costs were $42,000 for 1,800 hours worked
     2. Direct materials costing $25,750 and indirect materials costing $3,500 were purchased
     3. Sales commissions of $16,500 were earned by the sales force
     4. $26,000 worth of direct materials were used in production
     5. Advertising costs of $6,300 were incurred
     6. Factory supervisors earned salaries of $12,000
     7. Indirect labor costs for the month were $3,000
     8. Monthly depreciation on factory equipment was $4,500
     9. Utilities expense of $7,800 was incurred in the factory
     10. Tools with manufacturing costs of $69,000 were transferred to finished goods
     11. Monthly insurance costs for the factory were $4,200
     12. $3,000 in property taxes on the factory were incurred and paid
     13. Tools with manufacturing costs of $89,000 were sold for $165,000

        Instructions:
        a. If stone assigns manufacturing overhead of $32,400 what will the balance in the Direct Materials, Work in Process, and
            finished Goods inventory accounts at the end of January?
        b. As of January 31, what will be the balance in the manufacturing Overhead account?
        c. What was stones operating income for January?



      Direct materials inventory, Jan. 1 ………………………………………                                         $
a.                                                                                           8,700
           Direct materials purchased …………………………………….                                       25,750
         Less: Direct materials used in production …………………………..   (26,000)
     Direct materials inventory, Jan. 31                                 $
                                                                     8,450

     Work in process inventory, Jan. 1 ………………………………………..                 $
                                                                    76,500
        Direct materials used …………………………………………………                   26,000
        Direct labor used …………………………………………………                       42,000
        Manufacturing overhead assigned …………………………………….             32,400
        Less: Finished goods transferred out ………………………………….       (69,000)
     Work in process inventory, Jan. 31                                  $
     ……………………………………………..                                           107,900

     Finished goods inventory, Jan. 1 …………………………………….                   $
                                                                   53,000
          Cost of finished goods transferred in                    69,000
     ………………………………………….
          Less: Cost of goods sold                                (89,000)
     …………………………………………………………….
     Finished goods inventory, Jan. 31                                  $
     …………………………………………….                                            33,000

     Manufacturing overhead, Jan. 1 ……………………………………….                    $
b.                                                                      0
       Indirect materials purchased                                 3,500
     …………………………………………………….
       Supervisor salaries                                         12,000
     ………………………………………………………………
       Indirect labor costs                                         3,000
     ……………………………………………………………
       Depreciation                                                 4,500
     ……………………………………………………………………….
        Factory utilities                                                                      7,800
     ……………………………………………………………..
        Factory insurance                                                                      4,200
     ……………………………………………………………
        Property taxes on factory                                                              3,000
     ………………………………………………….
        Less: Manufacturing overhead assigned                                               (32,400)
     …………………………………………
     Manufacturing overhead, Jan. 31 …………………………………………..                                            $
                                                                                               5,600
c. Operating income for the month of January:
       Revenues                                                                      $
   ……………………………………………………………………….                                                165,000
       Cost of goods sold                                                     (89,000)
   ………………………………………………………
       Gross profit                                                             76,000
   …………………………………………………………….
       Operating expenses:
           Sales commissions                       $
   ………………………………….                             16,500
           Advertising expense                 6,300                          (22,800)
   …………………………..
   Operating income                                                                  $
   ……………………………………………………………..                                                    53,200


9. Mayville Company, a sole proprietorship, reports the following information pertaining to its operating activities:

                                                            Ending Balance                 Beg. Bal

Material Inventory………………………………………………………………………..$20,000                                                    $40,000

Work in process Inventory…………………………………………………………….$29,000                                                  $60,000
Finished Goods Inventory………………………………………………………………$52,000                                               $42,000



During the year, the company purchased $30,000 of direct materials and incurred $21,000 of direct labor costs. Total manufacturing
overhead costs for the year amounted to 18,000. Selling and administrativeexpenses amounted to $60,000, and the companies annual
sales amounted to $200,000.

     a. Prepare a Mayvilles schedule of the costs of finished goods manufactured.
     b. Prepare Mayvilles income statement (ignore income taxes)




a.                                          MAYVILLE COMPANY
                              Schedule of the Cost of Finished Goods Manufactured
                                        For the Year Ended December 31
 Work in process inventory, January 1                                                                 $     60,000
 Add: Manufacturing costs assigned to production:
    Direct materials used (1)                                                 $    50,000
    Direct labor                                                                  21,000
    Manufacturing overhead                                                        18,000
                                                                                                           89,000
 Total costs in process                                                                               $   149,000
 Less: Work in process inventory, December 31                                                              29,000
 Cost of finished goods manufactured                                                                  $   120,000




       Computation of direct materials used:
(1)
                                                    Direct materials, January 1                       $    40,000
                                                    Add: Direct materials                                  30,000
                                                 purchased
                                                 Direct materials available   $    70,000
                                                 Less: Direct materials,
                                                 December 31                      20,000
                                                 Direct materials put into
                                                 production                   $    50,000




b.                                            MAYVILLE COMPANY
                                                  Income Statement
                                          For the Year Ended December 31
Sales                                                                         $   200,000
Less: Cost of goods sold (1)                                                      110,000
Gross profit on sales                                                         $    90,000
Less: Selling and administrative expenses                                          60,000
Net income                                                                    $    30,000




      The company’s cost of goods sold figure is based
(1)
      on the following flow of costs through production
      to finished goods:

Finished goods inventory, January 1                                           $    42,000
Add: Cost of finished goods manufactured                                          120,000
Cost of goods available for sale                                              $   162,000
Less: Finished goods inventory, December 31                                        52,000
Cost of goods sold   $   110,000

				
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