Cost accounting assigment soloution PDF

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Q3 EXERCISE 1--COST ACCUMULATION PROCEDURE DETERMINATION:Classify these industries with respect to the type of cost accumulation procedure generally used--job order costing or process costing. a. Meat k. Pianos b. Sugar l. Linoleum c. Steel m. Leather d. Breakfast cereal n. Nylon e. Paper boxes o. B...

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Q3

EXERCISE 1--COST ACCUMULATION PROCEDURE DETERMINATION:

Classify these industries with respect to the type of cost accumulation procedure generally used--job order costing or process costing. a. Meat k. Pianos b. Sugar l. Linoleum c. Steel m. Leather d. Breakfast cereal n. Nylon e. Paper boxes o. Baby foods f. Wooden furniture p. Locomotives g. Toys and novelties q. Office machines equipment h. Coke r. Luggage i. Cooking utensils s. Paint j. Caskets t. Tires and tubes SOLUTION: 

Job order cost procedure: (e), (f), (g), (i), (j), (k), (p), (q), (r)



Process costing procedure: (a), (b), (c), (d), (h), (l), (m), (n), (o), (s), (t)

Q4

EXERCISE 2--JOB ORDER COST SHEET:

Forge Machine Works collects its cost data by the job order cost accumulation procedure. For Job 642, the following data are available: Direct Materials Direct Labor 9/14 Issued $ 1,200Week of Sep. 20 180 hrs @ $6.20/hr 9/20 Issued 662Week of Sep. 26 140 hrs @ $7.30/hr 9/22 Issued 480 Factory overhead applied at the rate of $3.50 per direct labor hour. Required: The appropriate information on a job cost sheet. The sales price of the job, assuming that it was contracted with a markup of 40% of cost.

1. 2.

SOLUTION:

1. Direct materials Date Issued Amount 9/14 $1,200 9/20 662 9/22 480

Forge Machine Works Job Order Cost Sheet--Job 642 Direct labor Applied factory overhead Date (Week of) Hours Rate Cost Date (Week of) Hours Rate Cost 9/20 180 $6.20 $1,116 9/20 180 $3.50 $630 9/26 140 7.30 1,022 9/26 140 3.50 490

--------

----------

----------

$2,342 =====

$2,138 ======

$1,120 ======

2. Sales Price of job 642, contracted with a markup of 40% of cost: Direct materials $2,342 Direct labor 2,138 Applied factory overhead 1,120 Total factory cost Markup 40% of cost

$5,600 2,240

------$7,840 ===== Q5

EXERCISE 3--JOB ORDER COSTING:

The Cambridge Company uses job order costing. At the beginning of the May, two jobs were in process: Job 369 Job372 Materials $ 2,000 $ 700 Direct labor 1,000 300 Applied factory overhead 1,500 450 There was no inventory of finished goods on May1. During the month, Jobs 373, 374, 375, 376, 378, and 379 were started. Materials requisitions for May totaled $13,000, direct labor cost, $10,000, and actual factory overhead, $16,000. Factory overhead is applied at a rate of 150% of direct labor cost. The only job still in process at the end of May is No. 379, with costs of $1,400 for materials and $900 for direct labor. Job 376, the only finished job on hand at the end of May, has a total cost of $2,000. Required: 1. T accounts for work in process, finished goods, cost of goods sold, factory overhead control, and applied factory overhead.

2. General journal entries to record: a. Cost of goods manufactured b. Cost of goods sold c. Closing of over or underapplied factory overhead to cost of goods sold. SOLUTION: T Accounts Work in Process May1 Balance Finished No. 369 4,500 goods No. 372 1,450Materials 13,000 Direct labor 10,000 Factory O/H 15,000 43,950 May31 Balance: No. 379 3,650*

*$1,400 + $900 + ($900 × 150%) 16,000

Factory Overhead Control 15,000 1,000 16,000

General journal entries to record: Cost of goods manufactured: Finished goods Work in process Cost of goods sold: Cost of goods sold

40,300

Finished Goods Cost of goods sod 38,300

From Work in Process 40,300 May31 Balance: No.376 2,000

Cost of Goods sold From finished goods 38,300Underapplied Overhead 1,000 39,300

Applied Factory Overhead 15,000

Dr 40,300

Cr 40,300

38,300

15,000

Finished goods Closing of underapplied factory overhead to cost of goods sold: Cost of goods sold Factory overhead control Q6

38,300

1,000 1,000

EXERCISE 4--JOB ORDER CYCLE ENTRIES:

Beaver, inc. provided the following data for January, 19B: Materials and supplies: Inventory, January 1, 19B Purchases on account Labor: Accrued, January 1, 19B Paid during January (ignore payroll taxes) Factory overhead costs: Supplies (issued from materials) Indirect labor Depreciation

$10,000 30,000 3,000 25,000 1,500 3,500 1,000

Other factory overhead costs (all from outside suppliers on account)

14,500

Work in process: Work in process January 1, 19B

Job1

Job2

Job3

Total

$ 1,000

--

--

$ 1,000

4,000 5,000 5,000

$6,000 8,000 8,000

$5,000 7,000 7,000

15,000 20,000 20,000

Job costs during January, 19B: Direct materials Direct labor Applied factory overhead

Job 1 started in December, 19A, finished during January, and sold to a customer for $21,000 cash Job 2 started in January, not yet finished. Job 3 started in January, finished during January, and now in the finished goods inventory awaiting customer's disposition Finished goods inventory January 1, 19B. Required: Journal entries, with detail for the respective job orders and factory overhead subsidiary records, to to record the following transactions for the January:

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Purchase of materials on account. Labor paid. Labor cost distribution. Materials issued. Depreciation for the month. Acquisition of other overhead costs on credit. Overhead applied to production. Jobs completed and transferred to finished goods. Sales revenue. Cost of goods sold.

SOLUTION: Journal Entries:

Subsidiary Record

Debit

Credit

1 Materials Accounts payable 2 Accrued payroll Cash 3. Factory overhead control Indirect labor Work in process (WIP) Job1 Job2 Job3 Payroll 4. Work in process Job1 Job2 Job3 Factory overhead control Supplies Materials 5 Factory overhead control Depreciation Accumulated Depreciation 6 Factory overhead control Other factory overhead costs Accounts payable 7 Work in process Job1 Job2 Job3 Factory overhead control (or applied FOH) 8 Finished goods Work in process (WIP) Job1 Job3 9 Cash Sales 1 Cost of goods sold 0 Finished goods

30,000 30,000 25,000 25,000 3,500 3,500 20,000 5,000 8,000 7,000 23,500 15,000 4,000 6,000 5,000 1,500 1,500 16,500 1,000 1,000 1,000 14,500 14,500 14,500 20,000 5,000 8,000 7,000 20,000 34,000 34,000 15,000 19,000 21,000 21,000 15,000 15,000

Q7 EXERCISE 5 JOB ORDER COSTING--JOURNAL ENTRIES, T ACCOUNTS, INCOME STATEMENT Hogle Company is a manufacturing firm that uses job order costing system. On January 1, the beginning of its fiscal year, the company's inventory balances were as follows: Raw materials $20,000 Work in process $15,000 Finished Goods $30,000

The company applies overhead cost to jobs on the basis of machine-hours worked. For the current year, the company estimated that it would work 75,000 machine-hours and incur $450,000 in manufacturing overhead cost. The following transactions were recorded for the year

1. 2.

Raw materials were purchased on account, $410,000.

Raw materials were requisitioned for use in production, $380,000 ($360,000 direct materials and $20,000 indirect materials).

3. The following costs were incurred for employee services: direct labor, $75,000; indirect labor, $110,000; sales commission, $90,000; and administrative salaries, $20,000. 4. 5. 6. 7.

Sales travel costs were $17,000. Utility costs in the factory were $43,000. Advertising costs were $180,000.

Depreciation was recorded for the year, 350,000 (80% relates to factory operations, and 20% relates to selling and administrative activities).

8. Insurance expired during the year, $10,000 (70% relates to factory operations, and 30% relates to selling and administrative activities). 9. Manufacturing overhead was applied to production. Due to greater than expected demand for its products, the company worked 80,000 machine-hours during the year. 10. Goods costing $9,00,000 to manufacture according to their job cost sheets were completed during the year. 11.

Goods were sold on account to customers during the year at a total selling price of $1,500,000. The goods cost $870,000 to manufacture according to their job cost sheets. Required:

1. 2.

Prepare journal entries to record the preceding transactions. Post the entries in (1) above to T-accounts (don't forget to enter the beginning balances in the inventory accounts).

3. Is manufacturing overhead underapplied or overapplied for the year? Prepare journal entry to close any balance in the manufacturing overhead account to cost of goods sold (COGS). Do not allocate the balance between ending inventories and cost of goods sold (COGS). 4.

Prepare an income statement for the year.

SOLUTION: 1: Journal Entries 1 Raw materials Accounts payable 2 Work in process Manufacturing overhead Raw materials 3 Work in process Manufacturing overhead Sales commission expense Administrative salaries expense Salaries and wages payable 4 Sales travel expense

410,000 410,000 360,000 20,000 380,000 75,000 110,000 90,000 200,000 475,000 17,000

Accounts payable 5 Manufacturing overhead Accounts payable 6 Advertising expense Accounts payable 7 Manufacturing overhead Depreciation expense Accumulated depreciation 8 Manufacturing overhead Insurance expense

17,000 43,000 43,000 180,000 180,000 280,000 70,000 350,000 7,000 3,000

Prepaid insurance 10,000 480,000 9*Work in process Manufacturing overhead 480,000 1 Finished Goods 900,000 0 Work in process 900,000 11Accounts Receivable 1,500,000 Sales 1,500,000 Cost of goods sold 870,000 Finished goods 870,000 *The predetermined overhead rate for the year would be computed as follows: Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total units in the allocation base = $450,000 / 75,000 machine-hours = $6 per machine-hour Based on the 80,000 machine-hours actually worked during the year, the company would have applied $480,000 in overhead cost to production: 80,000 machine-hours × $6 per machine-hour = $480,000. 2: T Accounts 11

Bal. 10

Accounts Receivable 1,500,000

Bal. (1)

Raw Materials 20,000 (2) 410,000 380,000

Bal.

50,000

Finished Goods 30,000 (11) 870,000 900,000

Prepaid Insurance (8) 10,000

Accounts Payable (1) 410,000 (4) 17,000 (5) 43,000 (6) 180,000 Sales (11)

Salaries and Wages Payable (3) 475,000

(11)

Cost of goods sold 870,000

Accumulated Depreciation (7) 350,000

Manufacturing Overhead (2) 20,000 (9) 480,000 (3) 110,000 (5) 43,000 (7) 280,000 (8) 7,000 460,000

1,500,000

(3) Sales Commissions Expenses

Work in Process Bal. 20,000 (10) 900,000 (2) 360,000 (3) 75,000 (9) 480,000 Bal. 30,000

480,000 Bal. 20,000

Administrative Salary Expense 200,000 Insurance Expense

(3)

(8)

90,000 (7) Advertising expense

(6)

180,000

3,000

Depreciation Expenses 70,000

(4)

Sales Travel Expense 17,000

3: Under or Overapplied manufacturing overhead: Manufacturing overhead is overapplied for the year. The entry to close it out to cost of goods sold is as follows: Manufacturing overhead 20,000 Cost of goods sold 20,000 4: Income Statement HOGLE COMPANY Income Statement For the Year Ended December 31 Sales $1,500,000 Less cost of goods sold ($870,000 - $20,000 overapplied O/H 850,000 -------------Gross margin 650,000 Less selling and administrative expenses: Commission expense $90,000 Administrative salaries expense 200,000 Sales travel expense 17,000 Advertising expense 180,000 Depreciation expense 70,000 Insurance expense 3,000 560,000 -----------------------Net operating income $90,000 ======...