1.(20 pts.)
The Smith Inc.produces a special kind of clay that
is widely used by professional sports trainers. The clay is produced in three
processes: Refining, Blending, and Mixing. Raw materials are introduced at the
beginning of the refining process. A “mountain-air scent” material is
added in the blending process when processing is 50% completed.
The following Work-in-Process account for the Refining Department
is available for the month of July. The July 1 Work-in-Process Inventory
contains $1,500 in material costs.
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The following Work-in-Process account for the Blending Department
is available for the month of July. The July 1 Work-in-Process inventory
contains $5,920 in material costs, and $1.56/unit in costs transferred in from
the Refining Department.
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Smith Inc. uses first-in, first-out (FIFO) costing for the
Refining Department and weighted-average costing for the Blending Department.
Required (use 4 decimal places
for computations):
Part 1: Refining Department
(a) Compute the equivalent units of production for July.
(b) Compute the material cost per unit and the conversion cost per
unit for July.
(c) Compute the costs transferred to the Blending Department for
July.
(d) Compute the July 31 Work-in-Process Inventory balance.
Part 2: Blending Department
(e) Compute the equivalent units of production.
(f) Compute the unit costs in the Blending Department for the
month of July. (HINT: There are three!!)
(g) Compute the costs transferred out for July.
(h) Compute the July 31 Work-in-Process Inventory balance.
2. (10
pts.)
William Corporation uses process costing. The following data
pertain to its Assembly Department for February.
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Required:
Determine the equivalent units of production for the Assembly
Department for February using the weighted-average method.
3. (20 pts.)
Max
Inc. is a manufacturer of boots. It produces all of its products in one
department. The information for the current month is as follows:
Beginning work in process 22,000
units
Units started 44,000
units
Units completed 55,000 units
Ending work in process 10,000
units
Spoilage 1,000
units
Beginning work-in-process direct materials $15,000
Beginning work-in-process conversion $ 6,000
Direct materials added during month $70,800
Direct manufacturing labor during month $37,400
Beginning
work in process was half complete as to conversion. Direct materials are added
at the beginning of the process. Factory overhead is applied at a rate equal to
50% of direct manufacturing labor. Ending work in process was 60% complete. All
spoilage is normal and is detected at end of the process.
Required:
Prepare a
production cost worksheet if spoilage is recognized and the weighted-average
method is used.
4. (10 pts.)
Johnston Incorporated manufactures and distributes small robotic tools.
Because most of its orders are via telephone or fax, numerous orders have to be
reworked. The average cost of the reworked orders is $12.45: $5 for labor,
$5.15 for more materials, and $2.30 for overhead. This ratio of costs holds for
the average original order. On a recent day, the shop reworked 80 orders out of
800. The original cost of the 80 orders totaled $2,000. The average cost of all
orders is $26.245, including rework, with an average selling price of $35.
Required:
Prepare
the necessary journal entry to record the rework for the day if the shop charges
such activities to Johnston Department
Overhead Control. Prepare journal entries to record all relevant rework charges
as well as to transfer the reworked items finished goods to Finished Goods
Inventory.
5. (15
pts.)
Adams
Inc. has identified the following overhead costs and cost drivers for the
coming year:
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Budgeted direct labor cost was $400,000 and budgeted direct
material cost was $600,000. The following information was collected on three
jobs that were completed during the month:
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Required:
a. If the company uses traditional costing and allocates overhead
using direct labor cost, how much overhead cost should be assigned to Jobs 1,
2, and 3?
b. If the company uses activity-based costing (ABC), how much
overhead cost should be assigned to Jobs 1, 2, and 3?
6. (15 pts.)
Jason Company manufactures two models of
machinery, a standard and a deluxe model. The following activity and cost
information has been compiled:
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Assume a traditional costing system applies the overhead costs
based on direct labor hours.
Required:
a. What is the total amount of overhead costs assigned to the
standard model?
b. What is the total amount of overhead costs assigned to the
deluxe model?
Assume an activity-based costing system is used and that the
number of setups and the number of components are identified as the
activity-cost drivers for overhead.
c. What is the total amount of overhead costs assigned to the
standard model?
d. What is the total amount of overhead costs assigned to the
deluxe model?
7.(20 pts.)
Jones plans to sell 90,000 units of a certain
product line at a price of $16. There are 7,500 units of the product in the
inventory at January 1 and the inventory is to be increased 15% during the
year.
Two types of materials are used to make the product. Three units
of Material A, each costing 40 cents, are required for each unit of product,
and two units of Material B, each costing 36 cents, are required for each unit
of product. On January 1, there are 10,000 units of Material A in inventory and
5,000 units of Material B. Plans for the year indicate both Material A and B
inventories will increase 10%.
Each unit of product can be produced in 20 minutes of direct labor
time. Direct labor is paid at the rate of $12.00 an hour. The variable
manufacturing overhead varies at the rate of $2.60 per direct labor hour and
the fixed manufacturing overhead for the year is estimated at $175,000.
Required:
a. Prepare a production budget for the year.
b. Prepare a materials purchases budget for the year.
c. Prepare a labor cost budget for the year.
d. Prepare a budget for manufacturing overhead for the year.
8.
(10 pts.) Fran is working on its direct labor budget for the next two
months. Each unit of output requires 0.07 direct labor-hours. The direct labor
rate is $8.50 per direct labor-hour. The production budget calls for producing
4,800 units in June and 5,300 units in July.
Required:
Construct the direct labor budget for the next two months,
assuming that the direct labor work force is fully adjusted to the total direct
labor-hours needed each month.
1.(20 pts.) The Smith Inc.produces a special kind of clay that
is widely used by professional sports trainers. The clay is produced in three
processes: Refining, Blending, and Mixing. Raw materials are introduced at the
beginning of the refining process. A “mountain-air scent” material is
added in the blending process when processing is 50% completed.
The following Work-in-Process account for the Refining Department
is available for the month of July. The July 1 Work-in-Process Inventory
contains $1,500 in material costs.
.png”>
The following Work-in-Process account for the Blending Department
is available for the month of July. The July 1 Work-in-Process inventory
contains $5,920 in material costs, and $1.56/unit in costs transferred in from
the Refining Department.
.png”>
Smith Inc. uses first-in, first-out (FIFO) costing for the
Refining Department and weighted-average costing for the Blending Department.
Required (use 4 decimal places
for computations):
Part 1: Refining Department
(a) Compute the equivalent units of production for July.
(b) Compute the material cost per unit and the conversion cost per
unit for July.
(c) Compute the costs transferred to the Blending Department for
July.
(d) Compute the July 31 Work-in-Process Inventory balance.
Part 2: Blending Department
(e) Compute the equivalent units of production.
(f) Compute the unit costs in the Blending Department for the
month of July. (HINT: There are three!!)
(g) Compute the costs transferred out for July.
(h) Compute the July 31 Work-in-Process Inventory balance.2. (10
pts.)William Corporation uses process costing. The following data
pertain to its Assembly Department for February.
.png”>
Required:
Determine the equivalent units of production for the Assembly
Department for February using the weighted-average method.
3. (20 pts.)Max
Inc. is a manufacturer of boots. It produces all of its products in one
department. The information for the current month is as follows: Beginning work in process 22,000
units Units started 44,000
units Units completed 55,000 units Ending work in process 10,000
units Spoilage 1,000
units Beginning work-in-process direct materials $15,000 Beginning work-in-process conversion $ 6,000 Direct materials added during month $70,800 Direct manufacturing labor during month $37,400Beginning
work in process was half complete as to conversion. Direct materials are added
at the beginning of the process. Factory overhead is applied at a rate equal to
50% of direct manufacturing labor. Ending work in process was 60% complete. All
spoilage is normal and is detected at end of the process.Required:Prepare a
production cost worksheet if spoilage is recognized and the weighted-average
method is used.
4. (10 pts.)
Johnston Incorporated manufactures and distributes small robotic tools.
Because most of its orders are via telephone or fax, numerous orders have to be
reworked. The average cost of the reworked orders is $12.45: $5 for labor,
$5.15 for more materials, and $2.30 for overhead. This ratio of costs holds for
the average original order. On a recent day, the shop reworked 80 orders out of
800. The original cost of the 80 orders totaled $2,000. The average cost of all
orders is $26.245, including rework, with an average selling price of $35.Required:Prepare
the necessary journal entry to record the rework for the day if the shop charges
such activities to Johnston Department
Overhead Control. Prepare journal entries to record all relevant rework charges
as well as to transfer the reworked items finished goods to Finished Goods
Inventory.5. (15
pts.)Adams
Inc. has identified the following overhead costs and cost drivers for the
coming year:
.png”>
Budgeted direct labor cost was $400,000 and budgeted direct
material cost was $600,000. The following information was collected on three
jobs that were completed during the month:
.png”>
Required:
a. If the company uses traditional costing and allocates overhead
using direct labor cost, how much overhead cost should be assigned to Jobs 1,
2, and 3?
b. If the company uses activity-based costing (ABC), how much
overhead cost should be assigned to Jobs 1, 2, and 3?
6. (15 pts.) Jason Company manufactures two models of
machinery, a standard and a deluxe model. The following activity and cost
information has been compiled:
.png”>
Assume a traditional costing system applies the overhead costs
based on direct labor hours.
Required:
a. What is the total amount of overhead costs assigned to the
standard model?
b. What is the total amount of overhead costs assigned to the
deluxe model?
Assume an activity-based costing system is used and that the
number of setups and the number of components are identified as the
activity-cost drivers for overhead.
c. What is the total amount of overhead costs assigned to the
standard model?
d. What is the total amount of overhead costs assigned to the
deluxe model?
7.(20 pts.) Jones plans to sell 90,000 units of a certain
product line at a price of $16. There are 7,500 units of the product in the
inventory at January 1 and the inventory is to be increased 15% during the
year.
Two types of materials are used to make the product. Three units
of Material A, each costing 40 cents, are required for each unit of product,
and two units of Material B, each costing 36 cents, are required for each unit
of product. On January 1, there are 10,000 units of Material A in inventory and
5,000 units of Material B. Plans for the year indicate both Material A and B
inventories will increase 10%.
Each unit of product can be produced in 20 minutes of direct labor
time. Direct labor is paid at the rate of $12.00 an hour. The variable
manufacturing overhead varies at the rate of $2.60 per direct labor hour and
the fixed manufacturing overhead for the year is estimated at $175,000.
Required:
a. Prepare a production budget for the year.
b. Prepare a materials purchases budget for the year.
c. Prepare a labor cost budget for the year.
d. Prepare a budget for manufacturing overhead for the year.
8.
(10 pts.) Fran is working on its direct labor budget for the next two
months. Each unit of output requires 0.07 direct labor-hours. The direct labor
rate is $8.50 per direct labor-hour. The production budget calls for producing
4,800 units in June and 5,300 units in July.
Required:
Construct the direct labor budget for the next two months,
assuming that the direct labor work force is fully adjusted to the total direct
labor-hours needed each month.
