13–34
55.
AAA Plumbing Co. incurred the following costs during August:
Raw materials
$90,000
Direct labor
230,000
Manufacturing overhead
112,000
Selling expenses
70,800
Administrative expenses
45,200
Interest expense
25,000
During the month, 9,000 units of product were manufactured and 8,500 units of product
were sold. On August 1, AAA Plumbing carried no inventories.
(a.) Calculate the cost of goods manufactured during August and the average cost per
unit of product manufactured.
(b.) Calculate the cost of goods sold during August.
(c.) Where in the financial statements will the difference between cost of goods
manufactured and cost of goods sold be classified?
Cost of goods manufactured
Current period manufacturing costs:
Raw materials
Direct labor
Manufacturing overhead
56.
Erber, Inc. produces men’s neckties and dress socks. Manufacturing overhead is assigned
to production using an application rate based on direct labor hours.
(a.) For 2016, the company’s cost accountant estimated that total overhead costs incurred
would be $184,500, and that a total of 24,600 direct labor hours would be worked.
Calculate the amount of overhead to be applied for each direct labor hour worked on a
production run.
(b.) A production run of 500 neckties required raw materials that cost $3,120, and 140
direct labor hours at a cost of $8.00 per hour. Calculate the cost of each necktie produced.
(c.) At the end of February 2016, 420 neckties made in the above production run had been
sold, and the rest were in ending inventory. Calculate the cost of the neckties sold that
would have been reported in the income statement and the cost included in the February
28, 2016, finished goods inventory.
13–36
57.
Partridge, Inc. incurred the following costs during March:
Raw materials purchased
$46,800
Direct labor (9,200 hours)
156,400
Manufacturing overhead (actual)
83,000
Selling expenses
47,400
Administrative expenses
32,600
Interest expense
14,800
Manufacturing overhead is applied on the basis of $8.50 per direct labor hour. Assume
that overapplied or underapplied overhead is transferred to cost of goods sold only at the
end of the year. During the month, 3,500 units of product were manufactured and 3,400
units of product were sold. On March 1 and March 31, Partridge carried the following
inventory balances:
March 1
March 31
Raw materials
$14,200
$15,400
Work-in-process
64,700
55,800
Finished process
32,400
40,660
(a.) Prepare a Statement of Cost of Goods Manufactured for the month of March, and
calculate the average cost per unit produced.
(b.) Calculate the cost of goods sold during March.
(c.) Where in the financial statements will the difference between cost of goods
manufactured and cost of goods sold be classified?
Raw Materials:
Inventory, March 1
$14,200
13–37
58.
The following table summarizes the beginning and ending inventories of Ariel Co. for the
manufactured.
13–38
month of October:
Sept. 30
Oct. 31
Raw materials
$29,700
$31,000
Work-in-process
65,800
61,000
Finished process
52,700
46,200
Raw materials purchased during the month of October totaled $112,300. Direct labor
costs incurred totaled $234,800 for the month. Actual and applied manufacturing overhead
costs for October totaled $145,100 and $149,400, respectively.
(a) Calculate the cost of goods manufactured for October.
(b) Calculate the cost of goods sold for October (Ignore under/overapplied overhead).
(c) Given the fact that 25,000 units were produced, what is the cost per unit for October?
Raw Materials:
13–40
59.
Great Bay Co. manufactures cordless telephones. During 2016, total costs associated with
manufacturing 18,500 of the AB-2000 model (introduced this year) were as follows:
Raw materials
$195,175
Direct labor
115,625
Variable manufacturing overhead
85,100
Fixed manufacturing overhead
114,700
(a.) Calculate the cost per phone under both direct (or variable) costing and absorption
costing.
(b.) If 2,800 of these phones were in finished goods inventory at the end of 2016, by how
much and in what direction (higher or lower) would 2016 operating income be different
under direct (or variable) costing than under absorption costing?
(c.) Express the phone cost in a cost formula. What does this formula suggest the total
cost of making an additional 1,600 phones would be?
Total variable costs
Fixed manufacturing overhead
13–41
60.
PlayCraft Co. manufactures toy boats. During 2016, total costs incurred in making 54,000
toy boats included $189,000 of fixed manufacturing overhead. The total absorption cost
per toy boat was $28.50.
(a.) Calculate the variable cost per toy boat.
(b.) The ending inventory of toy boats was 11,600 units higher at the end of 2016 than at
the beginning of the year. By how much and in what direction (higher or lower) would cost
of goods sold for 2016 be different under direct costing than under variable costing?
(c.) Express the toy boat cost in a cost formula. What does this formula suggest the total
cost of making an additional 5,800 toy boats would be?
61.
Envision Company uses activity-based costing (ABC) for allocating manufacturing
overhead costs to jobs and it has established the following cost drivers and rates:
Activity
Cost Driver
Rate
Material handling
Number of parts used
$8.00 per part
Machine setups
Number of production runs
$3,000 per run
Assembly and inspection
Number of direct labor hours
$20.00 per DLH
Absorption cost per toy boat
under absorption.
13–42
Quality control
Number of units inspected
$5.00 per unit
During July, Job #2005 produced 1,500 units and required the following activity: 1,800
parts, 2 production runs, and 325 direct labor hours.
(a.) Calculate the amount of manufacturing overhead applied to Job #2005.
(b.) Explain the advantage of using the ABC approach.
6
2.
Baja Industries has recently switched its method of applying manufacturing overhead from a
single predetermined overhead rate based on direct labor hours to activity-based costing
(ABC). Assume that the direct labor rate is $18.00 per hour and that there were no beginning
inventories. The following cost drivers and rates have been developed for allocating
manufacturing overhead costs:
Activity
Cost Driver
Material handling
Number of parts used
Assembly and inspection
Number of direct labor hours
Testing
Number of units tested
* 1,800 parts used)
per DLH * 325 DLHs)
13–43
The following production, costs, and activities occurred during the month of August:
Units
Produced
Direct
Material
Cost
Number of
Parts Used
Direct
Labor
Hours
6,400
$208,600
142,000
26,480
(a.) Calculate the total manufacturing cost and the cost per unit for the month of August.
(b.) Assume instead that Baja Industries applies manufacturing overhead on the basis of
$40.00 per direct labor hours (rather than the ABC method). Calculate the total manufacturing
overhead cost applied for the month of August.
(c.) Which method of applying overhead do you think provides better information for
manufacturing managers?
13–45
63.
The following are beginning and ending inventories of ABC Company for the month of
May:
April 30
May 31
Raw materials
$50,300
$41,400
Work in process
106,900
97,200
Finished goods
70,800
62,800
Raw materials purchased during the month of May totaled $185,900. Direct labor costs
incurred totaled $468,300 for the month. Actual and applied manufacturing overhead costs
for May totaled $282,600 and $288,400, respectively. Over/underapplied overhead is
written off to cost of goods sold at the end of the year in December.
(a) Calculate the cost of goods manufactured for May.
(b) Calculate the cost of goods sold for May.
May 31
costs, May
