Exercise 15-17 (20 minutes)
1.
a. Work in Process Inventory………………….……….…………9,500
Raw Materials Inventory…………………..…………….… 9,500
To record direct materials used.
d. Cost of Goods Sold*…………….……………..…………….…..16,000
Finished Goods Inventory………….…………………….. 16,000
To record cost of sale of job 120.
*Total of direct materials, direct labor, and overhead applied to this job in June ($11,040)
and July ($4,960).
2. The balance in Work in Process Inventory at the end of July ($6,280)
equals the total cost reported on the job cost sheet for Job 122, the
Job 121 Job 122
Direct materials……………… $ 6,000 $2,500
Direct labor……………………. 3,700 2,100
Exercise 15-18 (35 minutes)
1. Estimated cost of the architectural job
Labor type
Estimated
hours Hourly rate Total cost
Architects…………….……………………..150 $300 $ 45,000
Staff………………….…………….……….…300 75 22,500
Clerical……………..……….……………....500 20 10,000
2. Frey should first determine an estimated selling price, based on its cost
and desired profit for this job.
Total estimated cost…………………..……………….…………..……… $213,125
This $293,125 price may or may not be its bid. It must consider past
experiences and competition. It might make the bid at the low end of
what it believes the competition will bid. By bidding at about $285,000,
the profit on the job will only be $71,875 ($285,000 – $213,125). While
this may allow Frey to get the job, it must consider several other factors.
Among them:
a. How accurate are its estimates of costs? If costs are understated,
b. How accurate is the estimate of the competition’s probable bidding
c. Is it willing to meet the expected low bid of the competition? In the
example above, would it be acceptable to earn only $71,875 on this
Exercise 15-19 (15 minutes)
(1) Raw Materials Inventory………………….…..…….…………..3,108
Accounts Payable………………….….….………….……… 3,108
To record raw material purchases.
(2) The amount of materials purchased is almost equal to the amount of
PROBLEM SET A
Problem 15-1A (80 minutes)
Part 1 Total manufacturing costs and the costs assigned to each job
306 307 308 April Total
From March
Direct materials….……............$ 29,000 $ 35,000
Direct labor….…….…………...... 20,000 18,000
Applied overhead*………..……. 10,000 9,000
Beginning goods
in process…..……………....... 59,000 62,000 $ 121,000
*Equals 50% of direct labor cost.
Part 2 Journal entries for April
a. Raw Materials Inventory………………………….……………..500,000
Accounts Payable………………….….….………….……… 500,000
To record materials purchases.
d. Factory Overhead………………..…………………………..…….23,000
Cash…………………………………..………………………….... 23,000
To record indirect labor.
Problem 15-1A (continued)
f. [continued from prior page]
Factory Overhead………………..…………………………..…….
50,000
Raw Materials Inventory…………………..…………….… 50,000
To record indirect materials.
Factory Overhead………………..…………………………..…….32,000
Cash…………………………………..………………………….... 32,000
To record factory rent.
g. Finished Goods Inventory (306 & 307)…………………..…828,500
Work in Process Inventory……………………………….. 828,500
To record jobs completed ($321,500 + $507,000).
j. Cost of Goods Sold………………….…………….……….……..5,000
Factory Overhead*……………..…..…….………….……… 5,000
To assign underapplied overhead.
*Overhead applied to jobs...... $170,000
Overhead incurred
Indirect materials……………..….... $50,000
Indirect labor…….………………..…. 23,000
Problem 15-1A (Continued)
Part 3
MARCELINO COMPANY
Schedule of Cost of Goods Manufactured
For Month Ended April 30
Direct materials used…………………………………………….…..……... $ 455,000
Direct labor used……………………………………………………....…..…. 340,000
Factory overhead applied…………………………………………..….….. 170,000
Cost of goods manufactured………………....…..…......…......…..... $ 828,500
Part 4
Gross profit on the income statement for the month ended April 30
Presentation of inventories on the April 30 balance sheet
Inventories
Raw materials ………………………………………………………………….……..…… $ 75,000*
Work in process (Job 308)…………………………………………………………….. 257,500
* Beginning raw materials inventory………..…………………….……....…....…....…....$ 80,000
Purchases…………………………………………………………………………………..……..….500,000
Part 5
Problem 15-2A (75 minutes)
Part 1
a.
Dec. 31 Work in Process Inventory………………………..……………28,800
Raw Materials Inventory…………………..…………….… 28,800
To record direct materials costs for
Jobs 402 and 404 ($10,200 + 18,600).
b.
d.
Dec. 31 Factory Overhead…………………………………………….…….5,600
Raw Materials Inventory…………………..…………….… 5,600
To add cost of indirect materials
to actual factory overhead.
e.
Dec. 31 Factory Overhead…………………………………………….…….8,200
Wages Payable…………………….…..….…………….……. 8,200
To accrue indirect labor and assign it to
actual factory overhead.
Part 2
Revised Factory Overhead account
Ending balance from trial balance………………....…......…......…..$115,000 debit
Dec. 31 Cost of Goods Sold…………………………………………..……9,200
Factory Overhead………….…………………………….…… 9,200
To close underapplied overhead.
Problem 15-2A (continued)
Part 3
BERGAMO BAY COMPANY
Trial Balance
December 31, 2015
Debit Credit
Cash …………..…………………….…………….…….………….……..$170,000
Accounts receivable……………….………………..……..……….. 75,000
Raw materials inventory*………….………………….…….…….. 45,600
Work in process inventory**…………………..………..……….. 208,200
Retained earnings …………..……………….…………………….... 271,000
Sales …………….…………………….…………….…………………….. 373,000
Cost of goods sold ($218,000 + $9,200)………….…………….… 227,200
Factory overhead……………..…………………………………….… 0
* Raw materials inventory
Balance per trial balance…………………………………………………………....$80,000
Less: Amounts recorded for Jobs 402 and 404……….…..……..………(28,800)
** Work in process inventory
Job 402 Job 404 Total
862 Financial and Managerial Accounting, 6th Edition
Problem 15-2A (continued)
Part 4
BERGAMO BAY COMPANY
Income Statement
For Year Ended December 31, 2015
Sales……………..…………………….…………….…………………..……………$373,000
Cost of goods sold………….………………..………………….……….…….. (227,200 )
BERGAMO BAY COMPANY
Balance Sheet
December 31, 2015
Assets
Cash………………………………….…………….…………………………. $170,000
Accounts receivable……………….…………….….…………….….. 75,000
Inventories
Finished goods inventory…………………………………………… 15,000 268,800
Prepaid rent……………….………………..….………….……………... 3,000
Total assets……………………….……………………………….….…… $516,800
Liabilities and equity
Retained earnings ($271,000 + $85,800)..……………………….. 356,800
Total stockholders’ equity…………………….…..…….………….. 406,800
Total liabilities and equity……………………………………………. $516,800
