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Exercise 3-5 (20 minutes)
Parts 1 and 2.
Cash
Raw Materials
(a)
94,000
(a)
94,000
(b)
89,000
(c)
132,000
Bal.
5,000
(d)
143,000
Work in Process
Finished Goods
(b)
78,000
(f)
342,000
(f)
342,000
(c)
112,000
Bal.
0
(e)
152,000
(f)
342,000
Bal.
0
Manufacturing Overhead
Cost of Goods Sold
(b)
11,000
(e)
152,000
(f)
342,000
(c)
20,000
(g)
22,000
(d)
143,000
(g)
22,000
Bal.
364,000
Bal.
0
Exercise 3-7 (10 minutes)
1.
Manufacturing overhead incurred (a) .........
$215,000
Actual direct labor-hours ...........................
11,500
× Predetermined overhead rate ................
$18.20
= Manufacturing overhead applied (b) .......
$209,300
Manufacturing overhead underapplied
(a) – (b) ................................................
$5,700
2. Because manufacturing overhead is underapplied, the cost of goods sold
would increase by $5,700 and the gross margin would decrease by
$5,700.
Exercise 3-8 (10 minutes)
Direct material .........................
$10,000
Direct labor .............................
12,000
Manufacturing overhead:
$12,000 × 125% ...................
15,000
Total manufacturing cost ..........
$37,000
Unit product cost:
$37,000 ÷ 1,000 units ...........
$37
Exercise 3-9 (30 minutes)
1.
a.
Raw Materials Inventory ...........................
210,000
Accounts Payable ..................................
210,000
b.
Work in Process .......................................
178,000
Manufacturing Overhead ..........................
12,000
Raw Materials Inventory ........................
190,000
c.
Work in Process .......................................
90,000
Manufacturing Overhead ..........................
110,000
Salaries and Wages Payable ...................
200,000
d.
Manufacturing Overhead ..........................
40,000
Accumulated Depreciation .....................
40,000
e.
Manufacturing Overhead ..........................
70,000
Accounts Payable ..................................
70,000
f.
Work in Process .......................................
240,000
Manufacturing Overhead .......................
240,000
30,000 MH × $8 per MH = $240,000.
g.
Finished Goods ........................................
520,000
Work in Process ....................................
520,000
h.
Cost of Goods Sold ..................................
480,000
Finished Goods .....................................
480,000
Accounts Receivable ................................
600,000
Sales ....................................................
600,000
$480,000 × 1.25 = $600,000.
2.
Manufacturing Overhead
Work in Process
(b)
12,000
(f)
240,000
Bal.
42,000
(g)
520,000
(c)
110,000
(b)
178,000
(d)
40,000
(c)
90,000
(e)
70,000
(f)
240,000
8,000
Bal.
30,000
(Overapplied
overhead)
Exercise 3-11 (30 minutes)
1. Mason Company’s schedule of cost of goods manufactured is as follows:
Direct materials:
Beginning raw materials inventory ..................
$ 7,000
Add: Purchases of raw materials .....................
118,000
Raw materials available for use .......................
125,000
Deduct: Ending raw materials inventory ..........
15,000
Raw materials used in production ...................
$110,000
Direct labor ......................................................
70,000
Manufacturing overhead ...................................
90,000
Total manufacturing costs .................................
270,000
Add: Beginning work in process inventory ..........
10,000
280,000
Deduct: Ending work in process inventory ..........
5,000
Cost of goods manufactured..............................
$275,000
2. Mason Company’s schedule of cost of goods sold is as follows:
Beginning finished goods inventory .............
$ 20,000
Add: Cost of goods manufactured ...............
275,000
Goods available for sale .............................
295,000
Deduct: Ending finished goods inventory ....
35,000
Unadjusted cost of goods sold ....................
$260,000
Deduct: Overapplied overhead ...................
$10,000
Adjusted cost of goods sold ........................
$250,000
3.
Mason Company
Income Statement
Sales ..............................................................
$524,000
Cost of goods sold ($260,000 – $10,000) ..........
250,000
Gross margin ...................................................
274,000
Selling and administrative expenses:
Selling expenses ...........................................
$140,000
Administrative expense .................................
63,000
203,000
Net operating income ......................................
$ 71,000
Exercise 3-13 (30 minutes)
1.
Units
Produced
Manufacturing
Overhead
High activity level (First quarter) ...
80,000
$300,000
Low activity level (Third quarter) ...
20,000
180,000
Change ........................................
60,000
$120,000
Variable cost = Change in cost ÷ Change in activity
= $120,000 ÷ 60,000 units
= $2.00 per unit produced
Total overhead cost (First quarter) .............................
$300,000
Variable cost element ($2.00 per unit × 80,000 units) .
160,000
Fixed cost element ....................................................
$140,000
These fixed and variable cost estimates can be used to estimate the to-
tal manufacturing overhead cost for the fourth quarter as follows:
Y = $140,000 + ($2.00 per unit)(60,000 units)
Estimated fixed manufacturing overhead ..................
$140,000
Estimated variable manufacturing overhead
$2.00 per unit × 60,000 units ................................
120,000
Estimated total manufacturing overhead cost ............
$260,000
Total manufacturing cost and unit product cost:
Direct materials .....................................................
$180,000
Direct labor ..........................................................
96,000
Manufacturing overhead ........................................
260,000
Total manufacturing costs ......................................
$536,000
÷ Number of units to be produced .........................
60,000
= Unit product cost (rounded) ...............................
$8.93
