114 Chapter 5
28. a. Some of the companies that have been found to engage in this practice are Fam-
ily Dollar, Pep Boys, Taco Bell, Toys-R-Us, and Walmart.
or punch-card records.
c. Each student will have a different answer. However, most students will proba-
29. a. Manufacturing Overhead
1,150
Raw Material Inventory
250
Wages Payable
900
b. WIP—Job #BA468
1,150
Raw Material Inventory
250
Wages Payable
900
Given that the rework costs were not necessary to the completion of the job,
San Angelo Corp. should probably not charge its markup percentage on the
$1,150 of rework costs unless the customer had already been informed that such
charges might be charged and the customer had agreed to such charges.
c. Loss on Abnormal Rework
1,150
Raw Material Inventory
250
Wages Payable
900
30. a. Predetermined OH rate = $1,421,000 ÷ 145,000 = $9.80 per MH
Direct material
$47,500
Direct labor
21,800
Overhead (325 × $9.80)
3,185
Total cost
$72,485
Per-unit cost = $72,485 ÷ 1,500 = $48.32 (rounded)
b. The $750 rework cost is included in Manufacturing Overhead Control.
c. Total original cost $72,485
31. a. The estimated cost of the spoilage should be included in calculating the prede-
termined overhead rate. This approach spreads the cost of spoilage across all
good units produced.
Chapter 5 115
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materials, direct labor, and manufacturing overhead.
c. In this case, the spoilage is unexpected and the net cost should be recorded as a
ited (Disposal value of defective work). A loss account (e.g., Loss from Ab-
normal Spoilage) should be debited to balance the transaction.
32. A standard costing system is most appropriate in production settings in which ac-
tivities are repetitive. That criterion is met in the case of Latamore Industries. De-
across the contracts. Better identification and understanding of the causes of vari-
ances will allow managers to manage costs more effectively and price company
services more appropriately.
33. MPV = Actual cost for paper purchased – Standard cost for paper purchased
MQV = Actual cost for paper used – Standard cost for paper that should have
favorable.
34. a. Total payroll = 9,000 × $9.65 = $86,850
b. LRV = Actual payroll – Standard cost for actual hours worked = $86,850 –
is favorable.
c. LQV = Standard cost for actual hours worked – Standard cost for standard
the variance is unfavorable.
d. One concern would be the reason the company was paying its workers less than
the standard rate per hour. The other concern would be that the workers, recog-
116 Chapter 5
accessible website, in whole or in part.
Chapter 5 117
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PROBLEMS
35. Raw Material Inventory
790,000
Accounts Payable
790,000
Work in Process Inventory
570,000
Raw Material Inventory
570,000
Manufacturing Overhead
120,000
Raw Material Inventory
120,000
Work in Process Inventory
794,000
Manufacturing Overhead
80,000
Wages Payable
874,000
Work in Process Inventory ($794,000 0.55)
436,700
Manufacturing Overhead
436,700
Finished Goods Inventory
1,046,000
Work in Process Inventory
1,046,000
Cost of Goods Sold
1,046,000
Finished Goods Inventory
1,046,000
Cash
1,342,000
Sales
1,342,000
36. a. $82,000 8,000 DLHs = $10.25 per DLH
b. Direct Material Inventory
90,000
Accounts Payable
90,000
Work in Process Inventory
75,600
Cash
75,600
Manufacturing Overhead
82,000
Various accounts
82,000
Work in Process Inventory
82,000
Manufacturing Overhead
82,000
Work in Process Inventory
88,500
Direct Material Inventory
($2,000 + $90,000 $3,500)
88,500
Finished Goods Inventory
248,850
Work in Process Inventory
248,850
CGM = BWIP + DM + DL + OH – EWIP
CGM = $10,500 + $88,500 + $75,600 + $82,000 –
$7,750 = $248,850
Accounts Receivable
350,400
Sales
350,400
Cost of Goods Sold
243,700
Finished Goods Inventory
243,700
118 Chapter 5
c. Beginning FG
$ 6,500
CGM
248,850
CGS
(243,700)
Ending FG
$ 11,650
37. a. 9/1 Raw Material Inventory
1,940,000
Accounts Payable
1,940,000
9/4 Work in Process Inventory
1,846,800
Manufacturing Overhead
53,200
Raw Material Inventory
1,900,000
Issuances made to jobs as follows:
#75, $289,600; #78, $252,600;
#82, $992,200; #86, $312,400
9/15 Work in Process Inventory
665,600
Manufacturing Overhead
91,400
Cash
757,000
Labor charged to jobs as follows:
#75, $84,600; #78, $267,200;
#82, $203,000; #86, $110,800
9/15 Work in Process Inventory
832,000
Manufacturing Overhead
832,000
Overhead applied to jobs as follows:
#75, $120,750; #78, $329,000;
#82, $253,750; #86, $128,500
9/15 Finished Goods Inventory
1,081,350
Work in Process Inventory
($586,400 + $289,600 + $84,600 + $120,750) 1,081,350
Accounts Receivable
1,405,755
Sales ($1,081,350 1.3)
1,405,755
Cost of Goods Sold
1,081,350
Finished Goods Inventory
1,081,350
9/20 Manufacturing Overhead
110,200
Accounts Payable
196,800
Cash
307,000
9/24 Raw Material Inventory
624,000
Accounts Payable
624,000
9/25 Work in Process Inventory
716,400
Manufacturing Overhead
55,800
Raw Material Inventory
772,200
Issuances made to jobs as follows:
#78, $154,800; #82, $212,600; #86, $349,000
9/30 Manufacturing Overhead
1,206,800
Accumulated Depreciation
809,000
Prepaid Insurance
165,400
Taxes & Licenses Payable
232,400
Chapter 5 119
9/30 Work in Process Inventory
649,400
Manufacturing Overhead
65,000
Cash
714,400
Labor charged to jobs as follows:
#78, $177,400; #82, $228,400;
#86, $243,600
9/30 Work in Process Inventory
407,125
Manufacturing Overhead
407,125
To apply overhead to jobs as follows:
#78, $111,750; #82, $170,625;
#86, $124,750
b.
Raw Material Inventory
Bal.
332,400
9/4
1,900,000
9/1
1,940,000
9/25
772,200
9/24
624,000
Bal.
224,200
Work in Process Inventory
Bal.
1,512,600
9/15
1,081,350
9/4
1,846,800
9/15
665,600
9/15
832,000
9/25
716,400
9/30
649,400
9/30
407,125
Bal.
5,548,575
Cost of Goods Sold
Bal.
4,864,000
#75
1,081,350
Bal.
5,945,350
Job #75
Bal.
586,400
1,081,350
DM
289,600
DL
84,600
OH
120,750
Bal.
0
Job #78
Bal.
266,600
DM
252,600
DL
267,200
OH
329,000
DM
154,800
DL
177,400
OH
111,750
Bal.
1,559,350
120 Chapter 5
Job #82
Bal.
659,600
DM
992,200
DL
203,000
OH
253,750
DM
212,600
DL
228,400
OH
170,625
Bal.
2,720,175
Job #86
DM
312,400
DL
110,800
OH
128,500
DM
349,000
DL
243,600
OH
124,750
Bal.
1,269,050
c. Schedule of Job Cost Records
September 30, 2013
Job #78
$1,559,350
Job #82
2,720,175
Job #86
1,269,050
Total
$5,548,575
d. Actual overhead for September
9/4
$ 53,200
9/15
91,400
9/20
110,200
9/25
55,800
9/30
1,206,800
9/30
65,000
$ 1,582,400
Applied overhead for September
9/15
$ 832,000
9/30
407,125
(1,239,125)
Underapplied overhead
$ 343,275
38. a. Raw Material Inventory
542,000
Cash
542,000
Manufacturing Overhead
54,000
Work in Process Inventory
602,800
Wages/Salaries Payable (or Cash)
656,800
To record DL for jobs (Job #247, $17,400;
#251, $8,800; #253, $21,000;
#254, $136,600; #255, $145,000;
#256, $94,600; and #257, $179,400)
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Manufacturing Overhead
76,000
Work in Process Inventory
466,400
Raw Material Inventory
542,400
To record DM for jobs (Job #247, $12,400;
#251, $6,200; #253, $16,800; #254, $105,200;
#255, $119,800;#256, $72,800;
and #257, $133,200)
Manufacturing Overhead
114,400
Various accounts
114,400
To record OH costs other than
indirect labor and indirect
materials ($244,400
$54,000
$76,000)
Work in Process Inventory
241,120
Manufacturing Overhead
241,120
To apply OH at a rate of $0.40 per DL$
(Job #247, $6,960; #251, $3,520; #253, $8,400;
#254, $54,640; #255, $58,000;
#256, $37,840; and #257, $71,760)
Finished Goods Inventory
1,779,040
Work in Process Inventory
1,779,040
(See schedule below.)
Cash
2,264,774
Sales
2,264,774
Cost of Goods Sold
1,779,040
Finished Goods Inventory
1,779,040
Schedule of Completed Jobs
Job
Direct Material
Direct Labor
Applied OH
Total
247
$ 89,600
$108,800
$ 43,520
$ 241,920
251
182,800
218,600
87,440
488,840
253
162,200
190,600
76,240
429,040
254
105,200
136,600
54,640
296,440
255
119,800
145,000
58,000
322,800
Totals
$659,600
$799,600
$319,840
$1,779,040
b. Job
Direct Material
Direct Labor
Applied OH
Total
256
$ 72,800
$ 94,600
$ 37,840
$205,240
257
133,200
179,400
71,760
384,360
Totals
$206,000
$ 274,000
$109,600
$589,600
c. Actual overhead
$ 244,400
Applied overhead
(241,120)
Underapplied overhead
$ 3,280
Unadjusted cost of jobs completed
1,779,040
Adjusted cost of jobs completed
$1,782,320
122 Chapter 5
39. a.
Aluminum
Steel
Other
Total
BI
$ 8,300
$ 12,800
$ 5,800
$ 26,900
Purchases
98,300
26,500
23,550
148,350
Available
$106,600
$ 39,300
$ 29,350
$ 175,250
Issuances
(58,700)
(34,200)
(25,900)
(118,800)
EI
$ 47,900
$ 5,100
$ 3,450
$ 56,450
b. Direct material
$ 620
Direct labor (8 × $15)
120
Overhead (16 × $30)
480
Total
$1,220
c. WIP—beginning*
$ 6,230
Direct material (total issuances)
118,800
Direct labor (680 × $15)
10,200
Overhead (1,200 × $30)
36,000
Total manufacturing costs
$171,230
WIP—ending
(1,220)
Cost of goods manufactured
$170,010
FG—beginning
23,800
Cost of goods available for sale
$193,810
FG—ending
(0)
Cost of goods sold
$193,810
*Job #
Material
Labor
OH
Total
411
$1,900
$ 540
$1,500
$3,940
412
1,240
150
900
2,290
$3,140
$ 690
$2,400
$6,230
For example, using job #67: $15,916 ÷ $13,840 = 1.15.
b. Direct material
$25,800
Direct labor
7,200
Applied overhead
8,280
Total
$41,280
c. Total direct material
$ 513,834
Less direct material in BI
(25,800)
$ 488,034
Total direct labor
$ 93,720
Less direct labor in BI
(7,200)
86,520
Total direct cost added during May
$ 574,554
d. Work in process—beginning
$ 41,280
Costs added during May:
Direct material
$ 488,034
Direct labor
86,520
Applied overhead ($86,520 × 1.15)
99,498
674,052
$ 715,332
Work in process—ending
[$308,430 + $57,000 + ($57,000 × 1.15)]
(430,980)
Cost of goods manufactured
$ 284,352
Chapter 5 123
41. a. Fabrication: $1,560,000 104,000 MHs = $15 per MH
Assembly: $1,760,000 ÷ 320,000 DLHs = $5.50 per DLH
b. Job #2296:
Fabrication (900 hours @ $12)
$10,800
Assembly (850 hours @ $10)
8,500
Total DL
$19,300
Job #2297:
Fabrication (460 hours @ $12)
$ 5,520
Assembly (400 hours @ $10)
4,000
Total DL
$ 9,520
c. Job #2296:
Fabrication (1,800 hours @ $15)
$27,000
Assembly (850 hours @ $5.50)
4,675
Total OH applied
$31,675
Job #2297:
Fabrication (900 hours @ $15)
$13,500
Assembly (400 hours @ $5.50)
2,200
Total OH applied
$15,700
d.
Job #2296
Job #2297
Direct material
$118,500
$147,200
Direct labor
19,300
9,520
Overhead
31,675
15,700
Total
$169,475
$172,420
e. Fabrication:
Applied (103,200 × $15)
$ 1,548,000
Actual
(1,528,000)
Overapplied
$ 20,000
Assembly:
Applied (324,000 × $5.50)
$ 1,782,000
Actual
(1,790,000)
Underapplied
$ (8,000)
42. a. Job Cost Sheet—Job #515
Customer Name and Address:
City of Gulf Shores, Alabama
Description of Job: Prepare site,
build and install a pedestrian over-
pass in Gulf Shores: see bid specifi-
cations for details
Contract Agreement Date: 5/13
Direct Material (Est. $1,240,000)
Date
Source
Cost
2013 July 31
Summary of material req.
$121,800