130 Chapter 5
accessible website, in whole or in part.
b.
Raw Material
Precast Overhead—P
Construction Overhead—C
1,150,000
1,150,000
500,000
150,000
25,000
26,895
1,485,000
1,000,000
5,000
98,750
60,000
221,595
425,000
36,320
18,650
175,000
5,000
5,000
225,000
54,050
43,850
Bal. 60,000
Bal. 526,620
Bal. 129,010
WIP—Precast
650,000
1,883,750
45,000
150,000
825,000
115,000
98,750
Bal. 0
WIP—Construction
16,300
599,090
26,895
200,000
134,300
221,595
Bal. 0
Completed Projects Inv.
2,482,840
2,482,840
Bal. 0
Cost of Contracts Sold
2,482,840
Bal. 2,482,840
c. (bottom section of job cost sheet)
Precast Department
DM (Est. $1,550,000)
DL (Est. $220,000)
OH (Est. $275,000)
Date
Amount
Date
Amount
Date
Amount
Oct. 1
$ 650,000
Oct. 31
$ 45,000
Oct. 31
$150,000
Nov. 4
825,000
Nov. 30
115,000
Nov. 30
98,750
$1,475,000
$160,000
$248,750
Construction Department
DM (Est. $350,000)
DL (Est. $130,000)
OH (Est. $214,500)
Date
Amount
Date
Amount
Date
Amount
Nov. 15
$200,000
Oct. 31
$ 16,300
Oct. 31
$ 26,895
Nov. 30
134,300
Nov. 30
221,595
$150,600
$248,490
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d. Lincoln Construction Company does not seem to have a good estimation system in
46. a. A job order costing system is appropriate in any environment in which costs can
b.
The only job remaining in WIP at 5/31 is DRS114:
DRS114 balance, 4/30
$1,570,000
May additions:
Raw material
$124,000
Purchased parts
87,000
Direct labor
200,500
Overhead (19,500 hrs. @ $7.50*)
146,250
557,750
WIP balance, 5/31
$2,127,750
*OH rate = $4,500,000 ÷ 600,000 hrs. = $7.50 per hour
c.
FG inventory of playpens, 4/30
19,400
Units completed in May
15,000
Units available
34,400
Units shipped in May
(21,000)
FG inventory, 5/31
13,400
inventory were completed in May.
Work in process inventory, 4/30
$420,000
May additions:
Raw material
Purchased parts
Direct labor
Overhead (4,400 $7.50)
90,000
Total cost
$510,000
$34 13,400 = $455,600
d. If the amount of overapplied or underapplied OH is not material or the result of
(CMA adapted)
132 Chapter 5
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47. a., b.
Applied OH rate = $302,400 ÷ 100,800 = $3 per DLH
Cost of goods manufactured
$ 96,000
Add ending work in process:
Two jobs open have DM of
$ 4,800
Two jobs open have DL of
9,000
Two jobs open have applied OH of
($3 × 2,144)
6,432
20,232
Total costs accounted for
$116,232
Less beginning work in process
(15,400)
Cost of production inputs
$100,832
Less: Direct labor
$36,400
Applied OH ($3.00 × 8,800)
26,400
(62,800)
Cost of direct material used
$ 38,032
Cost of indirect material issued
11,600
Total cost of raw material used
$ 49,632
c. Beginning raw material
$ 9,600
Raw material purchased
56,000
Total raw material available
$ 65,600
Raw material issued
(49,632)
Ending raw material
$ 15,968
d. Overhead applied ($3 × 8,800)
$ 26,400
Actual overhead charges:
Indirect labor
$10,800
Indirect material
11,600
All other
5,000
(27,400)
Underapplied overhead in April
$ (1,000)
e. Beginning finished goods
$ 16,800
Add cost of goods manufactured
96,000
Cost of goods available
$112,800
Less ending finished goods
(13,200)
Cost of goods sold
$ 99,600
48. a. Profit on the fixed-price contracts is constrained by the contract price. Profit
can only be increased if ways are found to reduce costs. One way that costs can
the shifted costs can be recovered under the terms of the cost-plus contracts.
Further, this strategy may have the effect of increasing costs under the cost-plus
b. This type of cost shifting is dishonest and unethical. It has the effect of increas-
ing the total prices of cost-plus contracts, and if those contracts are government
Chapter 5 133
accessible website, in whole or in part.
ethical.
49. a. No solution provided; each student will have a different answer.
b. The company is utilizing the benefits of automation to reduce the costs of han-
dling so many parts. By standardizing processes, the company can assemble a
messenger bag with a diverse set of parts in an amount of time that is similar to
that required for mass-produced ones. Accordingly, although the company is
c. Quality as viewed from the perspective of the consumer should be much higher
with the custom-made messenger bags because customers are able to specify
d. The answer is mostly revealed in (c). By containing costs to levels close to
those of mass-produced messenger bags, but allowing the customer to choose
the parts desired, a substantial gross profit can be achieved. The higher gross
50. a. It is likely that the least popular thoughts and opinions would not be heard on
campus. Students would naturally support those ideas and positions that were
b. Assuming diversity of opinions ultimately benefits all students, the University
of Wisconsin is possibly supporting diversity with the only means available—
student dollars. However, this approach may not be ethical because it forces
51. a. Overhead other than spoilage
$600,000
Estimated spoilage cost
$ 50,000
Less salvage value
(20,000)
30,000
Adjusted estimated overhead cost
$630,000
POR = $630,000 ÷ 40,000 = $15.75 per DLH
b. Disposal value of chemical 496
134 Chapter 5
52. a. Predetermined rate = $925,000 ÷ 100,000 = $9.25 per MH
b. Total cost of direct material
$687,100
Total cost of direct labor
157,750
Applied OH (3,080 × $9.25)
28,490
Total cost of Job B316
$873,340
head.
Manufacturing Overhead 75,500
Various accounts 75,500
d. Predetermined rate = $850,000 ÷ 100,000 = $8.50 per MH
Total cost of direct material
$687,100
Total cost of direct labor
157,750
Applied OH (3,080 × $8.50)
26,180
Total cost of Job B316
$871,030
e. Total cost of direct material
$687,100
Total cost of direct labor
157,750
Applied OH (3,080 × $8.50)
26,180
Rework cost ($75,500 × 0.20)
15,100
Sale of reworked pipe (200 × $3.50)
(700)
Total cost of Job B316
$885,430
53. a. Actual DM cost
$ 11,600,000
Standard DM cost ($56,000 × 200)
(11,200,000)
Material price variance
$ 400,000 U
Actual DL cost
$ 6,957,600
Standard DL cost ($34,400 × 200)
(6,880,000)
Direct labor rate variance
$ 77,600 U
Actual OH cost
$ 14,800,000
Standard OH cost ($76,000 × 200)
(15,200,000)
OH variance
$ (400,000) F
b. Material:
$11,600,000 ÷ 6,000,000 = $1.93 (rounded) actual cost per lb. vs. $2.00 stand-
6,000,000 lbs. used vs. (28,000 × 200) standard = 6,000,000 – 5,600,000 =
54. a. DM cost
$18.00
DL cost [$20 (12 ÷ 60)]
4.00
Total standard prime cost
$22.00
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accessible website, in whole or in part.
b. Job #918
DM cost ($18 × 1,200)
$21,600
DL cost ($4 × 1,200)
4,800
Total standard direct cost
$26,400
Job #2002
DM cost ($18 × 2,000)
$36,000
DL cost ($4 × 2,000)
8,000
Total standard direct cost
$44,000
c. Job #918
Standard
Actual
Variance
DM
$21,600
$23,525
$1,925 U
DL
4,800
4,840
40 U
Total
$26,400
$28,365
$1,965 U
Job #2002
DM
$36,000
$37,440
$1,440 U
DL
8,000
7,850
150 F
Total
$44,000
$45,290
$1,290 U