Chapter 4 – Product Costing for Manufacturing Companies
4-11
Exercise 4-9
Company
1
Company
2
Company
3
Company
4
Direct materials
inventory, beginning
$15,000
$25,000
$6,000
$165,000
+
Purchases of direct
materials
379,000
86,400
51,600
258,400
=
Total direct materials
available for use
394,000
111,400
57,600
423,400
–
Direct materials
inventory, ending
26,000
20,900
8,600
59,150
=
Direct materials used in
production
368,000
90,500
49,000
364,250
+
Direct labor
212,000
36,000
25,000
298,400
+
Total manufacturing
overhead
254,400
106,300
64,300
264,000
=
Total manufacturing cost
834,400
232,800
138,300
926,650
+
Beginning work in
process inventory
32,000
162,000
38,000
140,100
–
Ending work in process
inventory
49,000
34,800
72,850
82,250
=
Cost of goods
manufactured
817,400
360,000
103,450
984,500
+
Finished goods inventory,
beginning
35,000
62,000
36,600
25,000
=
Cost of goods available
for sale
852,400
422,000
140,050
1,009,500
–
Finished goods inventory,
ending
56,000
12,000
31,650
50,900
=
Cost of goods sold
796,400
410,000
108,400
958,600
Missing problem data in bold italics
4-12
Exercise 4-10
b. Machine hours is not likely to be as appropriate for an overhead
is a more appropriate application base.
d. Machine hours is an appropriate base for overhead application. As
Exercise 4-11
a.
Predetermined overhead rate =
hours machine 10,000
$500,000
=
$50/machine hour
b.
Applied overhead =
$50/MH × 10,500 MH
=
$525,000
Chapter 4 – Product Costing for Manufacturing Companies
4-13
Exercise 4-12
a.
$2,500,000
200,000 DLH
= $12.50/DLH
c.
$2,500,000
500,000 MH
= $5/MH
Exercise 4-13
a.
Direct Materials
Work in Process
Bal.
25,000
Bal.
148,000
(1)
415,000
427,000
(2)
(2)
427,000
850,000
(6)
13,000
(3)
180,000
(5)
162,000
67,000
Finished Goods
Bal.
255,000
(6)
850,000
1,075,000
(7)
30,000
4-14
Exercise 4-14
a.
Raw Materials
Work in Process
Bal.
15,000
Bal.
31,000
(1)
86,000
93,000
(2)
(2)
65,100
326,000
(7)
8,000
(3)
234,000
(6)
130,000
134,100
Finished Goods
Cost of Goods Sold
Bal.
22,000
(8)
303,750
(7)
326,000
303,750
(8)
44,250
303,750
Manufacturing Overhead
Cash
(2)
27,900
Bal.
32,000
(4)
25,000
(10)
450,000
100,000
(11)
(5)
70,000
130,000
(6)
259,000
(12)
7,100
123,000
Accounts Receivable
Accounts Payable
Bal.
56,000
42,000
Bal.
(9)
425,000
450,000
(10)
(11)
100,000
86,000
(1)
31,000
70,000
(5)
98,000
Wages Payable
Sales Revenue
(12)
259,000
234,000
(3)
425,000
(9)
25,000
(4)
425,000
0
Chapter 4 – Product Costing for Manufacturing Companies
4-15
Exercise 4-14, continued
b.
Direct Materialsa + Direct Labor + Overhead
= Total Manufacturing Cost
$65,100 + $234,000 + $130,000
= $429,100
c.
Beginning Finished Goods Balance + COGM
= Goods available for sale
$22,000 + $326,000
= $348,000
Exercise 4-15
Direct materials
$13,700
Direct labor
4,800
Manufacturing overhead
20,000
(800 MH × $25/MH)
Total cost for Job ICU2
$38,500
÷ number of shirts
7,000
Cost per shirt
$ 5.50
Exercise 4-16
a.
Predetermined overhead rate =
hours machine 40,000
$800,000
=
$20/machine hour
b. Faith: 4,000 machine hours × $20/machine hour = $ 80,000
c. The Hope order is the only job remaining in work in process at the
Direct materials
$2,250
Direct labor
1,300
Manufacturing overhead
44,500
$48,050
4-16
Exercise 4-17
a.
1.
Direct Materials Inventory
460,000
Cash or Accounts Payable
460,000
To record purchase of direct materials
2.
Manufacturing Overhead
230,000
Supplies Inventory
230,000
To record use of indirect materials in production
3.
Work in Process Inventory
415,000
Direct Materials Inventory
415,000
To record use of direct materials in production
4.
Work in Process Inventory
940,000
Wages Payable
940,000
To record direct labor payroll
5.
Manufacturing Overhead
540,000
Cash or Accounts Payable or
Accumulated Depreciation
540,000
To record actual manufacturing overhead
6.
Work in Process Inventory ($15 × 50,000)
750,000
Manufacturing Overhead
750,000
To record applied manufacturing overhead
7.
Finished Goods Inventory
2,100,000
Work in Process Inventory
2,100,000
To record transfer of completed goods to Finished Goods
Inventory
8.
Cost of Goods Sold
2,050,000
Finished Goods Inventory
To record cost of goods sold for the period
2,050,000
Chapter 4 – Product Costing for Manufacturing Companies
Exercise 4-17, continued
b.
Direct Materials Inventory
Work in Process Inventory
Bal.
20,000
Bal.
12,000
(1)
460,000
415,000
(3)
(3)
415,000
2,100,000
(7)
65,000
(4)
940,000
(6)
750,000
17,000
Manufacturing Overhead
Finished Goods Inventory
(2)
230,000
Bal.
35,000
(5)
540,000
750,000
(6)
(7)
2,100,000
2,050,000
(8)
20,000
85,000
$750,000
=
Underapplied Overhead
=
Actual Overhead
=
Underapplied Overhead
4-18
Exercise 4-19
a.
Predetermined overhead rate =
hours labor direct 30,000
$660,000
=
$22/direct labor hour
Applied Overhead
(33,400 DLH × $22/DLH)
$734,800
–
Actual Overhead
( 728,600)
=
Overapplied Overhead
$ 6,200
b.
Predetermined overhead rate =
cost labor direct $300,000
$660,000
=
220% of direct labor cost
Applied Overhead
($329,000 DL$ × 220%)
$723,800
–
Actual Overhead
( 728,600)
=
Underapplied Overhead
($ 4,800)
c.
Predetermined overhead rate =
hours machine 25,000
$660,000
=
$26.40/machine hour
Applied Overhead
(24,680 MH × $26.40/MH)
$651,552
–
Actual Overhead
( 728,600)
=
Underapplied Overhead
($ 77,048)
Chapter 4 – Product Costing for Manufacturing Companies
4-19
Exercise 4-20
a.
Predetermined overhead rate =
hours labor direct 72,500
$580,000
=
$8/direct labor hour
Applied Overhead
(72,500 DLH × $8/DLH)
$580,000
–
Actual Overhead
( 586,000)
=
Underapplied Overhead
($ 6,000)
b.
Applied Overhead
(73,550 DLH × $8/DLH)
$588,400
–
Actual Overhead
( 586,000)
=
Overapplied Overhead
$ 2,400
c.
Applied Overhead
(73,550 DLH × $8/DLH)
$588,400
–
Actual Overhead
( 590,000)
=
Underapplied Overhead
($ 1,600)
4-20
Exercise 4-21
a. From Exercise 4-14:
Manufacturing Overhead
(2)
27,900
(4)
25,000
(5)
70,000
130,000
(6)
7,100
Applied Overhead
$130,000
–
Actual Overhead
( 122,900)
=
Overapplied Overhead
$ 7,100
b.
Original Cost of Goods Sold
$303,750
Overapplied Overhead
( 7,100)
Adjusted Cost of Goods Sold
$296,650
c.
Ending
Balance
% of
totala
Allocationb
Adjusted
Balancec
Work In Process
$134,100
27.8%
$1,973.80
$132,126.20
Finished Goods
44,250
9.2%
653.20
$43,596.80
Cost of Goods Sold
303,750
63.0%
4,473.00
$299,277.00
$482,100
100.0%
$7,100.00
a
$134,100
$482,100
= 27.8%
b$7,100 × 27.8% = $1,973.80
c$134,100 – $1,973.80 = $132,126.20