Chapter 4 – Product Costing for Manufacturing Companies
4-21
SOLUTIONS TO PROBLEMS
Problem 4-22
4-22
Problem 4-23
a.
Raw Materials
Work in Process
(2)
40,000
26,000
(7)
144,000
104,000
(6)
104,000
186,000
(5)
80,000
36,000
72,000
52,000
Finished Goods
(1)
33,000
(5)
186,000
194,000
(4)
25,000
keyed to equations below.
1.
Beginning Finished Goods =
⅓ × $99,000
Beginning Finished Goods =
$33,000
2.
Ending Direct Materials =
2 × Beg. Direct Materials
$80,000 =
2 × Beg. Direct Materials
$40,000 =
Beg. Direct Materials
3.
Ending Work in Process =
2 × Beginning WIP
$52,000 =
2 × Beginning WIP
$26,000 =
Beginning WIP
4.
Sales Revenue =
COGS × 150%
$291,000 =
COGS × 150%
$194,000 =
COGS
5.
Beginning FG + COGM – COGS =
Ending FG
$33,000 + COGM – $194,000 =
$25,000
COGM =
$186,000
Chapter 4 – Product Costing for Manufacturing Companies
4-23
Problem 4-23, continued
6.
Beg. WIP + DM used + DL + MOH – COGM =
Ending WIP
$26,000 + DM used + $36,000 + $72,000 – $186,000 =
$52,000
DM used =
$104,000
7.
Beginning RM + Purchases – DM Used =
Ending Direct Materials
$40,000 + Purchases – $104,000 =
$80,000
Purchases =
$144,000
b. Schedule of Cost of Goods Manufactured
Direct materials
Direct Materials, beginning balance
$ 40,000
Add: Direct Materials purchases
144,000
Less: Direct Materials, ending balance
( 80,000)
Direct materials used in production
$104,000
Direct labor
36,000
Manufacturing overhead
72,000
Total manufacturing costs
212,000
Add: Work in Process, beginning balance
26,000
Less: Work in Process, ending balance
( 52,000)
Cost of goods manufactured
$186,000
Solutions for Davis & Davis, Managerial Accounting, 2nd ed.
4-24
Problem 4-24
a.
1.
No journal entry required
2.
Raw Material Inventory
75,000
Cash or Accounts Payable
75,000
To record raw materials purchases
3.
Work in Process Inventory ($60,000 × .7)
42,000
Manufacturing Overhead ($60,000 × .3)
18,000
Raw Materials Inventory
60,000
To record use of direct and indirect materials in production
4.
Work in Process Inventory ($12 × 20,800)
249,600
Wages Payable
249,600
To record direct labor payroll
5.
Manufacturing Overhead ($8 × 4,000)
32,000
Wages Payable
32,000
To record indirect labor payroll
6.
Manufacturing Overhead
45,000
Cash or various payables
45,000
To record other manufacturing overhead incurred
7.
Manufacturing Overhead
15,000
Accumulated Depreciation
15,000
To record factory depreciation
8.
Work in Process Inventory ($5/DLH × 20,800)
104,000
Manufacturing Overhead
104,000
To apply manufacturing overhead (POR =
$105,000
21,000 DLH
= $5/DLH)
9.
Finished Goods Inventory
398,000
Work in Process Inventory
398,000
To record transfer of completed products to finished goods
10.
Cost of Goods Sold
404,000
Finished Goods Inventory
404,000
To record cost of sales
Chapter 4 – Product Costing for Manufacturing Companies
4-25
Problem 4-24, continued
11.
Cost of Goods Solda
6,000
Manufacturing Overhead
To dispose of underapplied overhead
6,000
a
Applied overhead
$104,000
Actual Overhead:
Indirect materials
$18,000
Indirect labor
32,000
Other
45,000
Factory depreciation
15,000
–
Total actual overhead
110,000
=
Underapplied overhead
($ 6,000)
b.
Raw Materials
Work in Process
Bal.
5,000
34,000
(2)
75,000
60,000
(3)
42,000
398,000
(9)
20,000
249,600
104,000
31,600
Finished Goods
Cost of Goods Sold
Bal.
48,000
(10)
404,000
(9)
398,000
404,000
(10)
6,000
42,000
410,000
Manufacturing Overhead
(3)
18,000
(5)
32,000
(6)
45,000
104,000
(8)
(7)
15,000
6,000
(11)
0
4-26
Exercise 4-25
a.
Predetermined overhead rate =
DLH 12,000 DLH 60,000
$48,000 $276,000 $252,000
=
DLH 2,0007
76,0005$
=
$8/direct labor hour
b.
Seasons of Fun
Birth Announcement
Casting
—
—
Painting
0.5 DLH
1.0 DLH
Assembly
0.1 DLH
0.2 DLH
Total DLH
0.6 DLH
1.2 DLH
× POR
× $8/DLH
× $8/DLH
Overhead per frame
$4.80
$9.60
c.
Predetermined overhead rate =
MH 800 MH 28,000
$48,000 $276,000 $252,000
=
MH 8,8002
76,0005$
=
$20/machine hour
Seasons of Fun
Birth Announcement
Casting
1.00 MH
0.50 MH
Painting
—
—
Assembly
0.05 MH
0.05 MH
Total DLH
1.05 MH
0.55 MH
× POR
× $20/MH
× $20/MH
Overhead per frame
$21.00
$11.00
Chapter 4 – Product Costing for Manufacturing Companies
4-27
Exercise 4-25, continued
d. The casting department uses automated equipment and no direct
labor; therefore, machine hours are a better overhead application
e.
Casting POR:
MH 8,0002
52,0002$
= $9/MH
Painting POR:
DLH 0,0006
76,0002$
= $4.60/DLH
Assembly POR:
DLH 2,0001
8,0004$
= $4/DLH
Seasons of Fun
Birth Announcement
Casting
1.0 MH × $9/MH =
$9.00
0.5 MH × $9/MH =
$4.50
Painting
0.5 DLH × $4.60/DLH =
2.30
1.0 DLH × $4.60/DLH =
4.60
Assembly
0.1 DLH × $4/DLH =
0.40
0.2 DLH × $4/DLH =
.80
Total OH
$11.70
$9.90
f. The departmental overhead rates are better than an overall company
Solutions for Davis & Davis, Managerial Accounting, 2nd ed.
4-28
Problem 4-26
a. Total manufacturing cost for April is $117,750 and consists of all
costs added to production for all jobs during the month of April.
Job 78
Job 79
Job 80
Job 81
Total
Direct Material
$ 6,000
$ 8,000
$4,000
$ 18,000
Direct Labor
$5,000
24,000
12,000
500
41,500
Overheada
2,500
30,000
25,000
750
58,250
Total
$7,500
$60,000
$45,000
$5,250
$117,750
information from March:
$40,000
800 MH
= $50/MH.
b.
Job 78
Job 79
Job 80
Job 81
Beg. Balance
Direct Material
$25,000
$12,000
Direct Labor
30,000
1,000
Overhead
40,000
500
Total
$95,000
$13,500
Added in April
Direct Material
$ 6,000
$ 8,000
$4,000
Direct Labor
$ 5,000
24,000
12,000
500
Overheada
2,500
30,000
25,000
750
Total Cost to Date
$102,500
$73,500
$45,000
$5,250
Chapter 4 – Product Costing for Manufacturing Companies
4-29
Problem 4-26, continued
Since the only job still in process at the end of April is Job 81, Work in
79, and 80.
Solutions for Davis & Davis, Managerial Accounting, 2nd ed.
4-30
Problem 4-27
a.
CC723
CH291
PS812
DS444
Beg. Balance
$900,000
$431,000
$250,000
Added in December
Direct Material
155,000
13,800
211,000
$252,000
Direct Labor
122,400
43,200
200,500
138,000
Overheada
60,000
22,000
97,500
70,000
Total Cost Added
337,400
79,000
509,000
460,000
Total Cost to Date
$1,237,400
$510,000
$759,000
$460,000
aOverhead is applied using the following rate:
$4,500,000
900,000 MH
= $5/MH.
Applied Overhead for December
c. Cost of goods manufactured includes all costs for the jobs completed
d. Since the only job still in process at the end of December is Job