Chapter 4 – Product Costing for Manufacturing Companies
4-31
Problem 4-27, continued
e.
CC723
CH291
DS444
Total job cost
$1,237,400
$510,000
$460,000
Units produced
÷ 20,000
÷ 15,000
÷ 5,000
Cost per unit
$61.87
$34.00
$92.00
December Cost of Goods Sold:
CC723
15,000 units sold × $61.87 =
$928,050
CH291
12,000 units sold × $34.00 =
$408,000
DS444
$414,000
Total COGS
$1,750,050
December Finished Goods Inventory:
Beginning Balance
$3,456,400
COGM (from part c)
2,207,400
COGS
(1,750,050)
Ending Balance
$3,913,750
OR
Beginning Inventory
$3,456,400
CC723
5,000a units × $61.87
=
309,350
CH291
3,000b units × $34.00
=
102,000
DS444
500c units × $92.00 =
46,000
Total COGS
$3,913,750
4-32
Problem 4-28
a.
Applied OH, Jan. – Nov.
830,000 MH × $5/MH =
$4,150,000
Applied OH, Dec.
49,900a MH × $5/MH =
249,500
Total Applied OH
$4,399,500
Actual OH, Jan. – Nov.
4,274,500
Actual OH, Dec.
395,000
Total Actual OH
( 4,669,500)
Underapplied OH
($ 270,000)
b. Overhead was underapplied because the estimated overhead cost
c.
Cost of Goods Sold
$270,000
Manufacturing Overhead
$270,000
d.
Ending
Balance
% of
totala
Allocationb
Adjusted
Balancec
Work In Process
$ 759,000
5.0%
$ 13,500
$ 772,500
Finished Goods
3,913,750
25.8%
69,660
$ 3,983,410
Cost of Goods Soldd
10,500,300
69.2%
186,840
$10,687,140
$15,173,050
100.0%
$270,000
a
$759,000
$15,173,050
= 5.0%
b$270,000 × 5.0% = $13,500
c$759,000 + $13,500 = $772,500
dJan. to Nov. COGS of $8,750,250 + Dec. COGS of $1,750,050 = $10,500,300
Chapter 4 – Product Costing for Manufacturing Companies
4-33
Problem 4-28, continued
e. The amount of underapplied overhead is significant – over 5% of total
Problem 4-29
a.
Predetermined overhead rate =
$15/DLH DLH 800,1 employees 02
61,2009$
=
540,000$
61,2009$
=
178% of direct labor cost
Applied OH (35,000 DLH × $15/DLH × 178%)
$ 934,500
Actual OH
( 1,130,000)
Underapplied OH
($ 195,500)
b. The amount of underapplied overhead is over 17% of total overhead
(
$1,130,000
$195,500
) and over 11% of total cost of goods sold (
$1,720,960
$195,500
).
Therefore, it is likely that the amount of underapplied overhead is
material and will influence managers’ decisions. The underapplied
overhead should be prorated to finished goods and cost of goods
sold.
Solutions for Davis & Davis, Managerial Accounting, 2nd ed.
4-34
Problem 4-29, continued
c.
Predetermined overhead rate =
hour per units 5
units 540,000
$961,200
=
MH 000,108
61,2009$
=
$8.90/machine hour
d.
Applied OH (130,000 MH × $8.90/MH)
$1,157,000
Actual OH
( 1,130,000)
Overapplied OH
$ 27,000
e. Machine hours are the more appropriate overhead application base
Chapter 4 – Product Costing for Manufacturing Companies
4-35
Problem 4-30
a.
Predetermined overhead rate =
0005001$
,050,0001$
,,
=
70% of direct materials cost
b.
1.
Salaries Expense
438,000
Salaries Payable
438,000
To record salaries for president, vice-president, and
corporate secretary ($225,000 + $178,000 + $35,000)
2.
Manufacturing Overhead
112,000
Salaries Payable
112,000
To record indirect labor costs for factory manager,
assistant factory manager, and two security guards
($40,000 + $32,000 + [$20,000 × 2])
3.
Work in Process Inventory
163,125
Manufacturing Overhead
55,800
Wages Payable
218,925
To record direct labor (5 machine operators × 2,250
DLH × $14.50/DLH) and indirect labor [(2 materials
handlers × 2,000 DLH × $7.50/DLH) + (2 janitors ×
2,150 DLH × $6.00/DLH)]
4.
Depreciation Expense
17,500
Accumulated Depreciation
17,500
To record depreciation on administrative office
equipment ([$650,000 – $125,000] ÷ 30)
5.
Manufacturing Overhead
357,500
Accumulated Depreciation
357,500
To record depreciation on factory building and
equipment ([($4,000,000 – $150,000) ÷ 20] +
[($2,000,000 – $20,000) ÷ 12])
6.
Operating Expenses
11,000
Cash or Accounts Payable
11,000
To record administrative office utilities ($6,000) and
office supplies ($5,000) expense
Problem 4-30, continued
4-36
7.
Manufacturing Overhead
46,000
Cash or Accounts Payable
46,000
To record factory insurance ($14,000) and factory
utilities ($32,000)
8.
Raw Materials Inventory
1,945,000
Accounts Payable
1,945,000
To record raw materials purchases
9.
Work in Process Inventory
1,589,500
Manufacturing Overhead
280,500
Raw Materials Inventory
1,870,000
To record direct materials ($1,870,000 × 85%) and
indirect materials ($1,870,000× 15%) used in production
10.
Work in Process Inventory
1,112,650
Manufacturing Overhead
1,112,650
To apply overhead to work in process ($1,589,500 ×
70%)
11.
Finished Goods Inventory
3,450,000
Work in Process Inventory
3,450,000
To record transfer of completed airplanes
12.
Cost of Goods Sold
3,650,000
Finished Goods
3,650,000
To record cost of airplanes sold ($6,570,000 ÷ 1.8)
13.
Accounts Receivable
6,570,000
Sales Revenue
6,570,000
To record sale of airplanes to customers
Chapter 4 – Product Costing for Manufacturing Companies
4-37
Problem 4-30, continued
c.
Raw Materials
Work in Process
Bal.
250,000
Bal.
626,000
(8)
1,945,000
1,870,000
(9)
(3)
163,125
3,450,000
(11)
325,000
(9)
1,589,500
(10)
1,112,650
41,275
Finished Goods
Manufacturing Overhead
Bal.
340,000
(2)
112,000
1,112,650
(10)
(11)
3,450,000
3,650,000
(12)
(3)
55,800
140,000
(5)
357,500
(7)
46,000
(9)
280,500
260,850
Cost of Goods Sold
Sales Revenue
(12)
3,650,000
(13)
6,570,000
e.
Manufacturing Overhead
$260,850
Cost of Goods Sold
$260,850
f.
Ending
Balance
% of
totala
Allocationb
Adjusted
Balancec
Work In Process
$ 41,275
1.0%
$2,608.50
$ 38,666.50
Finished Goods
140,000
3.7%
9,651.45
$130,348.55
Cost of Goods Sold
3,650,000
95.3%
248,590.05
$3,401,409.95
$3,831,275
100.0%
$260,850.00
a
$41, 275
$3, 831, 275
= 1.0%
b$260,850 × 1.0% = $2,608.50
c$41,275 – $2,608.50 = $38,666.50