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Solutions Manual, Chapter 4 11
Exercise 4-5 (20 minutes)
1. To determine the cost of goods sold using the direct method, we must
determine the unit product cost. We can then determine the unadjusted
cost of goods sold as follows:
Job X32Z
Beginning balance .......................
$ 5,000
Direct materials ...........................
8,000
Direct labor .................................
2,000
Manufacturing overhead applied ..
4,000
Total (a) .....................................
$19,000
Units completed (b) .....................
100
Unit product cost (a) ÷ (b) ..........
$190
Units sold ...................................
40
Unadjusted cost of goods sold .....
$7,600
The cost of goods sold must be adjusted for the overapplied overhead
as follows:
Unadjusted cost of goods sold (see above) ....
$7,600
Deduct: Overapplied overhead ......................
300
Cost of goods sold ........................................
$7,300
2. The value of ending finished goods inventory can be determined using
the unit product cost computed above:
Job X32Z
Units completed ...................................................
100
Deduct: Units sold ................................................
40
Units in ending inventory ......................................
60
Unit product cost .................................................
$190
Total cost of ending finished goods inventory ........
$11,400
3. There is no ending work in process inventory, so its value is zero.
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document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
12 Managerial Accounting for Managers, 4th Edition
Exercise 4-6 (30 minutes)
To determine the cost of goods sold using the indirect method, we need:
(1) the beginning work in process inventory;
These values can be determined as follows:
(2) The total manufacturing cost charged to jobs during the period can be
determined as follows:
Job X32Z
Direct materials .........................................
$ 8,000
Direct labor ...............................................
2,000
Manufacturing overhead applied .................
4,000
Total manufacturing cost charged to jobs ....
$14,000
(3) There is no ending work in process inventory, so its value is zero.
(4) There was no beginning finished goods inventory.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 4 13
Exercise 4-6 (continued)
(5) The value of the ending finished goods inventory can be determined as
follows:
Job X32Z
Beginning balance .......................
$ 5,000
Direct materials ...........................
8,000
Direct labor .................................
2,000
Manufacturing overhead applied ..
4,000
Total (a) .....................................
$19,000
Units completed (b) .....................
100
Unit product cost (a) ÷ (b) ..........
$190
Job X32Z
Units completed ...................................................
100
Deduct: Units sold ................................................
40
Units in ending inventory ......................................
60
Unit product cost .................................................
$190
Total cost of ending finished goods inventory ........
$11,400
Finally, the cost of goods sold would be computed as follows:
Manufacturing costs charged to jobs:
Direct materials .............................................
$ 8,000
Direct labor ...................................................
2,000
Manufacturing overhead applied .....................
4,000
Total manufacturing cost charged to jobs ..........
14,000
Add: Beginning work in process inventory ..........
5,000
19,000
Deduct: Ending work in process inventory .........
0
Cost of goods manufactured .............................
$19,000
Beginning finished goods inventory, ................................
$ 0
Add: Cost of goods manufactured (see above) .................
19,000
Goods available for sale ..................................................
19,000
Deduct: Ending finished goods inventory .........................
11,400
Unadjusted cost of goods sold ................................
7,600
Deduct: Overapplied overhead ................................
300
Cost of goods sold ..........................................................
$ 7,300
Exercise 4-7 (30 minutes)
1. The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead cost
Predetermined=
overhead rate Estimated total amount of the allocation base
$170,000
= =$2.00 per machine-hour
85,000 machine-hours
2.
Predetermined overhead rate (see 1 above) ........
$2
Actual machine-hours worked .............................
× 80,000
Overhead applied...............................................
$160,000
Actual overhead cost incurred .............................
168,000
Underapplied overhead ......................................
$ 8,000
3. When overhead is applied using a predetermined rate based on
machine-hours, it is assumed that overhead cost is proportional to
overhead did not drop by this much. The actual total manufacturing
chapters.
Solutions Manual, Chapter 4 15
Exercise 4-8 (20 minutes)
1. The estimated total manufacturing overhead cost is computed as
follows:
Estimated fixed manufacturing overhead ................
$ 750,000
Estimated variable manufacturing overhead
$4.00 per MH × 150,000 MHs ..............................
600,000
Estimated total manufacturing overhead cost ..........
$1,350,000
The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead ........
$1,350,000
÷ Estimated total machine-hours (MHs) ........
150,000
MHs
= Predetermined overhead rate ....................
$9.00
per MH
2. Total manufacturing cost assigned to Job 500:
Direct materials ................................
$350
Direct labor ......................................
230
Manufacturing overhead applied
$9.00 per MH × 30 MHs .................
270
Total manufacturing cost ...................
$850
3. Computing underapplied/overapplied overhead:
Actual manufacturing overhead (a) .......
$1,325,000
Actual machine-hours ...........................
147,000
× Predetermined overhead rate ............
$9.00
= Manufacturing overhead applied (b) ..
$1,323,000
Underapplied overhead (a) – (b) ...........
$ 2,000
Manufacturing overhead underapplied ...
$2,000
Exercise 4-9 (15 minutes)
1. Milling Department:
The estimated total manufacturing overhead cost in the Milling
Department is computed as follows:
Solutions Manual, Chapter 4 17
Exercise 4-9 (continued)
2.
Total manufacturing cost assigned to Job 407:
Direct materials ($800 + $370) .........................
$1,170
Direct labor ($45 + $160) .................................
205
Milling Department (90 MHs × $8.50 per MH) ....
$765
Assembly Department (20 DLH × $10 per DLH) .
200
965
Total manufacturing cost ..................................
$2,340
3. Yes; if some jobs require a large amount of machine time and a small
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
18 Managerial Accounting for Managers, 4th Edition
Exercise 4-10 (10 minutes)
Direct material ............................
$12,000
Direct labor ................................
8,000
Manufacturing overhead applied:
$8,000 × 120% .......................
9,600
Total manufacturing cost .............
$29,600
Unit product cost:
$29,600 ÷ 200 units .................
$148
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 4 19
Exercise 4-11 (10 minutes)
1.
Actual direct labor-hours .........................
8,250
× Predetermined overhead rate ...............
$21.40
= Manufacturing overhead applied ...........
$176,550
Less: Manufacturing overhead incurred ....
172,500
Manufacturing overhead overapplied ........
$ 4,050
2. Because manufacturing overhead is overapplied, the cost of goods sold
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This
Exercise 4-12 (15 minutes)
1.
Actual manufacturing overhead costs ..............
$ 48,000
Manufacturing overhead applied:
10,000 MH × $5 per MH ..............................
50,000
Overapplied overhead cost ..............................
$ 2,000
2.
Direct materials:
Raw materials inventory, beginning ..............
$ 8,000
Add: Purchases of raw materials ...................
32,000
Raw materials available for use ....................
40,000
Deduct: Raw materials inventory, ending ......
7,000
Raw materials used in production .................
$ 33,000
Direct labor ....................................................
40,000
Manufacturing overhead cost applied to work
in process ...................................................
50,000
Total manufacturing cost ................................
123,000
Add: Work in process, beginning .....................
6,000
129,000
Deduct: Work in process, ending .....................
7,500
Cost of goods manufactured ...........................
$121,500
