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Solutions Manual, Appendix 3A 21
Exercise 3-9 (30 minutes)
1. The overhead applied to work in process is computed as follows:
This amount is shown in entry (a) below:
Manufacturin
g
Overhead
(Maintenance) 21,000 (a) 180,000
(Indirect materials) 8,000
Work in Process
(Direct materials) 710,000
2. Overhead is underapplied by $4,000 for the year, as shown in the Manu-
facturing Overhead account above. The entry to close out this balance
to Cost of Goods Sold would be:
g
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22 Managerial Accounting, 16th Edition
Exercise 3-9 (continued)
3. When overhead is applied using a predetermined rate based on ma-
chine-hours, it is assumed that overhead cost is proportional to ma-
chine-hours. When the actual machine-hours turn out to be 75,000, the
costing system assumes that the overhead will be 75,000 machine-hours
× $2.40 per machine-hour, or $180,000. This is a drop of $12,000 from
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Solutions Manual, Appendix 3A 23
Exercise 3-10 (30 minutes)
1. a. Raw Materials ………………………………… 325,000
b. Work in Process ……………………………… 232,000
g
c. Work in Process ……………………………… 60,000
g
d. Manufacturin
g
Overhead…………………… 75,000
e. Manufacturin
g
Overhead…………………… 62,000
f. Work in Process ……………………………… 300,000
Manufacturin
g
Overhead………………. 300,000
Estimated total manufacturing overhead cost
Predetermined =
2. Manufacturin
g
Overhead Work in Process
(b) 58,000 (f) 300,000 (b) 232,000
(c) 120,000 (c) 60,000
3. The cost of the completed job is $592,000 as shown in the Work in Pro-
cess T-account in requirement 2. The journal entry is:
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24 Managerial Accounting, 16th Edition
Exercise 3-10 (continued)
4. The unit product cost for this job would be:
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Solutions Manual, Appendix 3A 25
Problem 3-11 (45 minutes)
1. The cost of raw materials used in production was:
Be
g
innin
g
raw materials inventory……… $ 15,000
A
dd: Purchases of materials (debits) ….. 120,000
T
2. Of the $110,000 in materials requisitioned for production, $90,000 was
3.
T
otal factory wa
g
es accrued durin
g
the year (credits to
the Factory Wages Payable account) ……………………….. $180,000
4. The cost of goods manufactured was $470,000—the credits to the Work
5. The Cost of Goods Sold for the year was:
Be
g
innin
g
finished
g
oods inventory ………………………..….. $ 40,000
A
g
g
g
g
6. The predetermined overhead rate was:
Estimated total manufacturing overhead cost
Predetermined =
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26 Managerial Accounting, 16th Edition
Problem 3-11 (continued)
7. Manufacturing overhead was overapplied by $10,000, computed as fol-
lows:
A
ctual manufacturin
g
overhead cost for the year (debits
8. The ending balance in Work in Process is $30,000. Direct materials
make up $9,200 of this balance, and applied overhead makes up
$12,800. The computations are:
Balance, Work in Process, 12/31 (a) …………….… $30,000
A
T
–
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Solutions Manual, Appendix 3A 27
Problem 3-12 (30 minutes)
1. The predetermined overhead rate is computed as follows:
Estimated total manufacturin
g
overhead (a) .. $900,000
A
ctual manufacturin
g
overhead cost………………….. $850,000
Manufacturin
g
overhead applied to Work in Pro-
2. Cost of Goods Sold ……………………………. 130,000
g
3. The underapplied overhead would be allocated using the following per-
centages:
Overhead applied durin
g
the year in:
T
The entry to record the allocation of the underapplied overhead would
be:
Work in Process (5% × $130,000) ………. 6,500
g
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28 Managerial Accounting, 16th Edition
Problem 3-12 (continued)
4. Comparin
g
the two methods:
Cost of goods sold if the underapplied overhead is
closed to cost of goods sold ($1,400,000 +
Thus, net operating income will be $39,000 greater if the underapplied
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Solutions Manual, Appendix 3A 29
Problem 3-13 (30 minutes)
Schedule of cost of goods manufactured:
Direct materials:
Be
g
innin
g
raw materials inventory* ……….. $ 40,000
A
dd: Purchases of raw materials*………….. 290,000
T
otal raw materials available ………………… 330,000
T
A
g
g
g
Schedule of cost of goods sold:
Be
g
innin
g
finished
g
oods inventory* ………… $ 50,000
A
dd: Cost of
g
oods manufactured ……………. 690,000
Cost of
g
oods available for sale* ……………… 740,000
g
j
‒
A
g
Income statement:
Sales ………………………………………………… $915,000
Cost of
g
oods sold ($660,000
–
$15,000)….. 645,000
Gross mar
g
in ……………………………………… 270,000
Sellin
g
and administrative expenses:
g
A
* Given in the problem
g
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30 Managerial Accounting, 16th Edition
Problem 3-14 (60 minutes)
1. The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead cost
Predetermined=
2. Before the underapplied or overapplied overhead can be computed,
we must determine the amount of direct materials used in production
for the year.
Be
g
innin
g
raw materials inventory………………….. $ 20,000
A
T
A
ctual manufacturin
g
overhead costs:
Indirect labor ………………………………………..… $170,000
Property taxes ……………………………………….... 48,000
Depreciation of equipment …………………………. 260,000
T