Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Comprehensive Problem (Continued)
(Using FIFO)
Cost per EUP
Direct
Materials
Conversion
Costs incurred this period………
$ 52,440
$ 303,375
÷ EUP………………………………..
÷ 14,000
÷ 10,450
Cost per EUP (rounded)…………
$3.75 per
EUP
$29.03 per
EUP
Cost assignment and reconciliation
Costs transferred out
Cost of beginning work in process…………………
$ 8,135
Cost to complete beginning work in process
Costs of units started and completed this period
Costs of ending work in process
Total costs accounted for………………………….
$363,999*
*Equals $363,950 costs to account for with $49 rounding difference
Part 3 — Journal entries (Using FIFO)
Finished Goods Inventory …………………………..
241,103
Work in Process Inventory …………………………..
241,103
Transferred goods to Finished Goods.
Cash ……………………………………………………………………..
625,000
Sales ……………………………………………………….
625,000
Sold finished goods for cash.
Cost of Goods Sold ……………………………………………….
265,700
Finished Goods Inventory …………………………..
265,700
Transferred costs to COGS.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Comprehensive Problem (Continued)
Part 4 (Using FIFO)
General ledger accounts
Raw Materials Inventory
Acct. No. 132
Date
Explanation
Debit
Credit
Balance
June
30
Balance
25,000
(a)
Purchases
125,000
150,000
(b)
Usage
62,440
87,560
Work in Process Inventory
Acct. No. 133
Date
Explanation
Debit
Credit
Balance
June
30
Balance
(b)
Direct materials
60,575
(c)
202,250
262,825
Overhead allocation
101,125
363,950
(g)
Transfer to Fin. Goods
241,103
*Agrees with $122,896 from process cost summary with $49 rounding difference
Finished Goods Inventory
Acct. No. 135
Date
Explanation
Debit
Credit
Balance
June
30
Balance
110,000
(g)
Transfer in from prod.
241,103
351,103
(h)
July sales
265,700
85,403
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Comprehensive Problem (Continued)
Part 4—(Using FIFO) concluded
Factory Wages Payable
Acct. No. 212
Date
Explanation
Debit
Credit
Balance
202,500
202,500
Sales
Acct. No. 413
Date
Explanation
Debit
Credit
Balance
(h)
July sales
625,000
625,000
Cost of Goods Sold
Acct. No. 502
Date
Explanation
Debit
Credit
Balance
(h)
July sales
265,700
265,700
Factory Overhead
Acct. No. 540
Date
Explanation
Debit
Credit
Balance
(b)
(d)
115,000
Overhead application
101,125
Comprehensive Problem (Concluded)
Part 5 (Using FIFO)
Computation of gross profit for July
Sales ……………………………………………………………………………………….
$ 625,000
Cost of goods sold* …………………………………………………………………
(279,575)
Gross profit …………………………………………………………………………….
$ 345,425
Company Analysis — AA 16-1
(Dollar amounts in millions)
1. Total payments for unconditional purchase obligations = $8,663
2. Total payments for unconditional purchase obligations = $8,663 = 3.59%
Total liabilities $241,272
Comparative Analysis — AA 16-2
1.
Apple
Google
$ millions
2017
2016
2017
2016
Expenses
Cost of goods sold ……
$141,048
$131,376
$45,583
$35,138
Operating expenses..
26,842
24,239
39,126
31,418
Total expenses ………….
$167,890
$155,615
$84,709
$66,556
2. Based on the ratio of COGS to total expenses, Google had a greater
percentage reduction in selling and administrative costs during 2017.
Global Analysis — AA 16-3
1. Ratio of Cost of Goods Sold to Total Expenses
₩ billions
2017
2016
Samsung …………………..
₩129,291 / ₩185,931
= 69.5%
₩120,278 / ₩172,626
= 69.7%
(From AA 16-2)
$ millions
2017
Apple ………………………..
$141,048 /
$167,890
= 84.0%
2017
2. Of these three companies, Apple has the highest ratio of cost of goods
sold to total expenses in 2017.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Ethics Challenge — BTN 16-1
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Instructor note: The student’s solution will vary depending on the industry, product, and process
chosen. It will also depend on the sources obtained.
The memorandum should initially identify an industry (say, steel), a
product (say, cans), and a process (say, forming).
Generally, there are at least three approaches to maintaining and
expanding one’s knowledge about a particular industry, product, and
process—students are likely to have additional insights.
(1) First, the professional should read a quality trade journal in the selected
industry. Another useful part of this first step is to access company
and other related websites for further introductory information.
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Communicating in Practice — BTN 16-2
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
The main focus of this memorandum should be to explain the difference
between determining direct and indirect costs in a job order versus a
process cost accounting system since this appears to be the primary
source of confusion. In addition to the memorandum’s content, the
instructor should look for a student’s ability to be diplomatic in the
communication.
Points the memorandum should make include:
1. The reason for the assistant’s confusion. Given the assistant’s
experience in a job order system, it is likely s/he views the process
from that perspective. From a job order perspective, the costs s/he
identified would have been classified as indirect product costs.
2. Since your company does not limit production to specific batches of
product but rather continuously produces homogeneous products, you
need to point out that you use a different system (process costing).
3. It is important to recognize that the cost object is the process, not the
job. If costs are traceable to the cost object, they are direct costs.
Taking It to the Net — BTN 16-3
From www2.deloitte.com/us/en/pages/operations/articles/a-guide-to-robotic-process-
automation-and-intelligent-automation.html:
Robotic process automation (RPA) tools are most useful for processes
with repeatable and predictable interactions with information technology
(IT) applications. RPA tools work by mimicking how people interact with IT
applications and they follow simple rules to make decisions. In addition to
cost savings, the proposed benefits of RPA tools include:
Teamwork in Action — BTN 16-4
Each member of the team should participate in the activity to improve and
reinforce his/her understanding of the entries that correspond to Exhibit
16.14. (Note: The entries below are pro forma entries since information for
amounts are not provided in this activity.)
Raw Materials Inventory …………………………..
#
Accounts Payable …………………………………………….
#
Purchased materials on credit.
Teamwork in Action (concluded)
No journal entry required
Work in Process Inventory—Roasting …………………….
Work in Process Inventory—Blending …………………….
#
#
Factory Wages Payable …………………………..
#
Assign costs of direct labor used
in production.
Factory Overhead …………………………………………………..
#
Factory Wages Payable …………………………..
#
Record indirect labor as overhead.
Factory Overhead ………………………………………………….
#
Prepaid Insurance ……………………………………………
#
Accrued Utilities Payable …………………………..
#
Cash ……………………………………………………….
#
Accum. Depreciation—Factory Equip ………………..
#
Record manufacturing overhead incurred.
Work in Process Inventory—Roasting …………………….
Work in Process Inventory—Blending …………………….
#
#
Factory Overhead ……………………………………………..
#
Apply factory overhead costs.
9a.
Work in Process Inventory—Blending …………………….
Work in Process Inventory—Roasting ……………….
#
Record the transfer of partially complete
9b.
#
Work in Process Inventory—Blending ……………….
#
Record the transfer of completed goods
10.
Accounts Receivable ……………………………………………..
Sales ……………………………………………………….
#
Record sale.
Cost of Goods Sold ………………………………………………..
Finished Goods Inventory …………………………..
Entrepreneurial Decision — BTN 16-5
1. If a business unnecessarily holds raw materials, it will be less
profitable than a company that maintains appropriate raw materials
inventory levels. First, the inventory requires costs for storage space.
Second, higher inventory levels increase the risk of inventory theft by
customers or employees. Third, for manufacturers with perishable
inventory, additional costs must be incurred to keep it fresh. These
perishable items can spoil or lose their quality over time. Non-
perishable inventory (e.g. clothes) can become obsolete as consumer
tastes change.
2. Suzy can use “yield”, which is a measure of the ratio of raw materials’
outputs relative to raw materials’ inputs, to assess the efficiency of its
process operation. If yield is lower than expected it can indicate
problems in the production process that must be fixed.
3. A hybrid system combines features of both process and job order
operations. Azucar Ice Cream Company resembles a process
operation in that each flavor of ice cream goes through the same
Hitting The Road — BTN 16-6
Instructor note: This assignment is designed to help students identify
specific costs in a service process costing system. The answers are likely
to be unique for each student. Below are a few suggestions. This problem
is also a review of cost classifications.
Cost
Description
Direct
Material
Direct
Labor
Overhead
Variable
Cost
Fixed
Cost
Manual
sorting
X
X
Heating and
cooling
X
X
Manually
moving mail
– within
department
X
X
If hired on
a temp.
basis
X
Full time
labor under
contract.
equipment
X
X