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Ex. 17.10 a. Materials Inventory …….………...……………………. 125,000
Accounts Payable ……………………………….
125,000
f.
Accounts Receivable …………..…………………………
600,000
Sales ………………………………………………. 600,000
To record December sales on account.
To record the purchase of direct materials on account.
Ex. 17.10 h.
Cost of Goods Sold …………..……………………………
10,000
(continued)
Manufacturing Overhead ………………………
10,000
Ex. 17.11 a. Actual manufacturing overhead ………………………………………… 200,000$
Debit balance in Manufacturing Overhead account ………………… (40,000)
e. Beginning Work in Process Inventory …………………………………. 50,000$
Total manufacturing costs charged to production ……………………. 590,000
Ex. 17.12 a.
Beginning Materials Inventory ……………………………………….
16,000$
b.
Beginning Work in Process Inventory ……………………………….
34,000$
Direct materials used ………………………………………………….
104,000
Computations:
3
Cost of finished goods available for sale ……………………………..
450,000$
Manufacturing overhead = $475,000 × 60% = $285,000
Ex. 17.13 a. Work in Process Inventory:
Job no. 1000 ……………………………………………………………
12,400$
Job no. 1001 …………………………………………………………….
15,000
b. Finished Goods Inventory:
Job no. 1002, February 28 …………………………………………….
2,000$
There is no Finished Goods Inventory balance on March 31.
c.
Sales …………………………………………………………………….
78,750$
Cost of Job no. 1000 ($12,400 + $6,800) ……………………………. 19,200
*
Ex. 17.14 a.
Power-cost pool: Machine hours
Inspection-cost pool: Number of inspection hours
The most likely cost drivers for each cost pool are:
% of total
Machine hours used for machine-made costumes …………
96,000 96%
Step 2:
Allocation of inspection-cost pool to each product line:
Step 1:
% of total
b.
Machine-
Made
Costumes
Hand-
Made
Costumes
$ 120,000 $ 96,000
Allocate $32,000 in power-cost pool to each product line based on the
percentages computed in step 1.
Establish the percent of power-cost pool to be allocated to each product
line using the number of inspection hours as an activity base.
Direct labor and materials ………………………..
Manufacturing overhead costs:
Ex. 17.14
(continued)
c.
Machine-
Made
Costumes
Hand-Made
Costumes
$ 240,000 $ 160,000
Ex. 17.15 a.
Direct materials ………………………………………………………….
$ 14,000
Direct labor ……………………………………………………………….
15,000
Sales
SOLUTIONS TO PROBLEMS SET A
20 Minutes, Easy
PROBLEM 17.1A
JENSEN FENCES
a.
Manufacturing overhead charged to jobs in process,
June 30:
Direct labor charged to jobs in process, June 30 1,600$
Overhead application rate 125%
Manufacturing overhead applied to jobs
b.
(1) Work in Process Inventory 45,000
Materials Inventory 18,000
Direct Labor 12,000
Manufacturing Overhead 15,000
To record costs charged to jobs during June.
(3) Cash 50,000
Sales 50,000
To record cash sale of 80% of goods completed in June.
General Journal
15 Minutes, Easy
PROBLEM 17.2A
O'SHAUGHNESSY MFG. CO.
General Journal
a. Materials Inventory 59,700
Accounts Payable 59,700
To record purchases of direct materials during March.
d. Direct Labor 26,300
Cash 26,300
To record direct labor payrolls paid in March.
To record actual overhead costs in March.
f. Work in Process Inventory 36,000
Manufacturing Overhead 36,000
To record overhead applied to production during March
($18 per labor hour × 2,000 hours = $36,000).
g. Finished Goods Inventory 116,000
Work in Process Inventory 116,000
To record cost of completed jobs in March.
30 Minutes, Medium
PROBLEM 17.3A
GEORGIA WOODS, INC.
a. Department One overhead application rate based on machine-hours:
b. Job no. 58:
Dept. One Total
Direct materials 10,100$ 17,700$
Direct labor 16,500 27,600
c.
Accounts Receivable (City Furniture)
Sales 147,000
To record revenue from sale to City Furniture.
d.
Dept. Two
Actual manufacturing overhead for January 26,540$
Manufacturing overhead applied to jobs:
General Journal
39,010$
Dept. One
11,100
147,000
Dept. Two
7,600$
30 Minutes, Medium
PROBLEM 17.4A
PRECISION INSTRUMENTS, INC.
a. Department A overhead application rate:
b. Job no. 399:
Total
Direct materials 11,300$
Direct labor
15,300
Manufacturing overhead:
c.
Accounts Receivable (SkiCraft Boats)
Sales 19,500
Sale on account to SkiCraft Boats.
d.
Dept. B
Actual overhead for the year 424,400$
Dept. A
517,000$
General Journal
19,500
Dept. A
Dept. B
6,800$
8,100
7,200
4,500$
35 Minutes, Medium
PROBLEM 17.5A
YE OLDE BUMP & GRIND, INC.
a. (1)
123,000$
10,000
12.30$
(2)
b. (1)
25.00$
75.00
61.50
Total cost of Job 1 161.50$
(2)
25$
Overhead application rate based on direct labor hours:
Estimated total overhead
Estimated direct labor hours
Overhead application rate per direct labor hour ($123,000 ÷ 10,000 hours)
Overhead application rate based upon number of repair jobs:
Job 1:
Overhead applied on a per-job basis:
Job 1:
Direct materials used
Direct labor costs
Overhead applied using direct labor hours:
Overhead applied (5 hr. × $12.30 per hr.)
Job 2:
Direct materials used
PROBLEM 17.5A
YE OLDE BUMP & GRIND, INC. (concluded)
c.
Comments on the alternative overhead applications:
Allocating overhead based upon the number of jobs assumes that each repair job should be
charged with an equal amount ($410) of overhead. This allocation method ignores the fact
In this business, direct labor hours appear to be the major causal factor in the incurrence of
overhead costs. The use of indirect materials (sandpaper, welding materials, and metal
putty) is likely to be greater on jobs requiring more direct labor hours. As rent is a
percentage of gross revenue, large jobs cause the business to incur higher rent costs than do
30 Minutes, Medium
PROBLEM 17.6A
NORTON CHEMICAL COMPANY
a.
base.
% of total
b.
Assign total purchasing department costs of
Establish the percent of order cost pool to be
Allocate $16,000 in the order cost pool to each
$80,000 to each activity cost pool based on the
percentages computed in step 1.
allocated to each product line using the number
of purchase orders as an activity base.
Step 2:
Step 2:
product line based on the percentages computed
in step 1.
Assigning purchasing department costs to activity pools:
Step 1:
Establish the percent of purchasing department
costs to be assigned to each activity cost pool
using the number of employees as an activity
Step 1:
Order cost pool allocated to product lines:
PROBLEM 17.6A
NORTON CHEMICAL COMPANY (concluded)
c.
d.
(1)
(2)
If possible, the company needs to consider making larger orders of Bitrite material on a
Step 2:
Norton might control manufacturing overhead costs incurred by the purchasing department
in two ways:
Allocate $64,000 in the inspection cost pool
to each product line based on the percentages
computed in step 1.
The company needs to work more closely with the supplier of materials used to make
of inspections as an activity base.
Inspection cost pool allocated to product lines:
Step 1:
Establish the percent of inspection cost pool to be
allocated to each product line using the number
45 Minutes, Strong
PROBLEM 17.7A
DIXON ROBOTICS
a.
Compute the overhead application rate per MH:
$2.50 per MH
Compute required machine hours on a per-unit basis:
Compute maintenance costs allocated to each product
Step 4:
on a per-unit basis:
Maintenance department costs allocated to each product line on a
per-unit basis using machine hours (MH):
Compute total MH at “normal” production levels:
Step 3:
Step 1:
Step 2:
Overhead application rate ($100,000 ÷ 40,000 MH)
PROBLEM 17.7A
DIXON ROBOTICS (continued)
b.
% of total
in step 1.
Step 1:
Establish the percent of repairs cost pool to be
Assign total maintenance department costs of
$100,000 to each activity cost pool based on the
Step 2:
percentages computed in step 1.
product line based on the percentages computed
Step 2:
Allocate $20,000 in the repairs cost pool to each
allocated to each product line using the
Assigning maintenance department costs to activity pools:
Step 1:
Allocating repairs cost pool to product lines:
number of production runs as an activity base.
Establish the percent of maintenance department
costs to be assigned to each activity cost pool
using the number of work orders as an
activity base.
PROBLEM 17.7A
DIXON ROBOTICS (concluded)
in step 1.
A3B4 BC11 C3PO Total
$ 2,500 $ 7,500 $ 10,000 $ 20,000
10,000 20,000 50,000 80,000
c.
A3B4 BC11 C3PO
Allocating janitorial cost pool to product lines:
Establish the percent of janitorial cost pool to be
allocated to each product line using square
footage occupied as an activity base.
Step 1:
From janitorial cost pool
Allocate $80,000 in the janitorial cost pool to each
product line based on the percentages computed
Determining maintenance costs per unit using ABC:
Using machine hours as a single activity base is likely to result in significant cost distortions
Step 2:
From repairs cost pool
45 Minutes, Strong
PROBLEM 17.8A
HEALTHY HOUND, INC.
a. Budgeted manufacturing overhead 24,600$
Budgeted direct labor hours (DLH) ÷ 2,500
b. Percent of cost driver assigned to each product line Basic Chunks Custom Cuts
Kilowatt hours:
Machine hours:
Basic Chunks (160 MH ÷ 200 MH) 80%
Custom Cuts (40 MH ÷ 200 MH) 20%
Square feet occupied:
Direct labor hours:
Basic Chunks (500 DLH ÷ 2,500 DLH) 20%
Custom Cuts (2,000 DLH ÷ 2,500 DLH) 80%
Manufacturing overhead allocated using ABC Basic Chunks Custom Cuts
Utilities cost pool (using KWH as a cost driver):
Basic Chunks (90% × $8,000) 7,200$
Custom Cuts (10% × $8,000) 800$
Maintenance cost pool (using MH as a cost driver):
Miscellaneous cost pool (using DLH as a cost driver):
PROBLEM 17.8A
HEALTHY HOUND, INC. (concluded)
c. Total manufacturing costs allocated to each product line Basic Chunks Custom Cuts
Direct Labor:
Basic Chunks (50,000 bags × $12 per DLH × 0.01 DLH) 6,000$
Custom Cuts (20,000 cases × $12 per DLH × 0.10 DLH) 24,000$
d.
e.
The Custom Cuts product line is very labor intensive in comparison to the Basic Chunks
product line. Thus, the company’s current practice of using direct labor hours to allocate
The benefits the company would achieve by implementing an activity-based costing system
