Teamwork in Action
1. The types of transactions that are posted to the accounts may be sum-
marized in T-account form as follows:
Raw Materials
Beginning balance
Purchases
Direct materials used (to Work in
Process)
Beginning balance
Payments to suppliers
Purchases of raw materials
Beginning balance
Direct materials used (from Raw
Cost of goods manufactured (to
Direct labor
Manufacturing overhead applied
Manufacturing Overhead
Actual manufacturing costs
Manufacturing overhead applied
Overhead overapplied (to COGS)
Overhead underapplied (to COGS)
Beginning balance
Cost of goods manufactured (from
Cost of goods sold
Cost of goods sold
Teamwork in Action (continued)
2. The predetermined overhead rate and overhead applied amounts are:
Predetermined overhead rate:
3. The balance in the work in process account is determined as follows:
4. The completed T-accounts follow:
Accounts Payable
(c)
Payments
40,000
(c)
Balance 4/1
6,000
(plug)
Purchases
42,000
(given)
Balance 4/30
8,000
(b,d)
Direct labor*
31,200
(above)
(plug)
Direct materials
43,000
(above)
Balance 4/30
(given)
Balance 4/1
12,000
(above)
Direct materials
43,000
(above)
Teamwork in Action (continued)
Manufacturing Overhead
(given)
To cost of
Overapplied
Actual costs for
14,800
(above)
Overhead ap-
15,600
Finished Goods
(e)
Balance 4/1
11,000
(plug)
Cost of goods
sold
84,000
Communicating in Practice
Date: Current date
To: Instructor
From: Student’s Name
Subject: Talk with a Controller
The student’s memorandum should address the following:
• The name, title and job affiliation of the individual interviewed. (Note:
Not specifically required in problem but essential and, as such, a good
Chapter 2
Take Two Solutions
Exercise 2-1 (10 minutes)
The estimated total manufacturing overhead cost is computed as follows:
Y = $94,000 + ($2.00 per DLH)(18,000 DLHs)
Exercise 2-2 (10 minutes)
Actual direct labor-hours ………………………..
10,800
= Manufacturing overhead applied ……………
Exercise 2-3 (10 minutes)
1. Total direct labor-hours required for Job A-500:
Direct labor cost (a) ……………………………….
$108
Direct labor wage rate per hour (b) …………..
$12
2. Unit product cost for Job A-500:
Total manufacturing cost (a) ……………………
$554
Number of units in the job (b) ………………….
Exercise 2-6 (20 minutes)
1.
Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning……………
$12,000
Add: Purchases of raw materials ……………….
30,000
Total raw materials available ……………………
Deduct: Raw materials inventory, ending ……
Raw materials used in production ……………..
$ 12,000
Direct labor ………………………………………………
Total manufacturing costs …………………………...
Add: Beginning work in process inventory……….
213,000
Deduct: Ending work in process inventory ………
Cost of goods manufactured ………………………..
$170,000
2.
Cost of Goods Sold
Finished goods inventory, beginning ………………
$ 35,000
Add: Cost of goods manufactured …………………
170,000
Goods available for sale ………………………………
Deduct: Finished goods inventory, ending……….
Unadjusted cost of goods sold ……………………..
163,000
Add: Underapplied overhead ………………………..
Adjusted cost of goods sold …………………………
$167,000
Exercise 2-7 (10 minutes)
1.
Manufacturing overhead incurred (a) ………
$198,000
Actual direct labor-hours ………………………
11,500
× Predetermined overhead rate …………….
= Manufacturing overhead applied (b) …….
2. Because manufacturing overhead is overapplied, the cost of goods sold
Exercise 2-8 (10 minutes)
Direct material …………………….
$10,000
Direct labor ………………………..
Manufacturing overhead:
$10,000 × 125% ……………….
Exercise 2-10 (10 minutes)
Yes, overhead should be applied to value the Work in Process inventory at
year-end.
Exercise 2-11 (30 minutes)
1. Mason Company’s schedule of cost of goods manufactured is as follows:
Direct materials:
Beginning raw materials inventory ………………
$ 7,000
Add: Purchases of raw materials …………………
118,000
Raw materials available for use …………………..
125,000
Deduct: Ending raw materials inventory ……….
Raw materials used in production ……………….
Direct labor ………………………………………………
Manufacturing overhead ……………………………..
Total manufacturing costs …………………………...
Add: Beginning work in process inventory ……….
Deduct: Ending work in process inventory ……….
Cost of goods manufactured…………………………
2. Mason Company’s schedule of cost of goods sold is as follows:
Beginning finished goods inventory ………….
$ 20,000
Add: Cost of goods manufactured ……………
Goods available for sale ………………………..
Deduct: Ending finished goods inventory ….
Unadjusted cost of goods sold ………………..
Deduct: Overapplied overhead ……………….
Adjusted cost of goods sold ……………………
3.
Mason Company
Income Statement
Sales ……………………………………………………..
$524,000
Cost of goods sold ($256,000 – $10,000) ……….
Gross margin ……………………………………………
Selling and administrative expenses:
Selling expenses …………………………………….
Administrative expense …………………………...
Net operating income ………………………………..
Exercise 2-12 (15 minutes)
1.
Actual manufacturing overhead costs ……..
$473,000
Overapplied overhead cost ……………………
2.
Direct materials:
Raw materials inventory, beginning ……..
$ 20,000
Add purchases of raw materials …………..
350,000
Raw materials available for use …………..
370,000
Deduct raw materials inventory, ending ..
Raw materials used in production ………..
Less indirect materials ……………………….
Direct labor ……………………………………….
Total manufacturing costs …………………….
Add: Work in process, beginning ……………
Deduct: Work in process, ending ……………
Cost of goods manufactured …………………
Exercise 2-14 (20 minutes)
1. The estimated total manufacturing overhead cost is computed as fol-
lows:
Y = $650,000 + ($3.00 per MH)(120,000 MHs)
$650,000
Estimated total manufacturing overhead cost …………
÷ Estimated total machine-hours (MHs) ……..
per MH
2. Total manufacturing cost assigned to Job 400:
Direct materials ……………………………………………….
$450
Direct labor …………………………………………………….
3. Computing underapplied/overapplied overhead:
Actual manufacturing overhead (a) ……….
$1,350,000
= Manufacturing overhead applied (b) …..
Exercise 2-18 (30 minutes)
1. The predetermined overhead rate is computed as follows:
Y = $128,000 + $0.75 per MH × 80,000 MHs
Estimated fixed manufacturing overhead ………………
$128,000
Estimated total manufacturing overhead ……..
÷ Estimated total machine-hours ………………
= Predetermined overhead rate ………………..
2. The amount of overhead cost applied to Work in Process for the year
would be: 75,000 machine-hours × $2.35 per machine-hour =
$176,250. This amount is shown in entry (a) below:
Manufacturing Overhead
(Maintenance)
21,000
(a)
176,250
(Indirect materials)
(Indirect labor)
(Utilities)
32,000
(Insurance)
(Depreciation)
Balance
(Direct materials)
(Direct labor)
(Overhead) (a)
3. Overhead is underapplied by $7,750 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:
7,750
Manufacturing Overhead …………………….
7,750
Exercise 2-18 (continued)
4. 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,