Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
1134
Comprehensive Problem (Continued)
(Using FIFO)
Cost per EUP
Direct
Materials
Conversion
Costs incurred this period………
$ 52,440
$ 303,375
Part 3 — Journal entries (Using FIFO)
Finished Goods Inventory …………………………..
241,103
Cost of Goods Sold ……………………………………………….
265,700
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
1135
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
Work in Process Inventory
Acct. No. 133
Date
Explanation
Debit
Credit
Balance
June
30
Balance
8,135
Direct materials
60,575
262,825
Overhead allocation
363,950
Transfer to Fin. Goods
*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
351,103
July sales
85,403
Purchases
150,000
87,560
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
1136
Comprehensive Problem (Continued)
Part 4—(Using FIFO) concluded
Factory Wages Payable
Acct. No. 212
Date
Explanation
Debit
Credit
Balance
(c)
Direct labor
202,500
202,500
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)
(e)
115,000
Overhead application
101,125
Acct. No. 413
Date
Explanation
Debit
Credit
Balance
(h)
July sales
625,000
625,000
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
1137
Comprehensive Problem (Concluded)
Part 5 (Using FIFO)
Computation of gross profit for July
Sales ……………………………………………………………………………………….
$ 625,000
$ 345,425
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
1138
Reporting in Action — BTN 20-1
1. These costs are part of getting the products that Apple sells to its
2. These costs would either be expensed as cost of sales or as selling
and administrative expenses. Thus, net income will not be affected.
Comparative Analysis — BTN 20-2
1.
Apple
Google
($ millions)
Current Year
Prior Year
Current Year
Prior Year
Expenses
Cost of goods sold ……
$140,089
$ 112,258
$28,164
$25,691
23,814
2. Apple had a higher ratio in both the current year and the prior year.
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
1139
Ethics Challenge — BTN 20-3
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
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
Communicating in Practice — BTN 20-4
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
2. Since your company does not limit production to specific batches of
4. In job order cost accounting, materials and labor used exclusively on
specific jobs are charged to the jobs as direct costs. Materials and
5. A process cost accounting system uses the concepts of direct and
6. Some costs classified as manufacturing overhead in a job order system
can be classified as direct costs in process cost accounting. For
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
Taking It to the Net — BTN 20-5
There are several ways that such software is helpful to a business.
• This software allows companies to create process maps so they can
analyze and communicate processes and workflows.
Teamwork in Action — BTN 20-6
Each member of the team should participate in the activity to improve and
reinforce his/her understanding of the entries that correspond to Exhibit
20.14. (Note: The entries below are pro forma entries since information for
amounts are not provided in this activity.)
Raw Materials Inventory …………………………..
#
Work in Process Inventory …………………………..
#
Factory Overhead …………………………………………………..
#
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
Teamwork in Action (concluded)
Work in Process Inventory …………………………..
#
Factory Wages Payable …………………………..
#
Factory Overhead …………………………………………………..
#
Factory Wages Payable …………………………..
#
Factory Overhead ………………………………………………….
#
Prepaid Insurance ……………………………………………
#
Accrued Utilities Payable …………………………..
#
Cash ……………………………………………………….
#
Accum. Depreciation—Factory Equip ………………..
#
Work in Process Inventory …………………………..
#
Factory Overhead ……………………………………………..
#
Work in Process Inventory-Blending ………………………
#
Work in Process Inventory-Roasting …………………
#
Finished Goods Inventory …………………………..
#
Work in Process Inventory-Blending …………………
#
Accounts Receivable ……………………………………………..
#
Sales ……………………………………………………….
#
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
Entrepreneurial Decision — BTN 20-7
1. Using separate process cost summary reports for each process
enables managers to better understand costs and make decisions. For
example, Stance adds most of its materials (e.g. polyester-nylon
2. If a business unnecessarily holds 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
3. Stance 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
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
1144
Hitting The Road — BTN 20-8
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
equipment
X
X
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 20
Global Decision — BTN 20-9
1. Ratio of Cost of Goods Sold to Total Expenses
(₩ billions)
Current Year
Prior Year
(From BTN 20-2)
($ millions)
Current Year
Prior Year
$140,089 /
$112,258 /
($ millions)
Current Year
Prior Year
$28,164 /
$25,691 /
2. As a percentage of total expenses, Apple spends less on selling and
administrative expenses (and more on cost of goods sold) than does