SOLUTIONS TO PROBLEMS
PROBLEM 20–1A
(a) $840,000 ÷ $700,000 direct labor costs = 120% of direct labor costs
(c) Raw Materials Inventory …………………………………….. 90,000
Accounts Payable ………………………………………. 90,000
Factory Labor ……………………………………………………. 70,000
(d) Work in Process Inventory …………………………………. 79,000
Raw Materials Inventory
($10,000 + $39,000 + $30,000) …………………… 79,000
PROBLEM 20-1A (Continued)
(b)&(e) Job Cost Sheets
Job No. 50
Date
Direct Materials
Direct Labor
Manufacturing Overhead
$30,000
$17,000
Total cost ……………………………………………………………………. $69,000
Beg.
$20,000
$12,000
*$16,000*
Job No. 51
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Jan.
$39,000
$39,000
$25,000
$25,000
**$30,000**
**$30,000**
Direct labor …………………………………………………………… 25,000
Total cost ……………………………………………………………………. $94,000
Job No. 52
Date
Direct Materials
Direct Labor
Manufacturing Overhead
Jan.
$30,000
$20,000
***$24,000***
PROBLEM 20-1A (Continued)
Finished Goods Inventory ……………………………….. 163,000
Work in Process Inventory
($69,000 + $94,000) ……………………………….. 163,000
(g)
Finished
Goods Inventory
Beginning balance
Cost of completed jobs 50 and 51
90,000
163,000
159,000
Cost of jobs 49 and 50 sold
Ending balance
94,000
PROBLEM 20–2A
(a)
Work in Process Inventory
1/1 Balance (1) 128,400
Direct materials (2) 131,000
Completed work (5) (c) 386,200
(1)
Job 7640
$ 77,800
(3)
Job 7640
$ 36,000
$139,000
(2)
$166,800
Job 7640
Job 7641
$ 30,000
43,000
(4)
Job 7640
Job 7641
$ 43,200
57,600
(5) (a) Job 7640
Beginning balance ………………………………………… $ 77,800
Direct materials …………………………………………….. 30,000
(b) Job 7641
Beginning balance ………………………………………… $ 50,600
Direct materials …………………………………………….. 43,000
(c) Total cost of completed work
Job 7640 ………………………………………………………. $187,000
PROBLEM 20-2A (Continued)
Work in process balance ………………………………………. $179,000
Unfinished job No. 7642 ……………………………………….. $179,000 (a)
(a) Current year’s cost
(b) Actual overhead costs
Incurred on account ………………………………………. $120,000
Indirect materials ………………………………………….. 14,000
Applied overhead costs
Job 7640……………………………………………………….. $ 43,200
Job 7641……………………………………………………….. 57,600
Manufacturing Overhead ………………………………………. 6,800
Cost of Goods Sold ……………………………………….. 6,800
(c) Sales revenue (given) …………………………………. $530,000
Cost of goods sold
Add: Job 7638 …………………………………………… $ 87,000
PROBLEM 20–3A
(a)
(1) Raw Materials Inventory ……………………………………. 4,900
Accounts Payable ……………………………………… 4,900
(2) Work in Process Inventory ………………………………… 4,900
Manufacturing Overhead …………………………………… 1,500
Raw Materials Inventory …………………………….. 6,400
(3) Finished Goods Inventory …………………………………. 14,740
Work in Process Inventory …………………………. 14,740
Job
Direct
Materials
Direct
Labor
Manufacturing
Overhead*
Total
Costs
Rogers
$1,700
$1,560
$1,950
$ 5,210
Cash ………………………………………………………………… 18,900
Sales revenue ……………………………………………. 18,900
PROBLEM 20-3A (Continued)
(b)
Work in Process Inventory
6/1 Balance 5,540
Direct materials 4,900
June Completed work 14,740
(c) Work in Process Inventory ……………………………………………….. $3,800
(d) CASE INC.
Cost of Goods Manufactured Schedule
For the Month Ended June 30, 2017
Work in process, June 1…………………………………… $ 5,540
Direct materials used ………………………………………. $4,900
PROBLEM 20–4A
(a) Department D: $1,200,000 ÷ $1,500,000 = 80% of direct labor cost.
Department E: $1,500,000 ÷ 125,000 = $12.00 per direct labor hour.
(b)
Department
Manufacturing Costs
D
E
K
Direct materials
Direct labor
$140,000
120,000
$126,000
110,000
$ 78,000
37,500
(c)
Department
Manufacturing Overhead
D
E
K
Incurred
$99,000
$124,000
$79,000
PROBLEM 20–5A
(a) $7,600 ($16,850 + $7,975 – $17,225).
(b) $36,000 [$9,750 + $15,000 + (75% X $15,000)]. (Given in other data).
(c) $13,950 ($16,850 – $2,900).
CD20 CURRENT DESIGNS
Cost for one kayak:
Direct Materials
Polyethylene powder 54 pounds @ $1.50 per pound $ 81
Finishing kit 1 kit @ $170 170
Direct Labor
BYP 20-1 DECISION-MAKING ACROSS THE ORGANIZATION
(a) The manufacturing cost element that is responsible for the fluctuating
unit costs is manufacturing overhead. Manufacturing overhead is being
included as incurred rather than being applied on a predetermined basis.
Direct materials and direct labor are not the cause as they have the
same unit cost per batch in each quarter.
(c) The quarterly results using a predetermined overhead rate based on
batches produced are as follows:
Quarter
Costs
1
2
3
4
Direct materials
Direct labor
Manufacturing overhead
Applied
$100,000
60,000
$220,000
132,000
$ 80,000
48,000
$200,000
120,000
BYP 20-2 MANAGERIAL ANALYSIS
(1) (a) Work in Process Inventory ……………………….. 25,000
Raw Materials Inventory…………………….. 25,000
(2) (a) Sales Bonus Expense ………………………………. 12,000
Cash ………………………………………………… 12,000
(b) Both the income statement and the balance sheet are affected. In the
income statement, Sales Bonus Expense is understated, Income Tax
(3) (a) Factory Labor ………………………………………….. 120,000
Factory Wages Payable……………………… 102,000
Employer Payroll Taxes Payable ………… 18,000
BYP 20–2 (Continued)
(4) (a) Manufacturing Overhead …………………………... 3,000
Raw Materials Inventory …………………….. 3,000
(b) Both the income statement and balance sheet are affected. If units
that were in process during the month have been sold, then in the
BYP 20-3 REAL-WORLD FOCUS
(a) Candidates for the CMA or CFM Certificate must complete two continuous
years of professional experience in management accounting or financial
management. This requirement may be completed prior to or within seven
years of passing the examination.
(b) CMAs, CFMs, and candidates who have completed the CMA and/or
the CFM examination but have not yet met the experience requirement,
are required to maintain their proficiency in the fields of management
BYP 20-4 COMMUNICATION ACTIVITY
Williams Company
Date
Nancy Kopay
123 Cedar Lane
Altoona, Kansas 66651
Dear Ms. Kopay:
Thank you for your prompt payment! I am very glad that you found the cost
information helpful.
Thank you also for your questions about our overhead costs. We do try to
provide our customers with as much information as possible, but we cannot
give detailed information on overhead costs. The cost of providing such
information is prohibitive.
BYP 20-4 (Continued)
I hope this answers some of your questions. I’m glad you are interested in
our company and that you took the time to write. I am sending a copy of our
annual report under separate cover. It contains some details on the information
you asked about.
Thanks again for your letter and for having Williams make your new cabinets!
Sincerely,
Student
BYP 20-5 ETHICS CASE
(a) The stakeholders in this situation are:
Alice Reiley, controller for LRF Printing.
The president of LRF Printing.
The customers of LRF Printing.
The competitors of LRF Printing.
(b) Padding cost-plus contracts is both unethical and illegal. Alice is faced
with an ethical dilemma. She will be in trouble with the president if she
BYP 20-6 ALL ABOUT YOU
(a) Your chances of success in small business are increased if you have
the following characteristics: You are a self-starter, you get along with
(b) The top ten reasons why businesses fail as cited in the books Small
Business Management by Michael Ames, and The Do it Yourself
Business Book by Gustav Berle are:
1. Lack of experience
2. Insufficient capital (money)
3. Poor location
BYP 20-7 CONSIDERING YOUR COSTS AND BENEFITS
Discussion guide: The situation presented is a difficult one because you are
presently receiving some help for free. It would seem that the best strategy
is to price your services based on what it would cost you to do the landscape
business without any free help. In the long run, it is going to be impossible
to continue unless you can cover these costs. In addition, if you underprice
your services today, your customers may expect your prices will remain as
So what to do? Let’s address your old truck first. You should treat the truck
as an asset owned by your business. Put it on your books at its fair value,
and depreciate it over a reasonable life. This will result in an overhead
charge. You need to cover the cost of that truck, as you will have to buy