0
Total manufacturing costs added to production ……..
920,000
Cost of goods manufactured ……………………………..
Exercise 3-8 (15 minutes)
1.
Item (a):
Item (b):
Item (c):
Item (d):
Cost of Goods Sold ……………………………………
3. The underapplied overhead is allocated to Work in Process, Finished
Goods, and Cost of Goods Sold based on the percentage of total over-
head applied during the year that resides in each account as of the end
of the year:
Work in Process ………..
$ 19,500
5
%
Finished Goods ………….
58,500
15
Cost of Goods Sold …….
312,000
80
Total cost …………………
$390,000
100
%
Using these percentages, the journal entry would be as follows:
Work in Process (5% × $70,000) ……………..
3,500
Finished Goods (15% × $70,000) ……………..
10,500
Cost of Goods Sold (80% × $70,000) ………..
56,000
70,000
Exercise 3-9 (30 minutes)
1. The overhead applied to work in process is computed as follows:
Machine-hours worked (a) ………………………….
75,000
Predetermined overhead rate (b) …………………
$2.40
per MH
Overhead applied to work in process (a) × (b) ..
$180,000
This amount is shown in entry (a) below:
Manufacturing Overhead
(Maintenance)
21,000
(a)
180,000
(Indirect materials)
(Indirect labor)
(Utilities)
32,000
(Insurance)
(Depreciation)
Balance
Work in Process
(Direct materials)
710,000
(Direct labor)
90,000
(Overhead) (a)
180,000
2. Overhead is underapplied by $4,000 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:
Cost of Goods Sold ………………………………..
4,000
4,000
Exercise 3-9 (continued)
3. 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, the
costing system assumes that the overhead will be 75,000 machine-hours
× $2.40 per machine-hour, or $180,000. This is a drop of $12,000 from
the initial estimated manufacturing overhead cost of $192,000. How-
ever, the actual manufacturing overhead cost did not drop by this much.
Exercise 3-10 (30 minutes)
1.
a.
Raw Materials …………………………………..
325,000
Accounts Payable …………………………
325,000
b.
Work in Process ………………………………..
232,000
Manufacturing Overhead …………………….
58,000
Raw Materials ………………………………
290,000
Work in Process ………………………………..
60,000
Wages and Salaries Payable ……………
180,000
d.
Manufacturing Overhead …………………….
75,000
Accumulated Depreciation ………………
75,000
Manufacturing Overhead …………………….
62,000
Accounts Payable …………………………
62,000
f.
Work in Process ………………………………..
300,000
Manufacturing Overhead ………………..
300,000
Estimated total manufacturing overhead cost
Predetermined =
overhead rate Estimated total amount of the allocation base
$4,800,000
= = $20 per MH
240,000 MHs
15,000 MH × $20 per MH = $300,000
2.
Manufacturing Overhead
Work in Process
3. The cost of the completed job is $592,000 as shown in the Work in Pro-
cess T-account in requirement 2. The journal entry is:
Finished Goods …………………………...
592,000
Work in Process ……………………..
592,000
Exercise 3-10 (continued)
4. The unit product cost for this job would be:
$592,000 ÷ 16,000 units = $37 per unit
Problem 3-11 (45 minutes)
1. The cost of raw materials used in production was:
Beginning raw materials inventory ………
$ 15,000
Add: Purchases of materials (debits) …..
120,000
Total raw materials available ……………..
135,000
Deduct: Ending raw materials inventory .
25,000
Raw materials used in production ……….
$110,000
3.
Total factory wages accrued during the year (credits to
the Factory Wages Payable account) ……………………….
$180,000
Less direct labor cost (from Work in Process) ……………….
150,000
Indirect labor cost ………………………………………………….
$ 30,000
5. The Cost of Goods Sold for the year was:
Beginning finished goods inventory ……………………………..
$ 40,000
Add: Cost of goods manufactured (from Work in Process) ..
470,000
Cost of goods available for sale …………………………………..
510,000
Deduct: Ending finished goods inventory ………………………
60,000
Cost of goods sold ……………………………………………………
$450,000
6. The predetermined overhead rate was:
Problem 3-11 (continued)
7. Manufacturing overhead was overapplied by $10,000, computed as fol–
lows:
240,000
Overapplied overhead ……………………………………………..
8. The ending balance in Work in Process is $30,000. Direct materials
make up $9,200 of this balance, and applied overhead makes up
$12,800. The computations are:
Balance, Work in Process, 12/31 (a) ……………….
$30,000
Less: Direct labor cost (given) ……………………….
8,000
Applied overhead cost ($8,000 × 160%) ….
12,800
Total conversion cost (b) ………………………
20,800
Direct materials cost (a) – (b) ……………………….
$ 9,200
Problem 3-12 (30 minutes)
1. The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead (a) ..
$900,000
Estimated total computer hours (b) ……………
75,000
hours
Predetermined overhead rate (a) ÷ (b) ………
$12.00
per hour
Actual manufacturing overhead cost …………………..
Underapplied overhead cost ……………………………..
2.
Cost of Goods Sold ……………………………..
130,000
Manufacturing Overhead …………………
130,000
3. The underapplied overhead would be allocated using the following per-
centages:
Overhead applied during the year in:
Work in process …………………………...
$ 36,000
5
%
Finished goods …………………………….
180,000
25
%
Cost of goods sold ………………………..
504,000
70
%
Total ……………………………………………
$720,000
100
%
Work in Process (5% × $130,000) ………..
6,500
Finished Goods (25% × $130,000) ………..
32,500
Cost of Goods Sold (70% × $130,000) …..
91,000
Problem 3-12 (continued)
4.
Comparing the two methods:
Cost of goods sold if the underapplied overhead is
closed to cost of goods sold ($1,400,000 +
$130,000) ………………………………………………….
$1,530,000
Problem 3-13 (30 minutes)
Schedule of cost of goods manufactured:
Beginning work in process inventory ……………………
$ 4
2,0
00
Direct materials:
Beginning raw materials inventory ….
$ 40,00
0
Add: Purchases of raw materials ……
290,000
Total raw materials available …………
330,000
Deduct: Ending
raw materials
inventory …….
10,000
Direct materials used in production …….
32
0,0
Direct labor …………………………..……………………….
Manufacturing overhead applied to work in process ..
5,0
Total manufacturing costs added to production ……..
0
Deduct: Ending work in process inven-
0
Cost of goods manufactured……………..
$69
0,0
00
Schedule of cost of goods sold:
Beginning finished goods inventory* ………….
$ 50,000
Add: Cost of goods manufactured ……………..
690,000
Cost of goods available for sale* ……………….
740,000
Deduct: Ending finished goods inventory …….
80,000
Unadjusted cost of goods sold* …………………
Adjusted cost of goods sold ……………………..
Problem 3-13 (continued)
Income statement:
Sales ………………………………………………….
$915,000
Cost of goods sold ($660,000 – $15,000) ……
645,000
Gross margin …………………………..…………..
270,000
Selling and administrative expenses:
Selling expenses* ……………………………….
$140,000
Net operating income* …………………………..
$ 30,000
Problem 3-14 (60 minutes)
1. The predetermined overhead rate is computed as follows:
Estimated total manufacturing overhead cost
Predetermined=
overhead rate Estimated total amount of the allocation base
$800,000
= =160%
$500,000 direct materials cost
2. Before the underapplied or overapplied overhead can be computed,
we must determine the amount of direct materials used in production
for the year.
Beginning raw materials inventory …………………..
$ 20,000
Add, Purchases of raw materials ……………………..
510,000
Total raw materials available ………………………….
530,000
Deduct: Ending raw materials inventory ……………
80,000
Raw materials used in production ……………………
$450,000
Actual manufacturing overhead costs:
Indirect labor ……………………………………………
Property taxes ………………………………………….
Depreciation of equipment ………………………….
Rent, building …………………………………………..
Total actual costs ………………………………………..
Underapplied overhead …………………………..…….
Problem 3-14 (continued)
3. Schedule of Cost of Goods Manufactured:
Beginning work in process inventory ……………………
$150,0
Direct materials:
Beginning raw materials inventory ………………….
$ 20,000
Add: Purchases of raw materials …………………….
510,000
Total raw materials available …………………………
530,000
Deduct: Ending raw materials inventory …………..
80,000
Direct materials used in production …………………….
Direct labor ……………………………………………………
90,000
Manufacturing overhead applied to work in process ..
Total manufacturing costs added to production ……..
Total manufacturing costs to account for ……………..
Deduct: Ending work in process inventory ……………
Cost of goods manufactured ……………………………..
4.
Unadjusted cost of goods sold:
Beginning finished goods inventory ………………..
$ 260,000
Add: Cost of goods manufactured ………………….
1,340,000
Cost of goods available for sale …………………….
1,600,000
Deduct: Ending finished goods inventory ………..
400,000
Unadjusted cost of goods sold ………………………
$1,200,000
Problem 3-14 (continued)
5. The amount of overhead cost in Work in Process was:
$24,000 direct materials cost × 160% = $38,400
The amount of direct labor cost in Work in Process is:
Total ending work in process …………..
$70,000
Deduct: Direct materials ………………..
$24,000
Manufacturing overhead ……..
38,400
62,400
Direct labor cost …………………………...
$ 7,600
The completed schedule of costs in Work in Process was:
Direct materials …………………………....
Direct labor ………………………………….
Manufacturing overhead …………………
Work in process inventory ……………….
Problem 3-15 (120 minutes)
1.
a.
Raw Materials………………………………
200,000
Accounts Payable …………………….
200,000
b.
Work in Process…………………………...
185,000
Raw Materials …………………………
185,000
c.
Manufacturing Overhead ………………..
63,000
Utilities Expense …………………………..
7,000
Accounts Payable …………………….
70,000
d.
Work in Process…………………………...
Manufacturing Overhead ………………..
90,000
Salaries Expense ………………………….
110,000
Salaries and Wages Payable ……….
430,000
Manufacturing Overhead ………………..
54,000
Accounts Payable …………………….
54,000
f.
Advertising Expense ……………………..
136,000
Accounts Payable …………………….
136,000
g.
Manufacturing Overhead ………………..
76,000
Depreciation Expense ……………………
19,000
Accumulated Depreciation ………….
95,000
Manufacturing Overhead ………………..
102,000
Rent Expense ………………………………
18,000
Accounts Payable …………………….
120,000
Work in Process…………………………...
390,000
Manufacturing Overhead ……………
390,000
Problem 3-15 (continued)
j.
Finished Goods …………………………….
770,000
Work in Process ……………………….
770,000
Accounts Receivable ………………………
Sales ……………………………………..
Cost of Goods Sold ………………………..
800,000
Problem 3-15 (continued)
2.
Accounts Receivable
Sales
(k)
1,200,000
(k)
1,200,000
Raw Materials
Cost of Goods Sold
Bal.
30,000
185,000
(k)
800,000
(a)
200,000
(b)
Bal.
45,000
Bal.
21,000
(j)
770,000
(c)
63,000
(b)
185,000
(d)
(d)
230,000
(e)
54,000
390,000
(g)
76,000
Bal.
56,000
(h)
102,000
Bal.
Finished Goods
Advertising Expense
Bal.
60,000
(k)
800,000
(f)
136,000
(j)
770,000
Bal.
30,000
Accumulated Depreciation
Utilities Expense
(g)
95,000
(c)
7,000
(a)
200,000
(d)
110,000
(c)
(e)
54,000
Depreciation Expense
(f)
(g)
(h)
120,000
(d)
430,000
(h)
18,000
3. Schedule of Cost of Goods Manufactured
Beginning work in process inventory ……………………
$21,00
Direct materials:
Beginning raw materials inventory ………………….
$ 30,000
Add: Purchases of raw materials …………………….
200,000
Total raw materials available …………………………
230,000
Deduct: Ending raw materials inventory …………..
Direct materials used in production …………………….
Direct labor ……………………………………………………
Manufacturing overhead applied to work in process ..
Total manufacturing costs added to production ……..
Total manufacturing costs to account for ……………..
Deduct: Ending work in process inventory ……………
Cost of goods manufactured …………………………..…