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3-41
PROBLEM 3-56 (25 MINUTES)
1.
Quarter
Predetermined
Overhead Rate
Calculations
2.
February
May
Direct material.............................................
$600
$600
3.
February
May
Total cost ....................................................
$1,100
$1,140
4.
hours labor-direct budgeted annual
overhead ingmanufactur budgeted annual
rate nedPredetermi =
5.
February
May
PROBLEM 3-56 (CONTINUED)
6.
Total cost ......................................................
$1,117.80
3-43
PROBLEM 3-57 (55 MINUTES)
The answers to the questions are as follows:
1.
$648,000
6.
$180,000
The completed T accounts, along with supporting calculations, follow.
Raw-Material Inventory
Accounts Payable
Bal. 8/31
45,000
36,000
Bal. 8/31
Work-in-Process Inventory
Finished-Goods Inventory
Bal. 8/31
24,000
Bal. 8/31
105,000
Manufacturing Overhead
Sales Revenue
Wages Payable
Accounts Receivable
3,000
Bal. 8/31
Bal. 8/31
24,000
Supporting Calculations:
3-44
PROBLEM 3-57 (CONTINUED)
2.
Ending balance in accounts receivable
=
beginning balance + sales revenue
3.
Purchases of raw material
=
addition to accounts payable
4.
September 30 balance in
work-in-process inventory
=
direct
material
+
direct
labor
+
manufacturing
overhead
*Predetermined overhead rate
=
†
hours labor-direct budgeted
overhead budgeted
5.
Addition to work in process
for direct labor
=
September credit to
wages payable
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-45
PROBLEM 3-57 (CONTINUED)
6.
September applied overhead
=
direct labor hours predetermined overhead rate
7.
Cost of goods completed
during September
=
beginning
balance in
work in
process
+
additions
during
September
–
ending balance in
work in process
9.
August 31 balance in
raw-material inventory
=
September 30
balance in raw-
+
direct
material
–
purchases
10.
Overapplied or underapplied overhead = actual overhead – applied overhead
3-46
PROBLEM 3-58 (75 MINUTES)
1.
hours labor-direct budgeted
overhead ingmanufactur budgeted
rate overhead nedPredetermi
=
2.
Journal entries:
(a)
Raw-Material Inventory ......................................
6,000
Accounts Payable ....................................
6,000
**Valve lubricant is an indirect material, so it is considered an overhead cost.
(d)
Work-in-Process Inventory ................................
36,000
(e)
Manufacturing Overhead ...................................
13,000
3-47
PROBLEM 3-58 (CONTINUED)
(g)
Manufacturing Overhead ...................................
2,400
Accounts Payable ....................................
2,400
*Cost of Job T79:
Direct material (260 $5.50) ................
$ 1,430
(n)
Accounts Receivable .......................................
27,360*
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-48
PROBLEM 3-58 (CONTINUED)
3.
T-accounts and posting of journal entries:
Cash
Accounts Payable
Bal
11,000
14,500
Bal
1,340
(f)
6,000
(a)
Accounts Receivable
Wages Payable
Accumulated Depreciation:
Prepaid Insurance
Buildings and Equipment
Manufacturing-Supplies Inventory
Manufacturing Overhead
Raw-Material Inventory
Cost of Goods Sold
Selling and Administrative
Work-in-Process Inventory
Expenses
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
PROBLEM 3-58 (CONTINUED)
Finished-Goods Inventory
Sales Revenue
4.
(a)
Calculation of actual overhead:
Indirect material (valve lubricant) ...........................................
$ 120
(b)
Overapplied overhead
=
−
overhead
ingmanufactur applied
overhead
ingmanufactur actual
PROBLEM 3-58 (CONTINUED)
5.
BANDWAY COMPANY
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE MONTH OF OCTOBER
Direct material:
Raw-material inventory, October 1 .........................
$150,000
Manufacturing overhead:
Indirect material ........................................................
$ 120
Overhead applied to work in process .....................
39,600
Total manufacturing costs ..............................................
$ 86,930
3-51
PROBLEM 3-58 (CONTINUED)
6.
BANDWAY COMPANY
SCHEDULE OF COST OF GOODS SOLD
FOR THE MONTH OF OCTOBER
Finished-goods inventory, October 1 ......................................................
$223,000
Add: Cost of goods manufactured ...........................................................
37,130
7.
BANDWAY COMPANY
INCOME STATEMENT
FOR THE MONTH OF OCTOBER
Sales revenue ............................................................................................
$27,360
3-52
PROBLEM 3-59 (20 MINUTES)
JOB-COST RECORD
Job Number
T79
Description
Trombones
Date Started
October 5
Date Completed
October 20
Number of Units Completed
76
Direct Material
Date
Requisition Number
Quantity
Unit Price
Cost
Direct Labor
Date
Time Card Number
Hours
Rate
Cost
Manufacturing Overhead
Date
Cost Driver (Activity Base)
Quantity
Application Rate
Cost
Cost Summary
Cost Item
Amount
Total direct material
$ 1,430
Shipping Summary
Date
Units Shipped
Units Remaining
In Inventory
Cost Balance
*Rounded
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-53
PROBLEM 3-60 (50 MINUTES)
1.
Schedule of budgeted overhead costs:
Department A
Department B
Variable overhead
A 21,000 $17 ......................................................
$357,000
hours labor-direct budgeted total
rate overhead budgeted total
rate overhead nedPredetermi
=
2.
Product prices:
Basic
System
Advanced
System
Total cost .....................................................................
$1,190
$1,640
3.
Departmental overhead rates:
Department A
Department B
Budgeted overhead
(from requirement 1) ...............................................
$567,000
$315,000
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-54
PROBLEM 3-60 (CONTINUED)
4.
Revised product costs:
Basic
Advanced
System
System
Direct material .............................................................
$ 450
$ 900
5.
Revised product prices:
Basic
Advanced
System
System
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-55
PROBLEM 3-60 (CONTINUED)
6.
COLORTECH CORPORATION
Memorandum
Date:
Today
To:
President, ColorTech Corporation
From:
I. M. Student
Subject:
Departmental overhead rates
Until now the company has used a single, plantwide overhead rate in computing product
costs. This approach resulted in a product cost of $1,190 for the basic system and a cost of
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-56
SOLUTIONS TO CASES
CASE 3-61 (45 MINUTES)
2.
The only job remaining in KidCo's Work-in-Process Inventory on December 31 is
DRS114. The dollar value of DRS114 is calculated as follows:
DRS114 balance, 11/30 .......................................................
$250,000
December additions:
Direct material used ...................................................
$124,000
3.
The dollar value of the playpens remaining in KidCo's finished-goods inventory on
December 31 is $455,600, calculated as follows:
Playpen Units
Finished-goods inventory, 11/30 ...........................................................
19,400
3-57
CASE 3-61 (CONTINUED)
Since KidCo uses the FIFO inventory method, all units remaining in finished- goods
Unit cost of playpens completed in December:
Work in process inventory, 11/30 ....................................
$420,000
December additions:
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-58
CASE 3-62 (50 MINUTES)
1.
Manufacturers use predetermined overhead rates to allocate to production jobs the
2.
The manufacturing overhead applied through November 30 is calculated as follows:
3.
The manufacturing overhead applied in December is calculated as follows:
4.
Underapplied manufacturing overhead through December 31 is calculated as follows:
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-59
CASE 3-62 (CONTINUED)
5.
The balance in the Finished-Goods Inventory account on December 31 is comprised
only of Job No. N11-013 and is calculated as follows:
6.
Opticom’s Schedule of Cost of Goods Manufactured for the year just completed is
constructed as follows:
OPTICOM, INC.
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE YEAR ENDED DECEMBER 31
Direct material:
Raw-material inventory, 1/1 ...........................................
$ 210,000
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-60
CASE 3-62 (CONTINUED)
*Supporting calculations for work in process 12/31:
D12-002
D12-003
Total
Direct material ....................
$ 75,800
$ 52,000
$127,800
FOCUS ON ETHICS (See page 107 in the text.)
Did Boeing exploit accounting rules to conceal cost overruns and production snafus?
According to the circumstances alleged in the Business Week article cited in the text
(page 107), Boeing did not handle its cost overruns, production problems, and the merger
