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3-21
PROBLEM 3-43 (35 MINUTES)
1. Predetermined overhead rate = budgeted overhead ÷ budgeted direct-labor cost
4. Since there is no work in process at year-end, all amounts in the Work-in-Process
account must be transferred to Finished-Goods Inventory. Thus:
5. BBBC’s applied overhead totals 130% of direct-labor cost, or $2,827,500 ($2,175,000 x
130%). Actual overhead was $2,777,000, itemized as follows, resulting in overapplied
overhead of $50,500.
Indirect materials used ...........................................
$ 32,500
Indirect labor ...........................................................
1,430,000
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-22
PROBLEM 3-43 (CONTINUED)
6. The company’s cost of goods sold totals $7,654,650:
Finished-goods inventory, Jan. 1…………….
$ 0
7. No, selling and administrative expenses are operating expenses of the firm and are
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-23
PROBLEM 3-44 (45 MINUTES)
NOTE: The 12/31/x4 balances for cash and accounts receivable, although given in the
problem, are irrelevant to the solution.
1.
MISTER MUNCHIE, INC.
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE YEAR ENDED DECEMBER 31, 20X4
Direct material:
Raw-material inventory, 12/31/x3 .............................................
$ 30,300
Utilities .......................................................................................
18,000
Property taxes ...........................................................................
7,200
*The Schedule of Cost of Goods Manufactured lists the manufacturing costs applied to work
3-24
PROBLEM 3-44 (CONTINUED)
2.
MISTER MUNCHIE, INC.
SCHEDULE OF COST OF GOODS SOLD
FOR THE YEAR ENDED DECEMBER 31, 20X4
Finished-goods inventory, 12/31/x3 ...................................................................
$ 42,000
3.
MISTER MUNCHIE, INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X4
Sales revenue ..............................................................
$617,400
Less: Cost of goods sold ...........................................
511,200
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-25
PROBLEM 3-45 (25 MINUTES)
The completed T-accounts are shown below. (Missing amounts in problem are italicized.)
Raw-Material Inventory
Accounts Payable
Bal. 1/1
29,400
3,500
Bal. 1/1
Work-in-Process Inventory
Finished-Goods Inventory
Bal. 1/1
23,800
Bal. 1/1
16,800
Direct
labor
210,000
1,005,200
Manufacturing Overhead
633,500
630,000
Sales Revenue
Wages Payable
2,800
Bal. 1/1
Accounts Receivable
3-26
PROBLEM 3-46 (35 MINUTES)
2. (a) Work-in-Process Inventory .................................................. 160,000*
Raw-Material Inventory ............................................. 160,000
(b) Manufacturing Overhead ...................................................... 477,000
(d) Finished-Goods Inventory ................................................... 630,500*
(e) Accounts Receivable ............................................................ 293,900*
3. Job no. 103 and no. 104 are in production as of March 31:
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-27
PROBLEM 3-46 (CONTINUED)
PROBLEM 3-47 (30 MINUTES)
NOTE: Actual selling and administrative expense, although given in the exercise, is irrelevant
to the solution.
1. Machining Dept. overhead rate = budgeted overhead ÷ budgeted machine hours
2. The ending work-in-process inventory is carried at a cost of $76,765, computed as
follows:
Machining Department:
3. Actual overhead in the Machining Department amounted to $2,130,000, whereas
4. Actual overhead in the Assembly Department amounted to $1,525,000, whereas
5. The company’s manufacturing overhead was overapplied by $59,500 ($64,500 -
3-28
PROBLEM 3-47 (CONTINUED)
7. The firm’s selection of cost drivers (or application bases) seems appropriate. There
PROBLEM 3-48 (30 MINUTES)
1. Traceable costs total $3,750,000, computed as follows:
Total Cost
Percent
Traceable
Traceable
Cost
Professional staff salaries………
$3,750,000
80%
$3,000,000
2. Predetermined overhead rate = budgeted overhead ÷ traceable costs
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
PROBLEM 3-48 (CONTINUED)
4. The total cost of the Davis Manufacturing project is $96,000, and the billing is
$115,200, as follows:
Professional staff salaries… ………
$61,500
6. Professional staff members are compensated for attending training sessions and firm-
3-30
PROBLEM 3-49 (45 MINUTES)
1.
SUPERIOR METALS
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE YEAR ENDED DECEMBER 31, 20X4
Direct material:
Raw material inventory, 12/31/x3 ........................
$ 66,750
Manufacturing overhead:
Indirect material .....................................................
$ 33,750
Indirect labor .........................................................
112,500
Overhead applied to work in process ..................
433,125
*The Schedule of Cost of Goods Manufactured lists the manufacturing costs applied to work
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-31
PROBLEM 3-49 (CONTINUED)
2.
SUPERIOR METALS
SCHEDULE OF COST OF GOODS SOLD
FOR THE YEAR ENDED DECEMBER 31, 20X4
Finished-goods inventory, 12/31/x3 .......................................................
$ 26,250
Add: cost of goods manufactured .........................................................
1,329,375
3.
SUPERIOR METALS
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X4
Sales revenue ..........................................................................................
$1,578,750
Less: Cost of goods sold ........................................................................
1,327,500
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-32
PROBLEM 3-50 (15 MINUTES)
1. $30,000. Since there was no work-in-process inventory at the beginning of 20x4, all of the
4. Only the $22,500 of equipment depreciation would have been included in
3-33
PROBLEM 3-51 (25 MINUTES)
1.
hours machine budgeted
overhead ingmanufactur budgeted
rate overhead nedPredetermi
=
2.
Journal entries:
(a)
Raw-Material Inventory ......................................
8,240
Accounts Payable ....................................
8,240
3-34
PROBLEM 3-51 (CONTINUED)
(i)
Manufacturing Overhead ...................................
19,000
Wages Payable .........................................
19,000
PROBLEM 3-52 (40 MINUTES)
1. In accordance with the Standards of Ethical Conduct for Management Accountants,
the appropriateness of Joey Dulwich’s three alternative courses of action is described
as follows:
• Follow Brown's directive and do nothing further. This action is inappropriate as
3-35
PROBLEM 3-52 (CONTINUED)
2. The next step that Dulwich should take in resolving this conflict is to inform Brown
that he is planning to discuss the conflict with the next higher managerial level.
Dulwich should pursue discussions with successively higher levels of management,
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-36
PROBLEM 3-53 (30 MINUTES)
1.
MARVELOUS MARSHMALLOW COMPANY
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE MONTH OF JANUARY
Direct material:
Raw-material inventory, January 1 ..........................
$ 34,000
*Work upward from the bottom of the statement, using the information available. Direct labor
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-37
PROBLEM 3-53 (CONTINUED)
2.
MARVELOUS MARSHMALLOW COMPANY
SCHEDULE OF PRIME COSTS
FOR THE MONTH OF JANUARY
Raw material:
Beginning inventory ...................................................................
$ 34,000
3.
MARVELOUS MARSHMALLOW COMPANY
SCHEDULE OF CONVERSION COSTS
FOR THE MONTH OF JANUARY
PROBLEM 3-54 (30 MINUTES)
1.
hours machine budgeted
overhead ingmanufactur budgeted
rate overhead nedPredetermi
=
2.
Calculation of applied manufacturing overhead:
3-38
PROBLEM 3-54 (CONTINUED)
5.
(a)
Calculation of proration amounts:
Account
Explanation
Amount*
Percentage
Calculation
of Percentage
Work in Process
Job B19 only
$10,800
30%
10,800
36,000
*Machine hours used on job predetermined overhead rate.
Account
Underapplied
Overhead
Percentage
Amount Added
to Account
Work in Process
$2,000
30%
$ 600
(b)
Journal entry:
Work-in-Process Inventory ..................................................
600
3-39
PROBLEM 3-55 (45 MINUTES)
1.
Predetermined overhead rate:
*$575,000 = $345,000 + $230,000
2.
Cost of Job 57:
Cost in beginning work-in-process inventory ....................................
$108,000
3.
Manufacturing overhead applied to Job 59:
=
Chapter 03 - Product Costing and Cost Accumulation in a Batch Production Environment
3-40
PROBLEM 3-55 (CONTINUED)
4.
Total manufacturing overhead applied during November:
5.
Actual manufacturing overhead incurred during November:
Indirect material (supplies) ........................................................................
$24,000
6.
Underapplied overhead for November:
=
