7-55. (continued)
Income Statement
Youth Athletic Services
Income Statement
For Month Ending July 31
Managing
Officiating
Training
Dispute
Resolution
Total
Revenue …………………………………………………….
$6,950
$7,900
$3,000
$1,000
$18,850
Cost of Services:
Labora …………………………………………………….
$4,800
$1,200
$1,875
$1,350
Direct Overheadb …………………………..…………
1,525
2,175
1,100
260
Indirect Overheadc……………………………………
384
96
150
108
Total costs of services…………………………...
$6,709
$3,471
$3,125
$1,718
$15,023
Department margin ……………………………………..
$ 241
$4,429
$(125)
$(718)
$ 3,827
Less other costs:
Unassigned labor costs (idle time)d …………….
375
Unassigned overhead indirect costse ………….
30
Marketing and administrative costsf …………….
6,075
Operating profit …………………………………………..
$768
Total hours
640 hours worked
(including idle time)
7-55. (continued)
Only Managing and Officiating are clearly profitable. Training is losing a small amount of
money. The problem is in “Dispute Resolution” where the revenue is less than the direct
labor. The company should reconsider the pricing policy for “Dispute Resolution” or
consider dropping the service. The company should also consider the role of Mayes’
assistant considering the salary and the revenues.
7-56. (25 min.) Job Costs—Service Company: UP Payroll Services.
a.
Dune Motors
Jake’s Charters
Mission Hospital
Unassigned
Costs (not
required)
Total
Revenue ……..
$384,000
$115,200
$192,000
$691,200
(= 3,000 $128)
(= 900 $128)
(= 1,500 $128)
(= 3,000 $48)
(= 900 $48)
(= 1,500 $48)
(= 600 $48)
7-56. (continued)
b.
UP Payroll Services
Income Statement
For Month Ending July 31
Revenue from clients …………………………………….
$691,200
Less cost of services to clients:
Labor……………………………………………………….
$259,200
Overhead …………………………………………………
64,800
Total cost of services to clients ………………..
324,000
Gross margin ……………………………………………….
$367,200
Less other costs:
Labor……………………………………………………….
Overhead …………………………………………………
Marketing and administrative costs ………………
Total other costs …………………………………….
7-57. (50 min.) Job Costs In A Service Company: Pete’s Patios.
Materials Inventory
Balance 9/1 (given)
11,040
192
Indirect Materials
Purchases (given)
1,392
3,768
Requisition
Balance 9/30
8,472
Work-in-Process Inventory
9,510
7,270
Job PP–24
(c)
4,080
Job PP–30
(e)
10,872
Finished Goods Inventory
Balance 1/1 ($4,704 +
$1,896)
6,600
(c) Job PP–24
7,270
6,600
Sold
(e) Job PP–30
19,616
Balance 9/30
26,886
a.
Direct Materials + Direct Labor + Applied Overhead
=
$2,038 + $1,280 + $768 + $3,360 + [50% ($768 + $3,360)]
=
$9,510.
b.
To complete Job PP-24:
$2,720 Direct Labor + ($2,720 50%) Applied Overhead
=
$4,080.
c.
Transfer to Finished Goods: Job PP-24 Beginning Inventory Cost + Current Cost
=
$3,190 + $2,720 + 50%($2,720)
=
$1,296 + $8,000 + $4,000
Transfer of Job PP-30: Beginning Inventory Cost + Current Cost
=
7-57. (continued)
f.
New Job Cost = Current Charges to WIP less Current Charges for Jobs PP-24 and
PP–30:
=
Current Materials + Direct Labor + Overhead – Job PP-24 Current Cost
7-58. (55 min.) Tracing Costs In A Job Company: Apex Manufacturing.
(1)
Materials Inventory ……………………………………………….
75,180
Accounts Payable ……………………………………………..
75,180
(2)
Manufacturing Overhead ……………………………………….
Materials Inventory …………………………………………….
(3)
Accounts Payable …………………………………………………
75,180
Cash ……………………………………………………………….
75,180
(4)
Work in Process—Direct Materials ………………………….
35,700
Materials Inventory …………………………………………….
35,700
(5)
Payroll ………………………………………………………………..
58,800
Payroll Taxes Payable ……………………………………….
18,900
Cash ……………………………………………………………….
39,900
(6)
Payroll ………………………………………………………………..
29,400
Fringe Benefits Payable ……………………………………..
29,400
(7)
Work in Process (60% $88,200) …………………………..
52,920
Manufacturing Overhead (30% $88,200) ……………….
26,460
Administrative and Marketing Costs (10% $88,200) ..
Payroll ($29,400 + $58,800) ………………………………..
(8)
Manufacturing Overhead ……………………………………….
45,360
Cash ……………………………………………………………….
(9)
Work in Process—Overhead ($52,920 175%) ………..
92,610
Applied Manufacturing Overhead………………………..
92,610
(10)
Manufacturing Overhead Control…………………………….
24,150
Accumulated Depreciation—Property, Plant, and
Equipment ………………………………………………….
24,150
7-58. (continued)
b.
Materials Inventory
Balance 1/1
77,805
2,100
(2)
(1)
75,180
35,700
(4)
Balance 1/31
115,185
a
a$115,185 = $77,805 + $75,180 – $2,100 – $35,700.
(4) Direct Materials
(7) Direct Labor
(9) Overhead Applied
Balance 1/31
Manufacturing Overhead Control
(2)
2,100
(7)
26,460
(8)
45,360
(10)
24,150
Applied Manufacturing Overhead
92,610
(9)
75,180
75,180
(1)
7-58. (continued)
Cash
75,180
(3)
39,900
(5)
45,360
(8)
(5)
58,800
(6)
(7)
Payroll Taxes Payable
(5)
Fringe Benefits Payable
(6)
Administrative and Marketing Costs
(7)
8,820
Accumulated Depreciation—Property, Plant, and Equipment
24,150
(10)
Balance 1/1
Goods Completed
138,285
Balance 1/31
Cost of Goods Sold
Balance 1/31
138,285
7-59. (50 min.) Cost Flows Through Accounts: Brighton Services
a. T accounts.
Materials Inventory
137,200
(1a)
93,000
(1b)
94,000
(1c)
Wages Payable
490,000
(2a)
312,400
(2b)
197,600
(2c)
(Actual)
62,000
(3a)
27,500
(3b)
(3c)
(Actual)
(Applied)
104,000
(4a)
88,200
(4b)
17,000
(4c)
Work-in-Process Inventory
(1)
324,200
761,100
(a)
(2)
1,000,000
521,100
(b)
(3)
62,000
(4)
209,200
(1) = the sum of the amounts (1a) + (1b) + (1c)
(2) = the sum of the amounts (2a) + (2b) + (2c)
(3) = the sum of the amounts (3a) + (3b) + (3c)
7-59. (continued)
Finished Goods Inventory
(a)
761,100
(b)
521,100
1,282,200
Cost of Goods Sold
1,282,200
$728,000
200,000
7-59. (continued)
c. T accounts
Materials Inventory
137,200
(1a)
93,000
(1b)
94,000
(1c)
Wages Payable
490,000
(2a)
312,400
(2b)
197,600
(2c)
Variable Manufacturing Overhead*
(Actual)
(Applied)
62,000
38,220
(3a)**
Overapplied (5)
16,000
24,367
(3b)
15,413
(3c)
(Applied)
89,180
(4a)***
35,963
(4c)
27,200
(5) Underapplied
7-59. (continued)
Work-in-Process Inventory
(1)
324,200
754,600
(a)
(2)
1,000,000
486,624
(b)
(3)
78,000
(4)
182,000
(1) = the sum of the amounts (1a) + (1b) + (1c)
(2) = the sum of the amounts (2a) + (2b) + (2c)
(3) = the sum of the amounts (3a) + (3b) + (3c)
(a)
(b)
(5)
d.
Actual
Normal
Sales Revenue …………………………………
$1,400,000
$1,400,000
Less Cost of Goods Sold ……………………
(1,282,200)
(1,241,224)
Gross Margin ……………………………………
$ 117,800
$ 158,776
Less:
(Under-) Overapplied Overhead …………
—
(11,200)
Marketing and Administrative Costs ……
(112,000)
(112,000)
Operating Profit (Loss) ………………………
$ 5,800
$ 35,576
7-60. (60 min.) Show Flow Of Costs To Jobs: Kim’s Asphalt.
a.
1.
Payment received on account
Cash …………………………………………………………………………….
12,500
Accounts receivable ……………………………………………………
12,500
2.
Inventory purchase
Materials and equipment inventory …………………………………..
Accounts payable ……………………………………………………….
3.
Billing
Accounts receivable ……………………………………………………….
Sales revenue ……………………………………………………………
Cash …………………………………………………………………………….
Accounts receivable ……………………………………………………
4.
Indirect labor
Manufacturing overhead—Indirect labor …………………………...
650
Wages payable …………………………………………………………..
650
5.
Indirect materials issued
Manufacturing Overhead …………………………………………………
155
Materials and equipment inventory ………………………………..
155
6.
Overhead and advertising
Manufacturing Overhead [$550 + $675 + $320 + $200 + $325
Selling costs—Advertising ……………………………………………….
600
Cash …………………………………………………………………………
Accumulated Depreciation ……………………………………………
450
7.
Charges to Work in Process
Work in process—materials and equipment
Work in process—direct labor
Work in process—overhead applied [30% $18,750] …………
Materials inventory ……………………………………………………..
Wages payable …………………………………………………………..
18,750
8.
Transfer of Job 33
Cost of installations completed and sold …………………………...
100,200
Work in process—materials and equipment [$52,500 +
$4,800] ……………………………………………………………
57,300
Work in process—direct labor [$26,250 + $6,750] …………..
33,000
Work in process—overhead applied [30% $33,000] ……..
9,900
Note: No finished goods inventory account is required.
7-60. (continued)
b.
Overhead analysis:
Applied (Entry 7) …………
$5,625
Incurred
Entry 4 ……………………
$650
Entry 5 ……………………
155
Entry 6 ……………………
2,520
3,325
Overapplied …………………..
$ 2,300
c. Inventory balances
Balance 5/1
(7)
(2)
9,400
(5)
Balance 5/31
Balance 5/1
*
Current charges (7)
(8) Job 33
Balance 5/31
(8)
Balance 5/31