A E2-6 job cost sheet of Battle Company is given below.
Job Cost Sheet
JOB NO. 469
Quantity
2,000
ITEM White Lion Cages
Date Requested 7/2
FOR Tesla Company Date Completed 7/31
Direct
Direct Manufacturing
Date
Materials
Labor
Overhead
7/10
828
12
900
15
440
528
22
380
456
24
1,600
27
1,500
31
540
648
Cost of completed job:
Direct materials
4,828
Direct labor
1,360
Manufacturing overhead
1,632
Total cost
7,820
Unit cost
3.91
(a) Answer the following questions.
(1) What are the source documents for direct materials, direct labor, and manufacturing
overhead costs assigned to this job?
Direct materials - materials requisition slips
Direct labor - labor time tickets
Manufacturing overhead - predetermined overhead rate.
(2) What is the predetermined manufacturing overhead rate?
120%
(3) What are the total cost and the unit cost of the completed job?
Total cost:
7,820
Unit cost:
3.91
(b) Prepare the entry to record the completion of the job.
Date
Jul 31
GENERAL JOURNAL
Account Titles and Explanation
Finished Goods Inventory
Work in Process Inventory
(To record completion of Job No. )
Debit
Credit
7,820
7,820
E2-9 At May 31, 2005, the accounts of Yellow Knife Manufacturing Company show the
following.
1. May 1 inventoriesfinished goods $12,600, work in process $14,700, and raw materials
8,200
2. May 31 inventoriesfinished goods $11,500, work in process $17,900, and raw materials
7,100
3. Debit postings to work in process were: direct materials $62,400, direct labor $32,000,
and manufacturing overhead applied $48,000.
4. Sales totaled $200,000.
(a) Prepare a condensed cost of goods manufactured schedule.
Yellow Knife Manufacturing Company
Cost of Goods Manufactured Schedule
For the Month Ended May 31, 2005
Work in process, May 1
Direct Materials used
62,400
Direct labor
32,000
Manufacturing overhead applied
48,000
Total manufacturing costs
Total cost of work in process
Less: Work in process, May 31
Cost of goods manufactured
14,700
142,400
157,100
17,900
139,200
(b) Prepare an income statement for May through gross profit.
Yellow Knife Manufacturing Company
Income Statement (partial)
For the Month Ended May 31, 2005
Sales
Cost of goods sold
Finished goods inventory, May 1
12,600
Cost of goods manufactured
139,200
Cost of goods available for sale
151,800
Less: Finished goods inventory, May 3111,500
Cost of goods sold
Gross profit
200,000
140,300
59,700
(c) Indicate the balance sheet presentation of the manufacturing inventories at May 31,
2005
Yellow Knife Manufacturing Company
Balance Sheet (partial)
For the Month Ended May 31, 2005
Inventories
Finished goods
11,500
Work in Process
17,900
Raw materials
7,100
Total Inventories
36,500
E3-5 The Sanding Department of Han Furniture Company has the following production
and manufacturing cost data for April 2005.
Production: 12,000 units finished and transferred out; 3,000 units started that are
100% complete as to materials and 40% complete as to conversion costs.
Manufacturing costs: Materials $36,000; labor $30,000; overhead $37,320.
Prepare a production cost report. There is no beginning work in process.
Sanding Department
Production Report
For Cost the Month Ended April 30, 2005
Equivalent Units
Physical
Conversion
Units
Materials
Costs
QUANTITIES
Step 1
Step 2
Units to be accounted for
Work in process, April 1
0
Started into production
15,000
Total units
15,000
Units accounted for
Transferred out
12,000
12,000
12,000
Work in process, April 30 3,000
3,000
1,200
Total units
15,000
15,000
13,200
COSTS
Conversion
Unit costs
Step 3
Materials
Costs
Costs in April
(a)
36,000
67,320
Equivalent units
(b)
15,000
13,200
Unit costs [(a) / (b)]
2.40
5.10
Costs to be accounted for
Work in process, April 1
Started into production
Total costs
Cost Reconciliation Schedule 4
Step
Costs to be accounted for
Transferred out (12,000 x 7.50)
Work in process, April 30
Materials (3,000 x 2.40)
7,200
Coversion costs (1,200 x 5.10)
6,120
Total costs
Total
103,320
7.50
0
103,320
103,320
90,000
13,320
103,320
E3-9 Mary Mahr has recently been promoted to production manager, and so she has
just started to receive various managerial reports. One of the reports she has received is
the production cost report that you prepared. It showed that her department had 1,000
equivalent units in ending inventory. Her department has had a history of not keeping
enough inventory on hand to meet demand. She has come to you, very angry, and wants
to know why you credited her with only 1,000 units when she knows she had at least
twice that many on hand.
Explain to her why her production cost report showed only 1,000 equivalent
units in ending inventory. Write an informal memo. Be kind and explain very clearly why
she is mistaken.
To:
From:
Re:
Mary Mahr
Brandi Murobayashi
Ending inventory
The reason as to the confusion in ending inventory is because the report shows ending
inventory in equivalent units. Ending inventory can be measured in physical or equivalent
units. Your department has 2,300 physical units that are 43% complete, that is equivalent to
having 1,000 (2,300 x 43%) completed units at the end of the month. Ending inventory can
expressed as physical units or equivalent units and for the sake of this report we have
expressed ending inventory as equivalent units.
I hope this helped to clear up any confusion. If you have any further questions please do not
hesitate to contact me ext. 123.
Chapter 3 Questions 2 and 3
2. Indicate which of the following statements is not correct.
(a) Both a job order and a process cost system track the same three manufacturing cost
elementsdirect materials, direct labor, and manufacturing overhead.
(b) In a job order cost system, only one work in process account is used, whereas in a
process cost system, multiple work in process accounts are used.
(c) Manufacturing costs are accumulated the same way in a job order and in a process
cost system.
(d) Manufacturing costs are assigned the same way in a job order and in a process cost
system.
3. In a process cost system, the flow of costs is:
(a) work in process, cost of goods sold, finished goods.
(b) finished goods, work in process, cost of goods sold.
(c) finished goods, cost of goods sold, work in process.
(d) work in process, finished goods, cost of goods sold.