Chapter 17 Required Homework
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Chapter 17 Required Homework

Course Number: ACCT 5243, Fall 2012

College/University: Cameron University

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Chapter 17 Required Homework 1. award: 3 out of 3.00 points Conklin Corporation recorded the following activities during its first month of operations: Purchased materials costing $250,000. Used direct materials in production costing $230,000. Incurred direct labor costs of $300,000, of which $275,000 had actually been paid at the end of the month. Applied manufacturing overhead at a rate of $15 per direct...

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17 Chapter Required Homework 1. award: 3 out of 3.00 points Conklin Corporation recorded the following activities during its first month of operations: Purchased materials costing $250,000. Used direct materials in production costing $230,000. Incurred direct labor costs of $300,000, of which $275,000 had actually been paid at the end of the month. Applied manufacturing overhead at a rate of $15 per direct labor hour. (Direct labor workers earn $25 per hour.) Incurred actual manufacturing overhead costs of $175,000. Transferred completed jobs costing $520,000 to finished goods. Sold completed jobs for $700,000. The cost applied to the jobs sold totaled $480,000. Closed the Manufacturing Overhead account directly to Cost of Goods Sold at the end of the month. Incurred selling and administrative costs of $100,000 during the month. a. Prepare Conklin Corporation's income statement for its first month of operations. Ignore income taxes. (Input all amounts as positive values. Omit the "$" sign in your response.) Sales Cost of goods sold $ 700,000 475,000 Gross profit Selling & administrative $ 225,000 100,000 Net income $ 125,000 b. Determine the company's inventory balances at the end of its first month of operations. (Omit the "$" sign in your response.) Ending Materials Inventory Ending Work in Process Inv. Ending Finished Goods Inv. $ 20,000 $ 190,000 $ 40,000 2. award: 3 out of 3.00 points Rush Company budgeted that it would incur $180,000 of manufacturing overhead costs in the upcoming period. By the end of the period, Rush had actually incurred manufacturing overhead costs totaling $192,000. Other information from the company's accounting records is provided below: Beginning Work in Process Inventory was $30,000, whereas ending Work in Process Inventory was $25,000. Total manufacturing costs of $470,000 were charged to Work in Process Inventory during the period. This amount included direct materials costs of $200,000. Workers logged 5,400 direct labor hours during the period. Beginning Finished Goods Inventory was $50,000. The Manufacturing Overhead account had a $30,000 debit balance immediately prior to closing at the end of the period. Manufacturing overhead was applied to jobs throughout the period on the basis of direct labor hours. Prior to any adjustment to account for overapplied or underapplied manufacturing overhead, Cost of Goods Sold had a $520,000 debit balance. Sales for the period totaled $1,050,000, whereas selling and administrative expenses totaled $400,000. a. Determine how much manufacturing overhead was applied to jobs during the period. (Omit the "$" sign in your response.) Manufacturing overhead applied $ 162,000 b. Determine the company's manufacturing overhead application rate per direct labor hour. (Omit the "$" sign in your response.) Manufacturing overhead application $ 30 per DLH c. How many direct labor hours were budgeted at the beginning of the period? Direct labor hours budgeted 6,000 DLH d. What was the average hourly wage rate earned by direct labor workers? (Omit the "$" sign in your response.) Direct labor rate $ 20 per hour e. What was the company's ending Finished Goods Inventory balance? (Omit the "$" sign in your response.) Ending finished goods inventory $ 5,000 f. What was the company's net income for the period? Ignore taxes. (Omit the "$" sign in your response.) Net income $ 100,000 3. award: 3 out of 3.00 points Robinson International began operations in early February. The company has provided the following summary of total manufacturing costs assigned to the job sheets of its entire client base during its first three months of operations: Job Num Febr Marc ber uary h April Total Costs Assigned 12,4 6,80 19,2 1000 $ $ $ 00 0 00 1001 15,0 00 1002 7,40 0 2,00 0 $ 1,40 0 23,8 00 2,00 0 1003 16,0 00 1004 9,00 0 4,00 0 6,00 0 20,0 00 15,0 00 Job no. 1002 was completed in February and sold in March. Job no. 1000 was completed and sold in March. Job no. 1001 was completed and sold in April. Job no.1003 was completed in April, but won't be delivered until early May. Only job no. 1004 remains in process at April 30. The selling prices are set at 175 percent of the manufacturing costs assigned to each job. a. Determine the Work in Process Inventory balance at the end of February, March, and April. (Omit the "$" sign in your response.) Work in process inventory: February 28 March 31 April 30 $ 27,400 $ 47,400 $ 15,000 b. Determine the Finished Goods Inventory balance at the end of February, March, and April. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.) Finished goods inventory: February 28 March 31 April 30 $ 2,000 $0 $ 20,000 c. Compute the company's total gross profit for the three months ended April 30. (Omit the "$" sign in your response.) Gross profit $ 33,750 4. award: 3 out of 3.00 points Norton Chemical Company produces two products: Amithol and Bitrite. The company uses activity-based costing (ABC) to allocate manufacturing overhead to these products. The costs incurred by Norton's Purchasing Department average $80,000 per year and constitute a major portion of the company's total manufacturing overhead. Purchasing Department costs are assigned to two activity cost pools: (1) the order cost pool and (2) the inspection cost pool. Costs are assigned to the pools based on the number of employees engaged in each activity. Of the department's five full-time employees, one is responsible for ordering raw materials, and four are responsible for inspecting incoming shipments of materials. Costs assigned to the order pool are allocated to products based on the total number of purchase orders generated by each product line. Costs assigned to the inspection pool are allocated to products based on the number of inspections related to each product line. For the upcoming year, Norton estimates the following activity levels: Purcha se orders generate Total 10,000 Amithol 2,000 Bitrite 8,000 d Inspect ions conduct ed 2,400 1,800 600 In a normal year, the company conducts 2,400 inspections to sample the quality of raw materials. The large number of Amithol-related inspections is due to quality problems experienced in the past. The quality of Bitrite materials has been consistently good. a. Assign the Purchasing Department's costs to the individual cost pools. (Omit the "$" & "%" signs in your response.) Assigning purchasing department costs to activity pools: Step 1: % of total Employees 1 20 responsible for ordering Employees 4 80 responsible for inspecting % Employees in the department % 5 Step 2: Costs assigned to the order cost pool Costs assigned to the inspection cost pool 100 % $ 16,000 64,000 Total costs assigned to cost pools $ 80,000 b. Allocate the order cost pool to individual the product lines. (Omit the "$" & "%" signs in your response.) Order cost pool allocated to product lines: Step 1: Purchase orders for Amithol Purchase orders for % of total 2,000 20 % 8,000 80 % Bitrite Total purchase orders 10,000 100 Step 2: Costs assigned to Amithol Costs assigned to Bitrite % $ 3,200 12,800 Total order costs allocated to products $ 16,000 c. Allocate the inspection cost pool to the individual product lines. (Omit the "$" & "%" signs in your response.) Inspection cost pool allocated to product lines: Step 1: Inspections for Amithol Inspections for Bitrite Total inspections Step 2: Costs allocated to Amithol Costs allocated to Bitrite Total inspection costs allocated to products 1,800 600 2,400 % of total 75 % 25 % 100 % $ 48,000 16,000 $ 64,000 5. award: 5 out of 5.00 points Precision Instruments, Inc., uses job order costing and applies manufacturing overhead to individual jobs by using predetermined overhead rates. In Department A, overhead is applied on the basis of machine-hours, and in Department B, on the basis of direct labor hours. At the beginning of the current year, management made the following budget estimates as a step toward determining the overhead application rates: Departm ent A Direct labor Manuf acturing overhea d Machin ehours Direct labor hours Department B $ 420,000 $ 300,000 $ 540,000 $ 412,500 18,000 1,900 28,000 25,000 Production of 4,000 tachometers (job no. 399) was started in the middle of January and completed two weeks later. The cost records for this job show the following information: Departm ent A Job no. 399 (4,000 units of product): Cost of materials used on job Dire ct labor cost Dire ct labor hours Mac hine hours $ $ Department B 6,800 8,100 $ $ 4,500 7,200 540 600 250 100 a. Determine the overhead rate that should be used for each department in applying overhead costs to job no. 399. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Department A overhead application rate Department B overhead application rate $ 30.00 per machine-hour $ 16.50 per direct labor hour b. What is the total cost of job no. 399, and what is the unit cost of the product manufactured on this production order? (Omit the "$" sign in your response.) Total cost $ 44,000 Unit cost $ 11 c. Prepare the journal entries required to record the sale (on account) of 1,000 of the tachometers to SkiCraft Boats. The total sales price was $19,500. (Omit the "$" sign in your response.) General Journal Debit Cost of goods sold Credit 11,000 Finshed goods inventory 11,000 Accounts receivable 19,500 Sales 19,500 d. Assume that actual overhead costs for the year were $517,000 in Department A and $424,400 in Department B. Actual machine hours in Department A were 17,000, and actual direct labor hours in Department B were 26,000 during the year. On the basis of this information, determine the over- or underapplied overhead in each department for the year. (Omit the "$" sign in your response.) Dept. A Dept. B Underapplied overhead $ 7,000 Overapplied overhead $ 4,600 Healthy Hound, Inc., makes two lines of dog food: (1) Basic Chunks, and (2) Custom Cuts. The Basic Chunks line is a dry food that is processed almost entirely by an automated process. Custom Cuts is a canned food made with real horsemeat. The slabs of meat are cut and trimmed by hand before being shoveled into a automated canning machine. Basic Chunks sells very well and is priced significantly below competitive brands. Sales of Custom Cuts have been on the decline, as the company has failed to keep the brand price competitive. Other information concerning each product line is provided below. Basic Chunks Number of units* produced and sold per month Direct materials cost per unit Direct labor cost per hour Direct labor hours per unit Custom Cuts 50,000 20,000 $ 2 $ 4 $ 12 $ 12 0.01 0.10 *Units for Basic Chunks refer to bags; units for Custom Cuts refer to cases. The company currently allocates manufacturing overhead to each product line on the basis of direct labor hours. Budgeted manufacturing overhead per month is $24,600, whereas budgeted direct labor hours amount to 2,500 per month. Healthy Hound recently hired a consultant to examine its cost accounting system. The consultant recommends that the company adopt activity-based costing to allocate manufacturing overhead. She proposes that the following cost pools and cost drivers be used: Cost Pool Utilities Maintenance Depreciation of plant and equipment Amount Allocated Total Driver Volume Cost Driver $ Kilowatthours Machine1,000 hours 8,000 15,000 Square feet occupied 100,000 kWh 200 mh 80,000 sq. ft. Miscellaneou 600 s Total allocation $ Direct labor hours 2,500 DLH 24,600 The amount of driver activity corresponding to each product line is as follows: Cost Driver Basic Chunks Kilowatt90,000 kWh hours Machine160 mh hours Square feet 60,000 sq. ft occupied Direct labor 500 DLH hours Custom Cuts 10,000 kWh 40 mh 20,000 sq. ft. 2,000 DLH 6. award: 2 out of 2.00 points a. Allocate manufacturing overhead costs to each product line using direct labor hours as a single cost driver. (Omit the "$" sign in your response.) Manufacturing overhead allocated using DLH Basic Chunks $ 4920 Custom Cuts $ 19680 7. award: 2 out of 2.00 points b. Allocate manufacturing overhead costs to each product line using the activity-based costing approach recommended by the consultant. (Omit the "$" sign in your response.) Manufacturing overhead allocated using ABC Basic Chunks $ 19370 Custom Cuts $ 5230 8. award: 2 out of 2.00 points c. Compute the total monthly manufacturing costs assigned to each product line when activitybased costing is used to allocate manufacturing overhead. (Omit the "$" sign in your response.) Total manufacturing costs Basic Chunks $ 125,370 Custom Cuts $ 109,230 9. award: 1 out of 1.00 point d. Assume that the company sets selling prices as a fixed percentage above the total manufacturing costs allocated to each product line. On the basis of your results from parts a and b, discuss a possible reason why sales of the Custom Cuts product line are currently experiencing a decline. The Custom Cuts product line is less labor intensive in comparison to the Basic Chunks product line The Custom Cuts product line is very labor intensive in comparison to the Basic Chunks product line 10. award: 1 out of 1.00 point e. Select the benefits of adopting and implementing an activity-based costing system. (Select all that apply.) It will help in window dressing of financial statements A better understanding of its overhead cost structure It will lower overall cost of the company A better identification of its operating inefficiencies A better understanding of the resource requirements of each product line
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