Midterm 1 Problems and Solutions ACG 2071 - Midiwm l...

Midterm 1 Problems and Solutions ACG 2071
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Unformatted text preview: Midiwm l Rex/nut) QMBSHDAS 300417013 oq/HReview Questions; Midterm 1,1. Here are selected data for Anthony Corporation: er+0 W0 E . 3 Cost of materials purchases on account ' Cost of materials requisitioned (includes $3,000 of indirect) ' . , )Direct labor costs incurred 3Manufacturing overhead costs incurred, including indirect materials a- 0 cmaCost of goods soldBeginning raw materials inventoryBeginning work in process inventory 9Beginning nished goods inventoryPredetermined manufacturing overhead rate (as "/6 of direct labor cost) 9 BE, thlnu. aooWhat IS the balance in Work in process inventory at the end of the year?+ Dmuae * 30,000A) $18,200 {a}; am noB) $55,200 SUE _u<3 + 1;) L DL 4' fellow were9% +_mio mommaem 1%).) + amok? m5 23,800 Tetal Nonomvug Gusts aqqlion 39E) None ofthe above - E E3 LU}? Huh 7 Cosr oYGo eds Wong) 30; 0002. Sunnybrook Orange Groves processes a variety of fresh juices. The company has the following expenses for July: EB 3" M \Wages of factory workers $ 75,000 TrodtutFreshness sealslcaps for juice bottles - $ 3,000 TProdud' Reconguring the factory layorrt $102,000 'D\ 5-H I b u. o nDepreciation expense on bottling machines '9deGlass juice bottles ?rodud"SD l s-hri homo nWhat is the total cost for the customer service category of the value chain? T5155 Q. Li \o ' 4 '1Vol Lie- Ohnim Rn odluihes, otmnunlue Cam's Products.RwD abesin arpraduetuOt-x =; ereih'hj 3? TN S'lTl bw'hbrx aCusfServke.31 01.000What is the total production costs ofthe value chain? 3 [Elsi 00C) 3. Comfy Furniture Company manufactures furniture at its Akron, Ohio, factory. Some of its costs fromthe past year include: Depreciation on sales ofc FPe'm' o $ 11,000Depreciation on factory equipment g $ 16,000Factory supervisor salary m {o $ 52,500Sales commissions {a ,1 $ 23,000Lubricants used in factory equipment on O $ 3,000Insurance costs for factory 0 $ 21,000Wages paid to maintenance workers \'(\ (Yum; For M $ 115,000 IFabric used to upholster furniture .4 $ 7,000 3 7 000Freightin (on raw materials) $ 2,500 $1500 oz 1 L} 000Costs of delivery to customers Rf; , IWages paid to assemblydine workers L $ 132,500 [3,), $00Lumber used to build product m $ 72,000 '7 a, 000Utilities in factory m 0 $ 44,500Utilities in sales office * h,, d $ 26,500Prime costs for Comfy Furniture Company totaled: A) $332000 PrlMe C051": I D m v D L.B) $79,000.(25211500. Conversion Cos-ts; DL + MIDE) None of the above4. First Sporting Equipment manufactures sporting oods. Selected costs from the ast year include:? .4; 0+ V5, [0 MUDQLOEkS'. Plastics used to make products 5 m $ 151,000 0 L$ 73,000 ' W, HFactory janitor wages m m $ 67,000 'Costs of shipping to customers legal $ 11,000 ~32. 5Lubricants used in factory equipment 0 $ 2,000$ 17,000 'aes W00Depreciation on factory equipment 0 $ 23,000 1Ofce supplies for sales ofce E '0 $ 4,000 I Be 5Insurance costs for factory in 0 $ 15,000Maintenance worker wages - ED L_9_9,000Freight-in (on plastics) R n 8,000Aluminum used to make products '_ $ 175,000Assembly-line Worker wages D L $ 142,000Salaries of salespeople $ 84,000 3; 5Period costs for First Sporting Equipment totaled:A) $201,000.Em 95$ 53 ' S 3C) $99,000.D) $32,000.E) None of the above . Active Apparel Company reports the following data for its rst year of operation (000s omitted).Cost of goods manufactured $500,000Work in process inventory, rming - __ 0Work in process inventory, ending 120,000Direct materials used 85,0001 00,000 Manufacturing overheadFinished goods inventoryLending What are the total manufacttuing costs for the year? bm U QEMOA) $685,000 + 'DL Us .B)$493,ooo Tech gag, SQWD + [No 70,000, /_ _- t "JTokd mhwco$or r, ' jE) None ofthe above ' E .Inv. LOW MV- ($0,009= C 0% WMQ. 500,000.________. Tknl (Hamil. C031: 60mm +1;o,ooo : (090,060 6. A company produces two products, A and B, and estimates that its manufacturing overhead costs will be$261,780. MOH has traditionally been allocated on the basis of threat labor hour-S) Estimated data follows: Product A Product BX, P Estimated volume 500 units -1 1,250 units X 01 hrs = 0,1500 PQ Direct labor hours per unit 1 2 1 5000 5'51". DLHSEstimated O/H Estimated ActivityActivig Centers Cost Product A ProducQ (b b Machine setups $27,140 20 + 26 = 41. Siws17 Maintenance (sq. ft.) 183,040 1,620 4- 2,540 ; 4ch sq. $5Supervising Assembly (DLH) 51 600 56 1' 288 a 344 01. H 5 2g1a Z80A. Determine the overhead allocated per unit to each product under the traditional approach.(1plantwide predetermined overhead allocation rate) (A 51mg DLHOverhead rate = $261 780 = $87.26/DLH3,000 DLHs (500 units x 1hr + 1250 x 2)Allocated overhead:Product A: $87.26 x lDLH = $87.26Product B: $87.26 x 2DLH = $174.52 B. Determine the overhead allocated per unit to each product under ABC. Ti? Em d dd Wk:Activity Center rates: $93quSetups $27,140/46 = $590/setupMaintenance 183,040/4,160 = $44/sq.ftSup. Assembly $51,600/344 = $150/DLHAllocated Overhead: Product A Product BSetups (20 x $590) $11,800 $15,340 (26 x $590)Maintenance (1,620 x $44) 71,280 111,760 (2,540 x $44)Sup Assembly (56 x $150) 8,400 43,200 (288 x $150)$91,480 $170,300+ 500 units + 1250 unitsOverhead per unit $ 182.96 $ 136.24M. at 174.3;C. Which product overcosted under traditional overhead allocation approach?Product B, the high volume product was overcosted using traditional method, and Product A, thelow volume product was undercosted under the traditional approach. 7. At the end of the period, Kent Company had the following balances in selected accounts:Raw Materials Inventory Debit balance $ 90,000Finished Goods Inventory Debit balance 180,00 ,Work in Process Inventory Debit balance 70,000 Y ii 330100 0 C" 51E; Cost of Goods Sold Debit balance 1,000,000 1 W- ken *Manufacturing Overhead Debit balance 100,000., FPYDdMCi'S LUDvl-d OV)a. Prepare the journal entry to close the Manufacturing Overhead account if the balance in theaccount is considered material. Review M/OH Process** ( Nari) 13mg)If material, apportion among WIP, FG & COGS based on relative costs in these accounts:W1Plnv:$ 70,000 x $100,000 = $ 5,600 increase ~l~a LUiP 11w.underwplimd$1,250,000FG lnv: $ 130,000 x $100,000 = $ 14,400 inc. 4m FG 100.$1,250,000COGS: $1,000,000 x $100,000 = $ 80,000 inc. to 006 5$1 ,250,000Journal Entm:WIP Inventory 33 5,600FG Inventory $14,400COGS $80,000Manufacturing Overhead $100,000 +6 zero 0va mOH QCCKJDb. Prepare the entry assuming the balance is not considered material.If not material, close difference to COGS:COGS $100,000MOH $100,000 M/OH Process: As DM & DL used to build product, costs traced directly to WIP Inv.: WIP Inv.RM lnv.Wages PayableM/OH is applied not directly to WIP lnv. but accumulated in a temporary account-allocation rate. (Following are made up numbers just to show process)M/OH Cost by predetermined O/H1. Co. incurred actual M/OH costs of $250,000 consisting of:Jindirect Materials - $20,000 lndirect Labor $30,000Rent Exp. On Equip & Facility - $200,000I ,1} MJOI-l Accountq @Incl Mat $20,000 $150,000 O/H applied to ProductInd. Labor $30,000Rent Exp $200,000$100,000@M/OH applied to product by predetermined O/H allocation rate (based on DL Hours)Debit WlP an. Job #20 $150,000Credit M/OH $150,000 for O/H appliedSo debit balance in M/OH account of$100,000 (Actual O/H more than applied O/H or underapplied M/OH) 1%; At the end of 2009 Gator Company had two jobs still in process with a total balance of $5,000 (DM& DL~ & MOI-I). According to the respective job cos't sheets the jobs had $1,200 and $1,300 in direct materials costsand $400 and $100 in direct labor costs. What overhead rate is Gator using?-a. 25% of direct labor costs m 2L T0 m "'c b. 80% of direct material 513 > Job 1' $1200 $400 = $1600'c. 10% of direct labor costs Job 2 1300 E = wd. 50% of direct material costs $2500 $500 $3000$3000 + MO ? = $5000 To-kovt On atO = $2,000 ,use 0, ' '\R/ DM $2500 x ? M/O overhead allocation rate = $2000 (2000 + 2500) = 80%DM $2500 x 80% overhead allocation rate = $2,000This is only alternative that results in $2000 M/OH 095% x Bounce :las ~no 101ov 300 900 .- 1so -no "[0@ SD305L Sasooomcc 1030-00 ll0TR.2,000. The variable costs are $5.00 per unit. If the sales price. A h monthl xed costs of $119 company as y sts will be:of a unit is $20.00 and We sell 8,000 units, the company's total variable coA $120,000. ToJroJ Fwaok Costs em Conercmt wldwmges- in achuii-x/(rC $112,000. Y ID; $160,000. Tom\ Voxlll'bKLC/Ol ahanlhe 1m dllrujrE)Noneoftheabove Prowrmn +6 Chun%es rm Uotume.Variable Cmrzuer stat}: fame, wlchoxxge:1 Volume.<200o 1011+; x its/WW : $40,000'TVC 10. Gator Pharmaceuticals manufactures an over-the-counter allergy medication called Bertos. Gatorhas developed several different Bertos products tailored to specic markets. For example, the companysells large commercial containers of 1,000 capsules to health-care facilities and travel packs of 20 capsulesto shops in airports, train stations, and hotels. Gator Cos controller, has just returned from a conferenceon ABC, and asks Tim, supervisor of the Bertos product line to help her develop an ABC system. Theyidentify the following activities, related costs, and cost allocation bases: Activity Estimated Indirect Allocation EstimatedActivity Costs Base Quantity of_ Allocation Base_ Materials handling $160,000 Kilos 20,000 kilosPackaging 390,000 l Machine hours 2,000 hoursQuality assurance 110 000 Samples 2,200 samples_ Total indirect costs $660,000 i The commercial-container Bertos product line had a total weight of 8,200 kilos, used 1,200 machine hours, and270 required samples. The travel-pack line had a total weight of 6,500 kilos, used 400 machine hours, and 370required samples. Gator produced 2,700 commercial containers of Bertos and 40,000 travel packs.Reguirements:a. Compute the cost allocation rate for each activity. Materials Handling TPackaging Quality AssuranceEstimated indirect $160,000 $390,000 $110,000Activity costs + Estimated quantity of + 20,000 kilos + 2,000 hours + 2,200 samplesCost allocation base Cost allocation rate $ 8/kilo J $ l95/hour I $ 50/sample ib.Use the activity-based cost allocation rates to compute the indirect cost of each unit of the commercialcontainers & the travel packs.Activity Costs Per UnitCommercial Container Travel PackMaterials handling (8,200 and 6,500) x $8 $ 65,600 $ 52,000Packaging (1,200 and 400) x $195 234,000 78,000Quality assurance (270 and 370) x $50 13,500 18,500Total indirect costs $313,100 $148,500+ Number of units + 2,700 + 40,000Indirect activity cost per unit (rounded) $ 115.96 6 $ 3.71c.Gators original singleallocation-based costs system allocated indirect costs to products at $350 per machinehour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under theoriginal system. Then, compute the indirect cost per unit for each product.Indirect costs per unit under old single predetermined overhead allocation rate:Commercial Container Travel PackMachine Hours: 1,200 & 400 X $350 $ 420,000 $ 140,000+ Number of units + 2.700 + 40.000Indirect costs (MOH) per unit $ 155.56 f $ 3.50 d. Compare the activity-based costs per unit to the costs from the simpler original system. Which products wereovercosted, and which products were undercosted?Commercial Container Travel PackABC Overhead Allocation System $ 115.96 $ 3.71 undww 54,01,Original POHR 155.56 > 36%, 3.50 >Before implementing ABC, Commercial Containers were overcosted andTravel Packs were undercosted....
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