Midterm 1 problems and solutions acg 2071

Midterm 1 Problems and Solutions ACG 2071
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Unformatted text preview: Midiwm l Rex/nut) QMBSHDAS 300417013 oq/H Review 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) ' . , é) Direct labor costs incurred 3 Manufacturing overhead costs incurred, including indirect materials a- 0 cm a Cost of goods sold Beginning raw materials inventory Beginning work in process inventory 9 Beginning nished goods inventory Predetermined manufacturing overhead rate (as "/6 of direct labor cost) 9 BE, thlnu. aoo What IS the balance in Work in process inventory at the end of the year? + Dmuae * 30,000 A) $18,200 {a}; am no B) $55,200 SUE _u<3 + 1;) L® DL 4' fellow were 9% +_mio mommaem 1%).) + amok? m 5 23,800 Tetal Nonomvug Gusts aqqlion 39 E) None ofthe above - E E3 LU}? Huh 7 Cosr oYGo eds Wong) £30; 000 2. 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 Trodtut Freshness sealslcaps for juice bottles - $ 3,000 TProdud' Reconguring the factory layorrt $102,000 'D\ 5-H I b u. o n Depreciation expense on bottling machines '9de Glass juice bottles ?rodud "S D l s-hri homo n What is the total cost for the customer service category of the value chain? T5155 Q. Li \o ' 4 '1 Vol Lie- Ohnim Rn odluihes, otmnunlue Cam's Products. RwD abesin arpraduetuOt-x =; ereih'hj 3? TN S'lTl bw'hbrx aCusfServke. 31 01.000 What 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 from the past year include: Depreciation on sales ofc FPe'm' o $ 11,000 Depreciation on factory equipment g $ 16,000 Factory supervisor salary m {o $ 52,500 Sales commissions {a ,1 $ 23,000 Lubricants used in factory equipment on O $ 3,000 Insurance costs for factory 0 $ 21,000 Wages paid to maintenance workers \'(\ (Yum; For M $ 115,000 I Fabric used to upholster furniture .4 $ 7,000 3 7 000 Freightin (on raw materials) $ 2,500 $1500 oz 1 L} 000 Costs of delivery to customers Rf; , I Wages paid to assemblydine workers L $ 132,500 [3,), $00 Lumber used to build product m $ 72,000 '7 a, 000 Utilities in factory m 0 $ 44,500 Utilities in sales office * h,, d $ 26,500 Prime costs for Comfy Furniture Company totaled: A) $332000 PrlMe C051": I D m v D L. B) $79,000. (25211500. Conversion Cos-ts; DL + MID E) None of the above 4. 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, H Factory janitor wages m m $ 67,000 ' Costs of shipping to customers legal $ 11,000 ~32. 5 Lubricants used in factory equipment 0 $ 2,000 $ 17,000 'aes W00 Depreciation on factory equipment 0 $ 23,000 1 Ofce supplies for sales ofce E '0 $ 4,000 I Be 5 Insurance costs for factory in 0 $ 15,000 Maintenance worker wages - ED L_9_9,000 Freight-in (on plastics) R n 8,000 Aluminum used to make products '_ $ 175,000 Assembly-line Worker wages D L $ 142,000 Salaries of salespeople $ 84,000 3; 5 Period costs for First Sporting Equipment totaled: A) $201,000. Em 95$ 53 ' S 3 C) $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 $500,000 Work in process inventory, rming - __ 0 Work in process inventory, ending 120,000 Direct materials used 85,000 1 00,000 Manufacturing overhead Finished goods inventoryLending What are the total manufacttuing costs for the year? bm U QEMO A) $685,000 + 'DL Us . B)$493,ooo Tech gag, SQWD + [No 70,000, /_ _ - t "J Tokd mhw¥co$or r, ' j E) 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 B X, P Estimated volume 500 units -1 1,250 units X 01 hrs = 0,1500 P Q Direct labor hours per unit 1 2 1 5000 5'51". DLHS Estimated O/H Estimated Activity Activig Centers Cost Product A Produc Q (b b Machine setups $27,140 20 + 26 = 41. Siws 17 Maintenance (sq. ft.) 183,040 1,620 4- 2,540 ; 4ch sq. $5 Supervising Assembly (DLH) 51 600 56 1' 288 a 344 01. H 5 § 2g1a Z80 A. Determine the overhead allocated per unit to each product under the traditional approach.(1 plantwide predetermined overhead allocation rate) (A 51mg DLH Overhead rate = $261 780 = $87.26/DLH 3,000 DLHs (500 units x 1hr + 1250 x 2) Allocated overhead: Product A: $87.26 x lDLH = $87.26 Product 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: $93qu Setups $27,140/46 = $590/setup Maintenance 183,040/4,160 = $44/sq.ft Sup. Assembly $51,600/344 = $150/DLH Allocated Overhead: Product A Product B Setups (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 units Overhead per unit $ 182.96 $ 136.24 M. 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, the low 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 $ 90,000 Finished 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 the account 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 $1,250,000 FG lnv: $ 130,000 x $100,000 = $ 14,400 inc. 4m FG 100. $1,250,000 COGS: $1,000,000 x $100,000 = $ 80,000 inc. to 006 5 $1 ,250,000 Journal Entm: WIP Inventory 33 5,600 FG Inventory $14,400 COGS $80,000 Manufacturing Overhead $100,000 +6 zero 0va mOH QCCKJD b. Prepare the entry assuming the balance is not considered material. If not material, close difference to COGS: COGS $100,000 MOH $100,000 M/OH Process: As DM & DL used to build product, costs traced directly to WIP Inv.: WIP Inv. RM lnv. Wages Payable M/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/H 1. Co. incurred actual M/OH costs of $250,000 consisting of: Jindirect Materials - $20,000 lndirect Labor $30,000 Rent Exp. On Equip & Facility - $200,000 I ,1} MJOI-l Account q @ Incl Mat $20,000 $150,000 O/H applied to Product Ind. Labor $30,000 Rent 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 $150,000 Credit M/OH $150,000 for O/H applied So 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 costs and $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 = w d. 50% of direct material costs $2500 $500 $3000 $3000 + MO ? = $5000 To-kovt On at O = $2,000 , use 0, ' ' \R/ DM $2500 x ? M/O overhead allocation rate = $2000 (2000 + 2500) = 80% DM $2500 x 80% overhead allocation rate = $2,000 This is only alternative that results in $2000 M/OH © 095% x Bounce :las ~no © 10°1ov 300 900 .- 1so -no "[0 @ SD305L Sasooomcc 1030-00 ll 0 TR. 2,000. The variable costs are $5.00 per unit. If the sales price . A h monthl xed costs of $11 9 company as y sts will be: of a unit is $20.00 and We sell 8,000 units, the company's total variable co A $120,000. ToJroJ Fwaok Costs em Conercmt wldwmges - in achuii-x/(r C $112,000. Y I D; $160,000. Tom\ Voxlll'bKLC/Ol ahanlhe 1m dllrujr E)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. Gator has developed several different Bertos products tailored to specic markets. For example, the company sells large commercial containers of 1,000 capsules to health-care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. Gator Cos controller, has just returned from a conference on ABC, and asks Tim, supervisor of the Bertos product line to help her develop an ABC system. They identify the following activities, related costs, and cost allocation bases: Activity Estimated Indirect Allocation Estimated Activity Costs Base Quantity of _ Allocation Base _ Materials handling $160,000 Kilos 20,000 kilos Packaging 390,000 l Machine hours 2,000 hours Quality 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, and 270 required samples. The travel-pack line had a total weight of 6,500 kilos, used 400 machine hours, and 370 required 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 Assurance Estimated indirect $160,000 $390,000 $110,000 Activity costs + Estimated quantity of + 20,000 kilos + 2,000 hours + 2,200 samples Cost allocation base Cost allocation rate $ 8/kilo J $ l95/hour I $ 50/sample i b.Use the activity-based cost allocation rates to compute the indirect cost of each unit of the commercial containers & the travel packs. Activity Costs Per Unit Commercial Container Travel Pack Materials handling (8,200 and 6,500) x $8 $ 65,600 $ 52,000 Packaging (1,200 and 400) x $195 234,000 78,000 Quality assurance (270 and 370) x $50 13,500 18,500 Total indirect costs $313,100 $148,500 + Number of units + 2,700 + 40,000 Indirect activity cost per unit (rounded) $ 115.96 6 $ 3.71 c.Gators original singleallocation-based costs system allocated indirect costs to products at $350 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original 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 Pack Machine Hours: 1,200 & 400 X $350 $ 420,000 $ 140,000 + Number of units + 2.700 + 40.000 Indirect 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 were overcosted, and which products were undercosted? Commercial Container Travel Pack ABC Overhead Allocation System $ 115.96 $ 3.71 undww 54,01, Original POHR 155.56 > 36%, 3.50 > Before implementing ABC, Commercial Containers were overcosted and Travel Packs were undercosted. ...
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