Jacob Potter



Solutions Guide: ? This is meant as a solutions guide. Please try reworking the questions and reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as your own.acob PotterBrief Exercises1. During the year, Coronado Boat Yard has incurred manufacturing costs of 420,000 in building three large sailboats. At year end, each boat is about 70 percent complete. How much of these manufacturing costs should be recognized as expense in Coronado Boat Yards income statement for the current year? Explain?Coronado Boat Yard should not recognize any of the manufacturing costs on their year-end income statement. These are product costs and as a result, will not appear on the income statement until the boats are sold and the revenue is earned.2. During the current year, the cost of direct materials purchased by a manufacturing firm was $340,000, and the direct materials inventory increased by $20,000. What was the cost of direct materials used during the year?Direct materials used is $340,000 less the $20,000 increase in the ending balance of direct materials or $320,000.3. A company that assembles trucks produces 60 trucks during the current year and incurs $3 million of material, labor, and overhead costs. Fifty-three trucks were sold during the year and each is allocated the same amount of costs. How much of the $3 million assembly costs should appear on the company’s income statement for the current year?Product costs per truck: $3,000,000 ÷ 60 = $50,000Costs recognized due to matching: 53 trucks sold × $50,000 = 2,650,000The company should recognize $2,650,000 in product costs in the current year income statement.4. Hula’s Heavyweights, Inc., is a company that manufactures forklifts. During the year, Hulas purchased $1,450,000 of direct materials and placed $1,525,000 worth of direct materials into production. Hula’s beginning balance in the materials inventory account was 320,000. What is the ending balance in Hula’s Materials inventory account?Direct Materials InventoryBalance, 1/1 $ 320,000 ?????Purchases of??Direct materials used $1,525,000direct materials $ 1,450,000 ????Balance, 12/31 $ 245,000 ??5. A.J.’s Cooling Systems, Inc., assigns $230,000 of direct labor costs to production during the current period. A.J.’s also pays employees $200,000 during the period. What are the two journal entries used to record these transactions?Direct Labor $200,000 Cash $200,000 To record payment of direct labor costs.WIP Inventory $230,000 Direct Labor $230,000.00 To record usage of direct labor in the production process.6. During the Current year, Cherry Electronics incurred $350,000 of indirect labor costs, $10,000 of indirect material costs, $130,000 of rent costs, and $260,000 of other overhead costs. How much did Cherry Electronics assign to the work in process Inventory account from the Manufacturing Overhead Account?Manufacturing OverheadIndirect labor payroll $ 350,000 ??Overhead costs assigned to production $ 750,000 Indirect material costs10,000 ????Rent costs130,000 ????Other overhead costs260,000 ??7. Ardvark Pets, Inc., has three stores in the state. The owner, Ms. Perkins, is having trouble tracking inventory costs in the three pet stores. Ms. Perkins knows about your skill in tracking and understanding costs flows and asks you to find the following missing items for the three stores: Midwest Ardvark Northern Ardvark Eastern ArdvarkBeg Inventory $30,000 ? ?Transferred in $100,000 $200,000 $160,000Transferred out $110,000 $180,000 $150,000Ending Inventory ? $60,000 $40,000All amounts debited to the Manufacturing Overhead account during the year will be assigned to units of product manufactured. Therefore, at year-end the Manufacturing Overhead account will have a balance of zero. This means $750,000 must have been assigned to Work in Process Inventory during the year.Basic Formula = Beg. Inv. + Tr. In = End. Inv. + Tr. OutMidwest Ardvark’s = $30,000 + $100,000 = X + $110,000; X = $20,000Northern Ardvark’s = X + $200,000 = $60,000 + $180,000; X = $40,000Eastern Ardvark’s = X + $160,000 = $40,000 + $150,000; X = $30,0008. The work in process inventory account had a beginning balance of $16,200 on April 1. During April, the cost of direct materials used was 408,000 and direct labor cost assigned to production was $56,000. A total of $72,000 of overhead was assigned to production in April. If the costof finished goods manufactured was $523,500 what was the balance in the work in process inventoryaccount on April 30?Work in ProcessBeginning Bal. 4/1 $ 16,200 ??Transferred to Finished Goods account $ 523,500 Direct material used408,000 ????Direct labor applied56,000 ????Overhead applied72,000 ??????Ending Bal. 4/30 $ 28,700 ??????9. Hapless Repairs Co. does all the repair work for a medium sized manufacturer of handheld computer games. The games are sent directly to Hapless, and after the games are repaired, Hapless bills the game manufacturer for costs plus a 30 percent makeup. In the month of February, purchases of parts (replacement parts) by Hapless amounted to $90,000, the beginning inventory of parts was $40,500, and the ending inventory of parts was $15,250. Payments to repair technicians during the month of February totaled $63,000. Overhead incurred was $113,000. What was the cost of materials used for repair work during the month of February?What was the prime cost for February?What was the conversion cost for February?What was the total repair cost for February?a. $40,500 + $90,000 - $15,250 = $115,250b. $115,250 + $63,000 = $178,250c. $63,000 + $ 113,000 = $176,000d. $115,250 + $63,000 + $113,000 = $291,25010. At the end of the year, Johnson’s Manufacturing Corporation had the following balances:Work in process………………………………………..$52,000Cash and cash equivalents………………………..$346,000Finished Goods…………………………………………. $85,600Raw materials……………………………………………. $33,000Accounts Receivable…………………………………..$237,000Prepare a partial balance sheet for Johnson’s showing the above accounts.Johnson’s Manufacturing CorporationPartial Balance SheetDecember 31, 200XCurrent assets:Cash and Cash Equivalents …………………………………………….$346,000Accounts Receivable ……………………………………………………..237,000Inventories:Raw Materials ………………………………………………..$33,000Work in Process …………………………………………………..52,000Finished Goods ………………………………………………..85,600Total Inventories ………………………………………………………..170,600Total current assets ………………………………………………………………………..$753,6004 Exercises Listed below are eight technical accounting terms introduced or emphasized in the readingWork in process InventoryCost of finished goods manufacturedConversion CostsCost of Goods soldPeriod CostManagement AccountingProduct CostManufacturing OverheadEach of the following statements may or may not describe one of these technical terms. For each statement, indicate the accounting term described or answer None if the statement does not describe any of the terms The preparation and use of accounting information designed to assist managers in planning and controlling the operations of a businessAll manufacturing costs other than direct materials used and direct laborDirect materials and direct labor used in manufacturing a productA manufacturing cost that can be traced conveniently and directly to manufactured units of a product.The account debited at the time that the manufacturing overhead account is creditedThe amount transferred from the work in process Inventory account to the finished goods Inventory account.Costs that are debited directly to expense accounts when the costs are incurreda.Management accountingb.Manufacturing overheadc.None (These are prime costs.)d.None (The statement describes direct manufacturing costs.)e.Work in Process Inventoryf.Cost of finished goods manufacturedg.Period costs4. The following information was taken from the accounting Records of Reliable Tool Corporation:Work in process inventory, beginning of year………………………….$35,000Cost of direct materials used…………………………………………………….245,000Direct labor costs applied to production…………………………………..120,000Cost of finished goods manufactured……………………………………….675,000Overhead is assigned to production at $300,000. Compute the amount of work in process inventory on hand at year-end.Work in process inventory, beginning of the year ……………………….. $ 35,000 Manufacturing costs applied to production:Direct materials used ………………………………….. $245,000 Direct labor ………………………………………. 120,000 Manufacturing overhead ……………………………………………….. 300,000 Total manufacturing costs ………………………………………………. 665,000 Total cost of all goods in process during the year …………………….. $700,000 Less: Cost of finished goods manufactured …………………………675,000 Work in process inventory, end of the year ……………………………….$25,000 5. The Accounting records of NuTronics, Inc., include the following information for the year ended Dec. 31, 2009.Dec.31 Jan 1Inventory of materials…………………………………………………………………………… $24,000 20,000Inventory of work in process………………………………………………………………… 8,000 12,000Inventory of finished goods………………………………………………………………….. 90,000 80,000Direct materials used……………………………………………………………………………. 210,000Direct labor……………………………………………………………………………………………. 120,000Selling Expenses……………………………………………………………………………………. 170,000General and administrative expenses…………………………………………………… 140,000Overhead is assigned to production at $192,000. Prepare a schedule of the cost of finished goods manufactured. (not all the data given above are used in this schedule)Assume that the company manufactures a single productand that 20,000 units were completed during the year. What is the average per-unit costs of manufacturing this product?NuTronics, Inc.Schedule of the Cost of Finished Goods ManufacturedFor the Year Ended December 31, 2007???Work in process, January 1, 2007 …………………………………. $12,000 Manufacturing costs assigned to production:Direct materials used ………………………………..$210,000 Direct labor ………………………………….120,000 Manufacturing overhead ……………………….192,000 Total manufacturing costs ………………………………….522,000 Total cost of all goods in process during the year ………………………..$534,000 Less: Work in process inventory, December 31, 2007 …………………….8,000 Cost of finished goods manufactured …………………………………………..$526,000 b. $26.30 per unit ($526,000 cost of finished goods manufactured, divided by 20,000 units)6. Stone Tools, Inc., had the following account balances as of Jan. 1Direct Materials inventory………………………………………$8,700Work in Process Inventory………………………………………76,500Finished Goods inventory………………………………………..53,000Manufacturing overhead…………………………………………. -0-During the month of Jan. all of the following occurred: Direct labor costs were $42,000 for 1,800 hours workedDirect materials costing $25,750 and indirect materials costing $3,500 were purchasedSales commissions of $16,500 were earned by the sales force$26,000 worth of direct materials were used in productionAdvertising costs of $6,300 were incurredFactory supervisors earned salaries of $12,000Indirect labor costs for the month were $3,000Monthly depreciation on factory equipment was $4,500Utilities expense of $7,800 was incurred in the factoryTools with manufacturing costs of $69,000 were transferred to finished goodsMonthly insurance costs for the factory were $4,200$3,000 in property taxes on the factory were incurred and paidTools with manufacturing costs of $89,000 were sold for $165,000Instructions: If stone assigns manufacturing overhead of $32,400 what will the balance in the Direct Materials, Work in Process, and finished Goods inventory accounts at the end of January?As of January 31, what will be the balance in the manufacturing Overhead account?What was stones operating income for January?a.Direct materials inventory, Jan. 1 ……………………………………… $ 8,700 Direct materials purchased …………………………………….25,750 Less: Direct materials used in production …………………………..(26,000)Direct materials inventory, Jan. 31 $ 8,450 Work in process inventory, Jan. 1 ……………………………………….. $ 76,500 Direct materials used …………………………………………………26,000 Direct labor used …………………………………………………42,000 Manufacturing overhead assigned …………………………………….32,400 Less: Finished goods transferred out ………………………………….(69,000)Work in process inventory, Jan. 31 …………………………………………….. $ 107,900 Finished goods inventory, Jan. 1 ……………………………………. $ 53,000 Cost of finished goods transferred in ………………………………………….69,000 Less: Cost of goods sold …………………………………………………………….(89,000)Finished goods inventory, Jan. 31 ……………………………………………. $ 33,000 b.Manufacturing overhead, Jan. 1 ………………………………………. $ 0 Indirect materials purchased …………………………………………………….3,500 Supervisor salaries ………………………………………………………………12,000 Indirect labor costs ……………………………………………………………3,000 Depreciation ……………………………………………………………………….4,500 Factory utilities ……………………………………………………………..7,800 Factory insurance ……………………………………………………………4,200 Property taxes on factory ………………………………………………….3,000 Less: Manufacturing overhead assigned …………………………………………(32,400)Manufacturing overhead, Jan. 31 ………………………………………….. $ 5,600 c.Operating income for the month of January:Revenues ………………………………………………………………………. $ 165,000 Cost of goods sold ………………………………………………………(89,000)Gross profit …………………………………………………………….76,000 Operating expenses:Sales commissions …………………………………. $ 16,500 Advertising expense …………………………..6,300 (22,800)Operating income …………………………………………………………….. $ 53,200 9. Mayville Company, a sole proprietorship, reports the following information pertaining to its operating activities:Ending BalanceBeg. BalMaterial Inventory………………………………………………………………………..$20,000$40,000Work in process Inventory…………………………………………………………….$29,000$60,000Finished Goods Inventory………………………………………………………………$52,000$42,000During the year, the company purchased $30,000 of direct materials and incurred $21,000 of direct labor costs. Total manufacturing overhead costs for the year amounted to 18,000. Selling and administrativeexpenses amounted to $60,000, and the companies annual sales amounted to $200,000. Prepare a Mayvilles schedule of the costs of finished goods manufactured.Prepare Mayvilles income statement (ignore income taxes)a.MAYVILLE COMPANY?Schedule of the Cost of Finished Goods Manufactured?For the Year Ended December 31 Work in process inventory, January 1? $ 60,000 Add: Manufacturing costs assigned to production:???Direct materials used (1) $ 50,000 ??Direct labor 21,000 ??Manufacturing overhead 18,000 ?????? 89,000 Total costs in process? $ 149,000 Less: Work in process inventory, December 31? 29,000 Cost of finished goods manufactured? $ 120,000 ?????????????????? (1)Computation of direct materials used:?????Direct materials, January 1? $ 40,000 ??Add: Direct materials purchased? 30,000 ??Direct materials available? $ 70,000 ??Less: Direct materials, December 31? 20,000 ??Direct materials put into production? $ 50,000 ?????????????????? b.MAYVILLE COMPANY?Income Statement?For the Year Ended December 31 Sales??? $ 200,000 Less: Cost of goods sold (1)? 110,000 Gross profit on sales? $ 90,000 Less: Selling and administrative expenses? 60,000 Net income? $ 30,000 ?????????????????? (1)The company’s cost of goods sold figure is based ???on the following flow of costs through production ???to finished goods:???????? Finished goods inventory, January 1? $ 42,000 Add: Cost of finished goods manufactured? 120,000 Cost of goods available for sale? $ 162,000 Less: Finished goods inventory, December 31? 52,000 Cost of goods sold? $ 110,000 ................
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