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ACC 206 Week Three Assignment

Please complete the following five exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

1. Overhead application: Working backward 

The Towson Manufacturing Corporation applies overhead on the basis of machine hours. The following divisional information is presented for your review:

   

Division A

Division B

 

Actual machine   hours 

22,500

? 

 

Estimated machine   hours 

20,000

? 

 

Overhead   application rate 

$4.50 

$5.00 

 

Actual overhead 

$110,000 

? 

 

Estimated overhead 

? 

$90,000 

 

Applied overhead 

? 

$86,000 

 

Over- (under-)   applied overhead 

? 

$6,500 

Find the unknowns for each of the divisions.

2. Computations using a job order system 

General Corporation employs a job order cost system. On May 1 the following balances were extracted from the general ledger;

Work in process  $ 35,200 

Finished goods  86,900 

Cost of goods sold  128,700 

Work in Process consisted of two jobs, no. 101 ($20,400) and no. 103 ($14,800). During May, direct materials requisitioned from the storeroom amounted to $96,500, and direct labor incurred totaled $114,500. These figures are subdivided as follows:

     

Direct Materials

Direct Labor

 

Job     No.

Amount

Job     No.

Amount

 

101

$5,000     

101

$7,800     

 

115

19,500

103

20,800

 

116

36,200

115

42,000

 

Other

35,800

116

18,000

   

$96,500 

Other     

25,900

       

$114,500 

                                                 

Job no. 115 was the only job in process at the end of the month. Job no. 101 and three "other" jobs were sold during May at a profit of 20% of cost. The "other" jobs contained material and labor charges of $21,000 and $17,400, respectively. 

General applies overhead daily at the rate of 150% of direct labor cost as labor summaries are posted to job orders. The firm's fiscal year ends on May 31.

 

Instructions:

a. Compute the total overhead applied to production during May. 

b. Compute the cost of the ending work in process inventory. 

c. Compute the cost of jobs completed during May. 

d. Compute the cost of goods sold for the year ended May 31. 

3. High-low method
The following cost data pertain to 20X6 operations of Heritage Products: 

   

Quarter 1 

Quarter 2 

Quarter 3 

Quarter 4 

 

Shipping costs 

$58,200 

$58,620 

$60,125 

$59,400 

 

Orders shipped 

120

140

175

150

The company uses the high-low method to analyze costs. 

a. Determine the variable cost per order shipped. 

b. Determine the fixed shipping costs per quarter. 

c. If present cost behavior patterns continue, determine total shipping costs for 20X7 if activity amounts to 570 orders. 

4. Break-even and other CVP relationships 

Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs total $4,320,000 per year. 

a. How many patient days does the hospital need to break even? 

b. What level of revenue is needed to earn a target income of $540,000? 

c. If variable costs drop to $36 per patient day, what increase in fixed costs can be tolerated without changing the break-even point as determined in part (a)? 

5. Direct and absorption costing 

The information that follows pertains to Consumer Products for the year ended December 31, 20X6. 

  

Inventory, 1/1/X6 

24,000 units 

 

Units manufactured 

80,000

 

Units sold 

82,000

 

Inventory, 12/31/X6 

? units 

 

Manufacturing costs: 

 

Direct materials 

$3 per unit 

 

Direct labor 

$5 per unit 

 

Variable factory overhead 

$9 per unit 

 

Fixed factory overhead 

$280,000 

 

Selling & administrative expenses: 

 

Variable 

$2 per unit 

 

Fixed 

$136,000 

The unit selling price is $26. Assume that costs have been stable in recent years.

Instructions:

a. Compute the number of units in the ending inventory.

b. Calculate the cost of a unit assuming use of:

1. Direct costing.

2. Absorption costing.

c. Prepare an income statement for the year ended December 31, 20X6, by using direct costing.

d. Prepare an income statement for the year ended December 31, 20X6, by using absorption costing.