ACC 206 Principles of Accounting

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:

Find the unknowns for each of the divisions.

 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:

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:

Compute the total overhead applied to production during May.

Compute the cost of the ending work in process inventory.

Compute the cost of jobs completed during May.

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

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

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

Determine the variable cost per order shipped.

Determine the fixed shipping costs per quarter.

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

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.

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

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

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.

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

Instructions:

Compute the number of units in the ending inventory.

Calculate the cost of a unit assuming use of:

Direct costing.

Absorption costing.

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

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