cost accounting unit 4

After reading information on the fundamentals of product and service costing in Chapter 6 of the Fundamentals of Cost Accounting text, complete the problems shown below. In the first problem you will apply your knowledge of the operation of a two-stage allocation system for product costing, and in the second problem you will apply operations costing to assign conversion costs based on the number of units assembled.

Complete the following learning problems:

· Problem 6-49, "Two-Stage Allocation and Product Costing," page 234.

· Problem 6-51, "Operations Costing," page 235.

-49. Two-Stage Allocation and Product Costing

( LO 6-5 )

Donovan & Parents produces soccer shorts and jerseys for youth leagues. Most of the production is done by machine. Data on operations and costs for March follow:

	Jerseys	Shorts	Total
Units produced	32,000	16,000	48,000
Machine-hours used	6,000	4,800	10,800
Direct labor-hours	1,200	720	1,920
Direct materials costs	$96,000	$64,000	$160,000
Direct labor costs	$32,800	$19,200	$ 52,000
Manufacturing overhead costs			$266,400

Management asks the firm’s cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine-hours. The analysis of overhead accounts by the cost accountant follows:

Account	Amount	Related to:
Utilities	$48,000	Machine-hours
Supplies	33,600	Materials
Machine depreciation and maintenance	105,600	Machine-hours
Purchasing and storing materials	38,400	Materials
Miscellaneous	40,800	Machine-hours

Required

a. Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs.

b. Compute the total costs of production and the cost per unit for each of the two products for March.

6-51. Operations Costing

Vermont Instruments manufactures two models of calculators. The finance model is the Fin-X and the scientific model is the Sci-X. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is in the cost of the parts. The following data are available for June:

	Fin-X	Sci-X	Total
Number of units	10,000	40,000	50,000
Parts cost per unit	$25	$30
Other costs:
Direct labor			$ 62,000
Indirect materials			17,500
Overhead			70,500
Total			$150,000

Required

Vermont Instruments uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost per unit of the Fin-X and Sci-X models for June.

After reading information on job costing in Chapter 6 of the Fundamentals of Cost Accounting text, complete the problems shown below. This assignment will help pull together two important concepts associated with job costing. The first problem will apply your knowledge of analyzing overhead using a predetermined rate, while the second problem will apply job costing to service companies.

Complete the following learning problems:

· Problem 7-45, "Analysis of Overhead Using a Predetermined Rate," page 270.

· Problem 7-49, "Job Costs: Service Company," page 273.

7-45. Analysis of Overhead Using a Predetermined Rate

( LO 7-3 )

Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows:

Direct labor-hours	150,000	180,000	210,000
Variable overhead costs	$1,050,000	$1,260,000	$1,470,000
Fixed overhead costs	648,000	648,000	648,000
Total overhead	$1,698,000	$1,908,000	$2,118,000

The expected volume is 180,000 direct labor-hours for the entire year. The following information is for March, when Jobs 6023 and 6024 were completed:

Inventories, March 1
Materials and supplies	$ 31,500
Work in process (Job 6023)	$162,000
Finished goods	$337,500
Purchases of materials and supplies
Materials	$405,000
Supplies	$ 45,000
Materials and supplies requisitioned for production
Job 6023	$135,000
Job 6024	112,500
Job 6025	76,500
Supplies	18,000
	$342,000
Factory direct labor-hours (DLH)
Job 6023	10,500 DLH
Job 6024	9,000 DLH
Job 6025	6,000 DLH
Labor costs
Direct labor wages (all hours @ $8)	$204,000
Indirect labor wages (12,000 hours)	51,000
Supervisory salaries	108,000
Building occupancy costs (heat, light, depreciation, etc.)
Factory facilities	$ 19,500
Sales and administrative offices	7,500
Factory equipment costs
Power	12,000
Repairs and maintenance	4,500
Other	7,500
	$ 24,000

Required

Answer the following questions:

a. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Note: Regardless of your answer to requirement [a], assume that the predetermined overhead rate is $9 per direct labor-hour. Use this amount in answering requirements [b] through [e].)

b. Compute the total cost of Job 6023 when it is finished.

c. How much of factory overhead cost was applied to Job 6025 during March?

d. What total amount of overhead was applied to jobs during March?

e. Compute actual factory overhead incurred during March.

f. At the end of the year, Kansas Company had the following account balances:

Overapplied Overhead	$ 3,000
Cost of Goods Sold	2,940,000
Work-in-Process Inventory	114,000
Finished Goods Inventory	246,000

How would you recommend treating the overapplied overhead, assuming that it is not material? Show the new account balances in the following table:

Overapplied Overhead	_________
Cost of Goods Sold	_________
Work-in-Process Inventory	_________
Finished Goods Inventory	_________

7-49. Job Costs: Service Company

( LO 7-4 )

For the month of July, UP Payroll Services worked 3,000 hours for Dune Motors, 900 hours for Jake’s Charters, and 1,500 hours for Mission Hospital. UP bills clients at $128 an hour; its labor costs are $48 an hour. A total of 6,000 hours were worked in January with 600 hours not billable to clients. Overhead costs of $72,000 were incurred and were assigned to clients on the basis of direct labor-hours. Because 600 hours were not billable, some overhead was not assigned to jobs. UP had $48,000 in marketing and administrative costs. All transactions were on account.

Required

a. What are the revenue and cost per client?

b. Prepare an income statement for July.