job costing and process costing problems

Dr. Mojahid F. Saeed Osman/ISE304.01/Term132/HW4/April 10, 2014

ISE304.01 Principles of Industrial Costing

Term: Second Semester 2013-14 (132)

Homework Assignment 4 Due on Thursday April 17, 2014 by 01:30 PM

Submission Instructions: • Make sure your name is listed on a cover sheet as the first page of the document.

• Each question should be numbered. • Hand written homework will be accepted. However, you will have a credit of 5% of the total

possible points for typing the entire homework in MS word.

Read Chapter 7 in your Textbook

1. A manufacturing company produces two jobs F102 and F301, and uses job costing to account for costs. The following balances appeared in the account of the company:

Job F102 Job F301

Beginning Raw Material Inventory 111,150 - - Ending Raw Material Inventory 0 - - Beginning Work-in-Process 24,750 7,500 7,650

Ending Work-in-Process 0 0 0

Beginning Finished Goods Inventory 124,500 38,400 44,100

Ending Finished Goods Inventory 99,600 Beginning Good Sold 0 - -

Ending Good Sold ? - -

The following transactions occurred in March 2014:

(1) Purchased 105,000SR in materials on credit (2) Issued 3,000 in supplies from the material inventory to production department (3) Paid for material purchased in (1) (4) Issued 51,000 in direct materials to production department. Of this amount, 21,000 for F102, 30,000

for F301.

(5) Incurred direct labor costs of 84,000. Of this amount, 37,500 for F102, 46,500 for F301. (6) Paid (in cash) for utilities, power, equipment maintenance, and other miscellaneous items for the

manufacturing plant totaling 64,800SR (actual)

(7) Recognized depreciation of 34,500 on manufacturing property, plant, and equipment.(actual) (8) Applied overhead on the basis of 175% of direct labor costs.

The company uses a predetermined overhead rate based on direct labor costs to allocate overhead to

individual jobs.

a) Compute the predetermined overhead rate/percentage to be used to allocate the actual overhead to individual jobs during the year Allocate the overhead to individual jobs (2 points)

b) Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold, and the end balances of the four inventory accounts (20 points)

c) Compute the total cost of individual Jobs F102 and F301 when they are finished (6 points) d) Compute over/underapplied overhead. (2 points)

KING FAHD UNIVERSITY OF PETROLEUM & MINERALS Systems Engineering Department

ISE304.01 Principles of Industrial Costing 2 nd

Semester 2013-14

Dr. Mojahid F. Saeed Osman/ISE304.01/Term132/HW4/April 10, 2014 2

e) ASSUMING that the following account balances are recorded at the end of March 2014

Work in Process 306,750

Finished Good 99,600

Cost of Goods Sold 207,150

How would you recommend treating over/underapplied overhead, assuming that it is material?

(5 points)

Read Chapter 8 in your Textbook

2. The following information pertains to a production department for the month of March 2014. All materials are added at the beginning of the process. Labor and overhead (conversion resources) are

added evenly throughout the process.

Physical units

Beginning work-in-process inventory 3,600 units (30% complete)

Units started in March 18,000 units

Ending work-in-process inventory 2100 units (45% complete)

Assuming the costs to be accounted for as follows:

Materials Conversion

Beginning work-in-process inventory 25,500SR 22,656SR

Costs added in March 181,500 392,616

a. Determine the number of units completed and transferred out in March 2014. (3 Points)

(i) Using Weighted Average method determine the following: b. Compute the equivalent units. (4 Points) c. Compute the cost per equivalent unit. (3 Points) d. Compute the costs of goods transferred out and the ending work-in-process inventory. (4

Points)

(ii) Using First-in-first-out method determine the following e. Compute the equivalent units. (4 Points) f. Compute the cost per equivalent unit. (3 Points) g. Compute the costs of goods transferred out and the ending work-in-process inventory. (4

Points)

Show your work

Total Possible Points: 60