Accounting 221 Homework 2-8

wk_4_hw_problems.xls

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Problem 1

Perfect Pad manufacturers floor mats for trailers that are used to transport horses. The mats provide for a firm footing surface that quickly sheds water. Mats are made to customer specifications via orders submitted over an internet site. The mats are completed and shipped in about one day. As a result, Perfect Pad does not maintain any work in process or finished goods inventory. The following costs were incurred in producing and selling mats during August:
Synthetic rubber used in the mat	$ 134,300
Lubricant used in the molding machine	14,000
Factory rent	9,600
Electricity to run the molding machine	2,600
Labor cost of machine operators	34,100
Internet sales site	1,500
Administrative salaries	12,500
Depreciation of molding machine	7,400
Salary of factory safety inspector	3,500
Office rent	13,500

Evaluate these costs, and determine the amount of direct material, direct labor, factory overhead, and selling/general/administrative costs. Next, identify how much is considered to be a "prime cost" and how much is considered to be a "conversion cost."

&R&"Myriad Web Pro,Bold"&20B-17.04

B-17.04

Worksheet 1

	Total Cost	Direct Material	Direct Labor	Factory Overhead	SG&A
Synthetic rubber	$ 134,300	$ -	$ -	$ -	$ -
Lubricant - molding machine	14,000	-	-	-	-
Factory rent	9,600	-	-	-	-
Electricity - molding machine	2,600	-	-	-	-
Labor cost of machine operators	34,100	-	-	-	-
Internet sales site	1,500	-	-	-	-
Administrative salaries	12,500	-	-	-	-
Depreciation of molding machine	7,400	-	-	-	-
Salary of factory safety inspector	3,500	-	-	-	-
Office rent	13,500	-	-	-	-
	$ 233,000	$ -	$ -	$ -	$ -

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-17.04

B-17.04

Problem 2

Ashley Corporation provided the following list of cost data related to its manufacturing operations for the month of September 20X4.
	Beginning raw materials inventory	$ 966,400
	Raw materials purchased (net)	2,345,500
	Ending raw materials inventory	818,200
	Direct labor costs	322,300
	Indirect materials	125,500
	Indirect labor	88,900
	Factory utilities and maintenance	456,000
	Factory depreciation	56,600
	Other factory related overhead	24,400
	Beginning work in process	777,000
	Ending work in process	717,000


(a)	Arrange the cost data into a statement of cost of goods manufactured.
(b)	If Ashley's cost of goods sold for the month was $4,000,000, how much was the increase or decrease in finished goods inventory for the month of September?

&R&"Myriad Web Pro,Bold"&20B-17.06

B-17.06

Worksheet 2

(a)

	ASHLEY CORPORATION
	SCHEDULE OF COST OF GOODS MANUFACTURED
	FOR THE MONTH ENDING SEPTEMBER 30, 20X4

	Direct materials:
		$ -
		-
		$ -
		-
	Raw materials transferred to production		$ -
	Direct labor		-
	Factory overhead
		$ -
		-
		-
		-
		-	-
	Total manufacturing costs		$ -
			-
			$ -
			-
	Cost of goods manufactured		$ -




(b)

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-17.06

B-17.06

Problem 3

Information for three different companies follows. Each company applies factory overhead at the rate of 40% of direct labor cost. In each scenario, the following entry was made to record the actual overhead costs:
		Factory Overhead	85,000
		Salaries Payable		50,000
		Utilities Payable		15,000
		Supplies		4,000
		Accumulated Depreciation		16,000


Prepare a compound journal entry for each company to transfer raw materials to production, record direct labor costs on each job, and apply overhead at the predetermined rate. If the scenario involves underapplied or overapplied overhead, prepare an additional journal entry to transfer the amount to Cost of Goods Sold.
Company A	Raw materials transferred to production totaled $100,000, and direct labor cost was $212,500.

Company B	Raw materials transferred to production totaled $110,000, and direct labor cost was $200,000.

Company C	Raw materials transferred to production totaled $90,000, and direct labor cost was $225,000.

&R&"Myriad Web Pro,Bold"&20B-19.07

B-19.07

Worksheet 3

GENERAL JOURNAL
Date	Accounts	Debit	Credit
A



	To record costs and apply overhead at the predetermined rate ($212,500 X 40% = $85,000)

B



	To record costs and apply overhead at the predetermined rate ($200,000 X 40% = $80,000)

B



C



	To record costs and apply overhead at the predetermined rate ($225,000 X 40% = $90,000)

C

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-19.07

B-19.07

Problem 4

Cool Sun produces awnings and screens. Prepare journal entries to reflect the following transactions. After you complete the entries, determine the amount to include in raw materials, work in process, and finished goods.

Aug. 4, 20X5	Purchased fabric and aluminum to be used in the manufacturing process. The purchase price was $4,000, on account.

Aug. 8, 20X5	Transferred 60% of the raw materials purchased on August 4 into production.

Aug. 8, 20X5	Incurred direct labor costs of $3,000. Factory overhead is applied at 40% of the direct labor cost.

Aug. 9, 20X5	Transferred completed awnings with total assigned costs of $4,400 to finished goods.

Aug. 10, 20X5	Sold and delivered half of the finished goods (from August 9) to a customer for $4,000 cash.

&R&"Myriad Web Pro,Bold"&20B-19.06

B-19.06

Worksheet 4

GENERAL JOURNAL			Page 1
Date	Accounts	Debit	Credit
8-4-X5

	To record purchase of raw materials

8-8-X5



	To transfer raw materials to production, record direct labor costs on job, and apply overhead at the predetermined rate

8-9-X5

	To transfer completed units to finished goods inventory

8-10-X5

	To record sale of finished awning for $4,000

8-10-X5

	To transfer finished goods to cost of goods sold

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-19.06

B-19.06

Problem 5

Zeus Corporation produces cultured diamonds via a secretive process that grows the diamonds in a vacuum chamber filled with a carbon gas cloud. The diamonds are produced in a single continuous process, and Zeus uses the weighted-average process costing method of accounting for production. The production process requires constant utilization of facilities and equipment, as well as direct labor by skilled technicians. As a result, direct labor and factory overhead are both deemed to be introduced uniformly throughout production.

At the beginning of June, 20X9, 4,000 diamonds were in process. During June, an additional 8,000 diamonds were started, and 7,000 diamonds were completed and transferred to finished goods.

As of the beginning of the month, work in process was 80% complete with respect to materials and 60% complete with respect to conversion costs.

As of the end of the month, work in process was 70% complete with respect to materials and 40% complete with respect to conversion costs.

Prepare a "unit reconciliation" schedule that includes calculations showing the equivalent units of materials, direct labor, and factory overhead for June.

&L&"Arial,Bold"&20 &R&"Myriad Web Pro,Bold"&20B-20.02

B-20.02

Worksheet 5


Unit Reconciliation:
	Quantity Schedule
Beginning Work in Process
Started into Production
Total Units into Production		Equivalent Units Calculations:
			Conversion
		Direct Materials	Direct Labor	Factory Overhead
To Finished Goods
Ending Work in Process
Total Units Reconciled

		Ending WIP Completion Status: Materials = % Conversion = %

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-20.02

B-20.02