Question 1
The following information appears in Tots' Toy Factory records for the year ended December 31, 20x6:
Administrative expense $21,550
Manufacturing building depreciation 12,500
Indirect materials and supplies 2,150
Sales commissions 7,100
Direct materials inventory, January 1 8,200
Direct labor 16,300
Direct materials inventory, December 31 9,000
Finished goods inventory, January 1 4,450
Finished goods inventory, December 31 4,050
Direct materials purchases 10,150
Work in process inventory, December 31 5,550
Supervisory and indirect labor 6,200
Property taxes, manufacturing plant 3,700
Plant utilities and power 10,750
Work in process inventory, January 1 6,600
Sales revenue 97,200
Prepare an income statement with a supporting cost of goods sold statement.
Question 2
The following data were taken from the records of Cougar Enterprises, a Canadian manufacturer that uses a job-order costing system:
Work in Process, November 30
Job Number 170 175 180
Direct materials $1,800 $2,400 $1,500
Direct labour 1,200 2,400 600
Applied overhead 600 1,350 450
Total $3,600 $6,150 $2,550
During December, jobs numbered 170 through 190 were worked on, and the following costs were incurred:
Job Number 170 175 180 185 190 Total
Total Direct materials $600 $ 900 $1,200 $1,350 $1,500 $5,550
Direct labour $750 $1,500 $3,000 $2,250 $6,000 $13,500
Direct labour hours 50 100 200 150 400 900
Additional information:
1. Total overhead costs are applied to jobs on the basis of direct labour hours worked. At the beginning of the year, the company estimated that total overhead
costs for the year would be $150,000, and the total labour hours worked would be 12,500.
2. Total actual overhead for the period January 1 - November 30 was $160,010. Direct labour hours worked for the previous 11 months (January through November) were 11,250.
3. Expenses for December were as follows (not yet recorded in the books of account):
Direct materials purchased $7,500
Production supervisor salary 3,700
Amortization (plant and equipment) 2,490
Factory supplies 1,500
Sales staff salaries 9,200
Utilities (factory) 1,800
Administrative expenses 9,500
Total $35,690
4. The company writes off all over- or underapplied overhead to Cost of Goods Sold at the end of the year.
5. Jobs numbered 170, 180, 185, and 190 were completed during December. Only Job 190 remained in finished goods on December 31.
6. The company charges its customers 250 percent of total manufacturing cost.
7. Cost of goods sold to December 1 was $358,750.
8. There were no jobs in finished goods on November 30.
Required:
1. Calculate the predetermined overhead rate used to apply overhead to jobs.
2. Prepare job-order cost sheets for each job in process during December.
3. What is the cost of work-in-process inventory at December 31?
4. Prepare a statement of cost of goods manufactured for December.
5. Calculate the gross margin for December.
6. Calculate the over- or underapplied overhead for the year. What effect would this amount have on net income?
Question 3
Ehsan Electronics Company manufactures two products, X21 and Y37, at its manufacturing plant in Duluth, Minnesota. For many years the company has used a
simple plant-wide manufacturing support cost rate based on direct labor hours. A new plant accountant suggested that the company may be able to assign support costs to
products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.
After studying the plant's manufacturing activities and costs, the plant accountant has collected the following data for 20x0:
ITEM X21 Y37
Units produced and sold 50,000 100,000
Direct labor hours used 100,000 300,000
Direct labor cost $1,000,000 $4,500,000
Number of times handled 40,000 20,000
Number of parts 12,000 8,000
Number of design changes 2,000 1,000
Number of product setups 8,000 6,000
The accountant has also determined that actual manufacturing support costs incurred during 20x0 were as follows:
COST POOL ACTIVITY COSTS
Handling $ 3,000,000
Number of parts 2,400,000
Design changes 3,300,000
Setups 2,800,000
Total $11,500,000
The direct materials cost for product X21 is $120 per unit, while for product Y37 it is $140 per unit.
Required -
(a) Determine the unit cost of each product using direct labor hours to allocate all manufacturing support costs.
(b) Determine the unit cost of each product using activity-based costing.