1. Ashley Corporation provided the following list of cost data related to its manufacturing operations for the month of September 20X4.
(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?
2. Mel Cheek is a fishing guide on the Chenega River. The fish are usually found 20 to 50 miles upriver. Once the fish are located, Mel slows the boat to trolling speed and fishes for about 6 hours before returning to dock. Mel has noted that overall fuel costs vary based on "miles upriver" and he is considering changing his guide fee to separately charge customers for estimated fuel costs. Below is Mel's log for 15 typical days showing "miles upriver to locate fish" and "total fuel cost".
(a) Use the high-low method to determine the "fixed fuel cost" associated with the trolling time, and the "variable fuel cost" associated with running up and down the river.
(b) If the sole objective of the fuel charge is to approximately recover actual costs incurred each day, would "$2.50 per mile upriver" be a fair formula? What alternative formula might you suggest?
3. Greg Morrison recently graduated from mortuary school. He is considering opening his own funeral home. A funeral home is a high-fixed cost business, as it requires considerable expenditures for facilities, labor, and equipment, no matter how many families are served. Assume the annual fixed cost of operations is $800,000. Further assume that the only significant variable cost relates to burial containers like urns and caskets. An average casket costs $1,200. Greg's banker has asked a variety of questions in contemplation of providing a loan for this business.
(a) If the average family is charged $6,000 for services and a burial container, how many families must be served to clear the break-even point?
(b) If the banker believes Greg will only serve 100 families during the first year in business, how much will the business lose during its first year of operation?
(c) If Greg believes his profits will be at least $100,000 during the first year, how much is he anticipating for total revenue?
(d) The banker has suggested that Greg can reduce his fixed costs by $150,000 if he will not buy any vehicles. Greg can instead rent vehicles as needed. The variable cost of renting is $700 per family served. Will this suggestion help Greg reach the break-even point sooner?
4. Ekpro Products manufactures containment chambers for environmentally friendly incinerators. Each chamber is built to customer specifications. Most of the direct labor time is spent on welding activities. Following is the job cost sheet for an incinerator manufactured for Benzate Corporation:
(a) What types of costs do you imagine would be included in factory overhead? If overhead is applied based on direct labor hours, what is the application rate?
(b) Ekpro is considering installation of a robotic machine that will do all welding operations. How might this decision impact the total overhead and the application method?
(c) How does the applied overhead relate to the actual overhead? When they are not the same, what happens to the difference? Why is actual overhead not assigned to each job?
5. 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.
6. 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:
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.
7. "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."
Zeus Corporation prepared the following "unit reconciliation" for the month of July:
The above beginning work in process inventory had an assigned cost of $3,000,000, divided between direct materials (30%), direct labor (20%), and factory overhead (50%).
Additional costs incurred during July were $9,500,000, divided between direct materials (15%), direct labor (25%), and factory overhead (60%).
Prepare a schedule showing the calculation of cost per equivalent unit.
8. "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.
Below is the company's calculation of cost per equivalent unit for October. During October, the company completed and transferred 8,000 diamonds to finished goods. An additional 4,000 units were still in process at the end of the month. The ending work in process was 60% complete with respect to direct materials and 40% complete with respect to both elements of conversion cost."
Prepare a schedule showing the allocation of total cost between finished goods and ending work in process.
9. Howorth Dental Products is a London-based producer of a patented anti-microbial dental floss. All raw material is introduced at the beginning of the production process, but considerable processing time is needed to create the anti-microbial qualities of the specially designed floss. Howorth measures output in meters of floss and applies the weighted-average process costing method. The following information is available for a recent period:
Prepare a cost of production report for Howorth.
10. Vasquez Systems produces high-quality table tops. Each table top is produced from a single large tree in a three-step process consisting of milling, sanding, and cutting. All raw material is introduced at the start of the milling process. The company uses a process costing system for all costs incurred throughout the production cycle. The following data were extracted from each department's cost of production report prepared for April:
Milling Dept. The beginning balance of work in process was $275,000. During April, additional costs of $690,000 were incurred. The additional costs were attributable to direct materials (70%), direct labor (20%), and factory overhead (10%). The ending balance of work in process was $160,000.
Sanding Dept. The beginning balance of work in process was $175,000. During April, additional costs of $400,000 were incurred. The additional costs were attributable to direct labor (70%) and factory overhead (30%). The ending balance of work in process was $290,000.
Cutting Dept. The beginning balance of work in process was $365,000. During April, additional costs of $150,000 were incurred. The additional costs were attributable to direct labor (60%) and factory overhead (40%). The ending balance of work in process was $210,000.
Prepare summary journal entries to reflect costs incurred by each department during April, as well as the transfer of costs between departments and into finished goods.
Attachment:- Homework_Problems.xls