What was the amount in the beginning finished goods and

Question

Question 1:

Crandall Corporation makes portable enclosures for festivals, concerts, and other events. Its products aren't mass produced-each unit is made to customer specifications. Crandall employs a normal job costing system. Direct labor at the company is compensated at a rate of $21 per hour: however, employees receive no pay when they aren't working on jobs. A predetermined rate based on direct labor-hours is used to assign manufacturing overhead to jobs.

In the past two years, the company incurred manufacturing overhead costs (adjusted for price-level changes using current prices and wage rates) as follows:

	Year 1	Year 2
Direct labor-hours worked	144.000	118,000
Manufacturing overhead costs incurred:
Indirect labor	$4,580,000	$5,603,340
Empluyee benefits	2,204,000	3,134,000
Supplies	858,000	1,367,400
Power	620,000	987,420
Heat and light	244,000	210,870
Supervision	598,000	721,970
Depreciation	2,370,000	2,370,000
Property taxes and insurance	945,000	945,000
Total manufacturing overhead costs	$12,419,000	$15,340,000

At the start of Year 3, Crandall has two jobs not yet delivered to customers. Job AT-360 was completed on December 15, Year 2. It's scheduled to ship out on January 21, Year 3. Job AT-365 is still in progress. The predetermined rate in Year 2 was $155 per direct labor-hour. Data on direct material costs and direct labor-hours for these jobs in Year 2 was as follows:

		Job AT-360	Job AT-365 $947,000 6,200 hours
Direct material costs Direct labor-hours		$680,000
		4.800 hours

During Year 3, Crandall incurred direct material costs and direct labor-hours for all jobs worked in Year 3, including the completion of Job AT-365, as follows:

Direct material costs	$15.780,000
Direct labor-hours	150,000
Actual manufacturing overhead	$18,609,400

To compute the predetermined overhead rate, Crandall uses the previous year's actual over¬head rate. At the end of Year 3, three jobs had not been shipped. Data on these jobs is as follows:

	AT-285	AT-288	AT-292
Direct materials	$154,000	$224,500	$112,400
Direct labor-hours	2,600 hours	3,400 hours	7.500 hours
Job status	Finished	Finished	In progress

A. What was the amount in the beginning Finished Goods and beginning Work-in-Process accounts for Year 3?

B. Crandall incurred direct materials costs of $210,000 and used an additional 800 hours in Year 3 to complete Job AT-365. What was the final (total) cost charged to Job AT-365?

C. What was the overapplied or underapplied overhead for Year 3?

D. Crandall prorates any overapplied or underapplied overhead to Cost of Goods Sold, Finished Goods Inventory, and Work-in-Process Inventory. Prepare a properly formatted journal entry to prorate the Overapplied or Underapplied Overhead calculated in requirement. As an allocation basis, use the direct labor hours in each account from Year 3.

E. A customer requested that Crandall bid on a job to be finished in Year 4. Crandall has estimated that the job will need approximately $156,000 in direct materials and 8,000 direct labor-hours. Due to the condition of the economy, Crandall believes demand for its services will be below average in Year 4, and the CEO therefore would like to bid aggressively, but doesn't want to lose money on the project. Crandall estimated essentially no sales or administrative costs connected with this job. What is the minimum amount the company can bid on the job and not incur a loss? (In order to perform an estimation of the variable portion of overhead, use the high-low method.)

Question 2:

Intrepid Industries manufactures sterile parts used in medical equipment. The company uses the weighted-average process costing method to account for production costs. It produces parts in three different departments: Forming, Sterilization, and Assembling. The following information was reported for the Assembling Department for the month of June:

Beginning work-in-progress inventory on June 1 had 250,000 units made up of the following:

	Amount	Degree of Completion
Prior department costs transferred in from the Forming Department	$387,600	100%
Costs added by the Steril­ization Department:
Direct materials	317,200	100%
Direct labor	120,050	40%
Manufacturing overhead	67.100	30%
	$504,350
Work in process, June 1	$891.950

During June, 580;000 units were transferred in from the Forming Department at a cost of $1,870,000. The Assembling Department added the following costs:

Direct materials	$974 8012
Direct labor	318,600
Manufacturing overhead	202,000
Total costs added	$1,495,400

Assembling finished 480,000 units and transferred them to the Sterilization Department. At June 30, the number of units in ending work-in-progress inventory was 350,000. The degree of completion of work-in-process inventory at June 30 was as indicated below:

Direct materials	80%
Direct labor	65
Manufacturing overhead	30

A. Prepare a correctly formatted (including heading) production cost report (see Exhibit 8.11 as a example report) using the weighted-average method.
B. Management wants to lower the costs of manufacturing the parts. It has established the following per unit targets for this product in the Assembling Department: materials, $1 65; labor, $.62; and manufacturing overhead $0.48. Has the product achieved management's cost targets in the Assembling Department? Write a short report to management containing your answer(s).

C. Prepare a correctly formatted (including heading) production cost report (see Exhibit 8.12 as a example report) using the FIFO method using the data given in Question A with one exception: the beginning direct materials costs as of June 1 listed in work-in-process should be $315,700 instead of $317,200.

D. Using data from the FIFO report, write a short report to management addressing the issues raised in Question B.

Question 3:

Wayfarer Corporation is contemplating changing its cost system to an activity-based costing system and wants to know more about the effects of doing so. The corporation's cost accountant has identified three overhead cost pools along with the cost drivers associated with each pool as follows:

Cost Pools	Costs	Activity Drivers
Utilities	$5,420,000	180,000 machine hours
Delivery	5,420,000	10,000 deliveries
Assembly	10,940,000	2,000,000 pounds of material

The corporation makes three models of kitchen sinks (Deluxe, Premium, and Standard). The plans for production for the next year and the direct costs that have been budgeted for activity by product are listed below:

                                                           Products

	Deluxe	Premium	Standard
Total direct costs (material and labor)	$850,000	850,000	850,000
Total machine-hours	210,000	95,000	154,000
Total deliveries	310	620	480
Total pounds of material	1,800.000	1,200,000	2,600,000
Total direct labor-hours	12,400	8,500	18,600
Number of units produced	18.000	12,000	24,000

A. The current cost accounting system charges overhead to products on the basis of direct labor-hours. What unit product costs will be reported for the three products assuming the current cost system continues to be used?

B. What are the cost driver rates associated with the three cost pools specified by the cost accountant?

C. What unit product costs will be reported for the three products if the ABC system suggested by the cost accountant's categorization of cost pools is utilized?