PROBLEM 1 Kennedy Company reports the following costs and expenses in May. Factory utilities $ 13,500 Direct labor $79,100 Depreciation on factory Sales salaries 48,400 equipment 12,650 Property taxes on factory Depreciation on delivery trucks 3,800 building 2,500 Indirect factory labor 48,900 Repairs to office equipment 1,300 Indirect materials 70,800 Factory repairs 2,000 Direct materials used 157,600 Advertising 23,000 Factory manager's salary 8,000 Office supplies used 2,640 From the information, determine the total amount of: (a) Manufacturing overhead. (b) Product costs. (c) Period costs. PROBLEM 2 Kwik Delivery Service reports the following costs and expenses in June 2013. Indirect materials $ 8,400 Driver's salaries $14,000 Depreciation on delivery Advertising 5,100 equipment 11,200 Delivery equipment Dispatcher's salary 5,000 repairs 300 Property taxes on office Office supplies 650 building 870 Office utilities 1,490 CEO's salary 12,000 Repairs on office Gas and oil for delivery trucks 3,200 equipment 180 Determine the total amount of (a) delivery service (product) costs and (b) period costs. PROBLEM 3 Finn Manufacturing Company uses a job order cost accounting system and keeps perpetual inventory records. Prepare journal entries to record the following transactions during the month of June. June 1 Purchased raw materials for $20,000 on account. 8 Raw materials requisitioned by production: Direct materials $8,000 Indirect materials 1,000 15 Paid factory utilities, $2,100 and repairs for factory equipment, $8,000. 25 Incurred $96,000 of factory labor. 25 Time tickets indicated the following: 1
Direct Labor (6,000 hrs $12 per hr) = $72,000 Indirect Labor (3,000 hrs $8 per hr) = 24,000 $96,000 25 Applied manufacturing overhead to production based on a predetermined overhead rate of $7 per direct labor hour worked. 28 Goods costing $18,000 were completed in the factory and were transferred to finished goods. 30 Goods costing $15,000 were sold for $20,000 on account. PROBLEM 4 Selected accounts of Kosar Manufacturing Company at year end appear below: RAW MATERIALS INVENTORY 2 WORK IN PROCESS INVENTORY (a) 40,000 (d) 25,000 (d) 25,000 (g) 140,000 (e) 80,000 (f) 100,000 FINISHED GOODS INVENTORY (g) 140,000 (h) 120,000 (h) 120,000 FACTORY LABOR COST OF GOODS SOLD MANUFACTURING OVERHEAD (b) 110,000 (e) 110,000 (c) 75,000 (f) 100,000 (e) 30,000 Explain the probable transaction that took place for each of the items identified by letters in the accounts. For example: (a) Raw materials costing $40,000 were purchased. PROBLEM 5 Lutz Company produces a product in two departments: (1) Mixing and (2) Finishing. The company uses a process cost accounting system. (a) Purchased raw materials for $50,000 on account. (b) Raw materials requisitioned for production were: Direct materials Mixing department $20,000 Finishing department 14,000 (c) Incurred labor costs of $69,000. (d) Factory labor used: Mixing department $44,000 Finishing department 25,000
(e) Manufacturing overhead is applied to the product based on machine hours used in each department: Mixing department 300 machine hours at $30 per machine hour. Finishing department 500 machine hours at $20 per machine hour. (f) Units costing $56,000 were completed in the Mixing Department and were transferred to the Finishing Department. (g) Units costing $60,000 were completed in the Finishing Department and were transferred to finished goods. (h) Finished goods costing $40,000 were sold on account for $55,000. Prepare the journal entries to record the preceding transactions for Lutz Company. PROBLEM 6 Hayward Industries manufactures dining chairs and tables. The following information is available: Dining Chairs Tables Total Cost Machine setups 200 600 $48,000 Inspections 250 470 $72,000 Labor hours 2,600 2,400 Hayward is considering switching from one overhead rate based on labor hours to activitybased costing. Perform the following analyses for these two components of overhead: a. Compute total machine setups and inspection costs assigned to each product, using a single overhead rate. b. Compute total machine setups and inspection costs assigned to each product, using activity-based costing. c. Comment on your findings. PROBLEM 7 Sonoma Manufacturing has five activity cost pools and two products (a budget tape vacuum and a deluxe tape vacuum). Information is presented below: Cost Drivers by Product Activity Cost Pool Cost Driver Est. Overhead Budget Deluxe Ordering and Receiving Orders $ 120,000 600 400 Machine Setup Setups 297,000 500 400 Machining Machine hours 1,000,000 150,000 100,000 Assembly Parts 1,400,000 1,200,000 800,000 Inspection Inspections 300,000 550 450 3
Compute the overhead cost per unit for each product. Production is 700,000 units of Budget and 200,000 units of Deluxe. Round your answer to the nearest cent. PROBLEM 8 Sandburg Manufacturing manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for the production of 2,000 units. The Utilities and Maintenance are mixed costs. The fixed portions of these costs are $300 and $200, respectively. Costs Incurred Production in Units 2,000 4,000 Production Costs a. Direct Materials $ 4,000? b. Direct Labor 16,000? c. Utilities 1,000? d. Rent 3,000? e. Indirect Labor 4,200? f. Supervisory Salaries 1,500? g. Maintenance 900? h. Depreciation 2,500? Calculate the expected costs to be incurred when production is 4,000 units. Use your knowledge of cost behavior to determine which of the other costs are fixed or variable. PROBLEM 9 Bill Braddock is considering opening a Fast n Clean Car Service Center. He estimates that the following costs will be incurred during his first year of operations: Rent $9,200, Depreciation on equipment $7,000, Wages $16,400, Motor oil $2.00 per quart. He estimates that each oil change will require 5 quarts of oil. Oil filters will cost $3.00 each. He must also pay The Fast n Clean Corporation a franchise fee of $1.10 per oil change, since he will operate the business as a franchise. In addition, utility costs are expected to behave in relation to the number of oil changes as follows: Number of Oil Changes Utility Costs 4,000 $ 6,000 6,000 $ 7,300 9,000 $ 9,600 12,000 $12,600 14,000 $15,000 Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each. (a) Using the high-low method, determine variable costs per unit and total fixed costs. (b) Determine the break-even point in number of oil changes and sales dollars. (c) Without regard to your answers in parts (a) and (b), determine the oil changes required to earn net income of $20,000, assuming fixed costs are $32,000 and the contribution margin per unit is $8. 4
PROBLEM 10 Nimble Corp. manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operations are shown below: Manufacturing Costs Fixed Overhead $140,000 Variable overhead $3 per unit Direct labor $12 per unit Direct material $30 per unit Beginning inventory 0 units Units produced 10,000 Units sold 9,000 Selling and Administrative Costs Fixed $200,000 Variable $4 per unit sold The portable cooking unit sells for $110. Management is interested in the opening month s results and has asked for an income statement. Assume the company uses absorption costing. Calculate the production cost per unit and prepare an income statement for the month of June, 2013. 5