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Chapter 22, E22-19, Chapter 22, P22-22A, Chapter 23, P23-28A ACC206: Principles of Accounting II (BBD1238A) Instructor: Jess Stern October 18, 2012
Week 5: Assignment
Cash+
Accts. rec+
Inv.+
Furn.+
(Accum. deprec.)
Accts. = payable
Stkhols. equity
June 30 bal. j)$11,400 1)$5,140 Payts. for inv. Payts. on account Depreciation Cost of goods sold Other expns. i)(6,000 Sales on credit Cash rec. k)12,700 (8,200) b)(4,300)
d)$10,600 f)$28,360
= c)(8,200)
g)(900) h)(6,350)*
= = = = =
= $2,400
Oleans.com Budgeted Balance Sheet July 31,2012 Assets Current assets: Cash $7,100 Accounts receivable 3,640 Inventory 15,700 Total current assets $26,440 Plant assets: Furniture and fixtures Accumulated depreciation 3,770 Total assets $30,210 Liabilities Current liabilities: $34,500 (30,730)
Accounts payable $2,400 Total liabilities 2,400 Stockholders Equity Stockholders equity $27,810 Week 5: Assignment 4 Darryl Goodwin Chapter 22, E22-19 Continued
Chapter 22, P22-22A Requirements: 1.Prepare Thumbtacks sales budget for April and May,2012. Round all amounts to the nearest $1.
$40,000
2.Prepare Thumbtacks inventory, purchases, and cost of goods sold budget for April and May.
Thumbtack Office Supply Inventory, Purchases, and Cost of Goods Sold Budget Week 5: Assignment Darryl Goodwin 5 Chapter 22, P22-22A Continued
AprilMay 2012 April Cost of goods sold $20,400 Desired ending inventory 16,200 Desired inventory $36,600 Beginning inventory Purchases 50% of sales revenue $11,000 + (0.25 x $20,400) = $16,100 $20,000 16,100 $36,100 (16,000) $20,100 (16,100) 20,500 May
$11,000 + [($40,000 x 1.04) x .50 x 0.25] = $16,200 Inventory amount from the Budgeted Balance Sheet same as
Thumbtack Office Supply Operating Expenses Budget AprilMay 2012 April Week 5: Assignment Darryl Goodwin 6 Chapter 22, P22-22A Continued May
Variable operating expenses: Commissions expense $2,040 Fixed operating expenses: Salaries expense Rent expense Depreciation expense 200 Insurance expense 100 $7,000 2,400 200 100 $7,000 2,400 $2,000
Total fixed operating expenses $9,700 Total operating expenses 5% of sales for that month
Thumbtack Office Supply Budgeted Income Statements Months Ending AprilMay 2012 April Sales revenue $40,800 Costs of goods sold 20,400 Week 5: Assignment Darryl Goodwin 7 Chapter 22, P22-22A Continued $40,000 20,000 May
$20,000
2,000
Contribution margin $18,360 Fixed operating expenses: Salaries expense $7,000 Rent expense 2,400 Depreciation expense 200 Insurance expense 100 Total fixed operating expenses $9,700 Operating income $8,660 Income tax expense 1,732 Net income $6,928 $8,300 x 0.20 = $1,660 $8,660 x 0.20 = $1,732
$18,000
Requirements 1. Compute the price and efficiency variances for direct materials and direct labor. Direct materials: Actual price. $0.17/lb. Standard price...$0.25/lb. Actual quantity.10,000 lbs. Standard quantity (62,900 units x 0.2 lb./unit) 12,580 lbs.
Direct labor: Actual price ($30,300 divided by 202,000 min.)$0.15/min. Standard price.$0.12/min. Actual quantity 202,000 mins. Standard quantity (62,900 units x 3 mins./unit) 188,700 mins.
Now we can compute the variances: Price Variances: Price variance = Actual price per input unit -Standard price x Actual quantity per input unit of input
x 10,000 lbs.
$800 F
x 202,000 minutes
=$6,060 U
Efficiency Variances: Efficiency variance = Actual quantity Standard quantity x Standard price of input of input per input unit
$645 F
Week 5: Assignment
$1,596 U
2.Journalize the usage of direct materials and the assignment of direct labor, including the related variances.
Journal Entry POST. DATE ACCOUNTS AND EXPLANATIONS Materials inventory (10,000 x $0.25) Direct materials price variance 800 Accounts payable (10,000 x $0.17) 1,700 REF. DEBIT 2,500 CREDIT
3,145
Direct materials efficiency variance 645 Week 5: Assignment Darryl Goodwin Chapter 23, P23-28A Continued 11
Manufacturing wages (202,000 x $0.12) Direct labor price variance Wages payable (202,000 x $0.15) 30,300
24,240 6,060
Work in process inventory (188,700 x $0.12) Direct labor efficiency variance Manufacturing wages (202,000 x $0.12) 24,240
22,644 1,596
3.For manufacturing overhead, compute the variable overhead spending and efficiency variances and the fixed overhead spending and volume variances. Variable overhead variances: VOH Spending variance = = = Actual overhead $10,000 $100 F [Actual min. x [(202,000/3) x Standard price] $0.15)
= = =
Fixed overhead variances: FOH Spending variance = = = FOH Volume variance = = = Actual overhead $30,500 $5,216 U Budgeted overhead $25,284 $1,134 F Applied overhead (62,900 x $0.42) Budgeted overhead $25,284
Flexible budget overhead for 62,900 coffee mugs: Variable overhead (62,900 units x $0.15/unit)$9,435 Fixed overhead (60,200 units x $0.42/unit)25,284* Total flexible budget overhead$34,719
*Note that to get the budgeted fixed overhead, one must multiply the $0.42 fixed overhead per coffee mug by the static budget output of 60,200 mugs.
4.Journalize the actual manufacturing overhead and the applied manufacturing overhead. Journalize the movement of all production from WIP. Journalize the closing of the manufacturing overhead account.
Journal Entry POST. DATE ACCOUNTS AND EXPLANATIONS Manufacturing overhead ($10,000 + $30,500) Various accounts 40,500 REF. DEBIT 40,500 CREDIT
Journal Entry POS T. DATE ACCOUNTS AND EXPLANATIONS REF. DEBIT 35,853 CREDIT
35,853
Journal Entry POST. DATE ACCOUNTS AND EXPLANATIONS Finished goods inventory Work in process inventory 61,642 *$3,145 + $22,644 + $35,853 = $61,642 REF. DEBIT 61,642* CREDIT
Journal Entry POST. DATE ACCOUNTS AND EXPLANATIONS Variable overhead efficiency variance Fixed overhead spending variance REF. DEBIT 665 5,216 CREDIT
Variable overhead spending variance 100 Fixed overhead volume variance 1,134 Manufacturing overhead ($40,500-$35,853) 4,647
5.Java intentionally hired more-skilled workers during July. How did this decision affect the cost variances? Overall, was the decision wise? Hiring more-skilled, higher-paid labor led to an unfavorable direct labor price variance. Given the unfavorable direct labor efficiency variance, it does not appear that these more-skilled workers performed efficiently. The overall net effect is unfavorable, thus managements decision was unwise.
Reference: Horngren, C.T., Harrison, W.T., & Oliver, M.S. (2012). Accounting (9th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. ISBN: 9780132569057