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1 Cost Accounting

Ahmed Qureshi Tauseef

Job Order Costing Assignment no 3 Problem 1

Williams, Inc had the following inventories on March 1 Finished Goods .. 1!,""" Wor# in $rocess 1%,"&" Materials . 1',""" The WI$ account controls three (o)s* Job 621 Job 622 Materials . +,,"" -,'"" .a)or .. +,1"" +,&"" A//lied F01 .. 1,2," +,12" 2,!," ,,+2" The following information /ertains to March 0/erations a3 Materials /urchased and received ++,""". )3 Material re4uisitioned for /roduction, +1,""".0f this mount, +,'"" was for indirect materials5 the difference was distri)uted* !,-"" to 6o) 2+15 &,'"" to 6o)2++* and !,%"" to 6o) 2+-. c3 Materials returned to the store room from the factor7, 2"", of which +"" was for indirect materials, the )alance from 6o) 2++. d3 Materials returned to vendors ,"". e3 $a7roll was -,,""" /aid in cash. f3 0f the /a7roll , direct la)or re/resented !! 8, indirect la)or +" 8, sales salaries 1! 85 and administrative salaries, 1" 8 9 the direct la)or cost was distri)uted 2,'+" to 6o) 2+15 ,,12" to 6o) 2++* and 2,-+" to 6o) 2+-3 g3 F01, other than an7 /reviousl7 mentioned , amounted to !,!"". Included in this figure were +,""" for de/reciation of factor7 )uilding and +!" for e:/ired insurance on the factor7. The reaming overhead -,+!" was un/aid at the end of March. h3 F01 a//lied to /roduction* ,"8 of the direct la)or cost to )e charged to three (o)s )ased on the la)or cost of March. i3 6o)s 2+1 ; 2++ were com/leted and transferred to the finished goods warehouse. (3 <oth (o)s 2+1 and 2++ were shi//ed and )illed at a gross /rofit of '"8 of the cost of goods sold. #3 =ash collection from accounts receiva)le during March were 2%,'!". >e4uired* 1. $re/are (ournal entries. +. ?chedule of inventories on March -1

Job 623 1,,"" 1,-!" 1,"," ',+-"

Problem 2 The ?eit@ com/an7 had the following inventories on ?e/t 1. Materials . Finished Goods WI$B Materials 2",""" !",""" -",""" WI$ A .a)or -2,""" WI$Bfactor7 overhead +&,"""

Curing ?e/tem)er, the cost of materials /urchased was +"",""", direct la)or cost incurred was 1,",""", and factor7 overhead a//lica)le to /roduction was &!8 of the direct la)or cost. The ?e/t -" inventories were as follows. Materials . Finished Goods WI$B Materials >e4uired* T accounts showing the flow of the cost of goods manufactured Problem No 3 1ogle is a manufacturing firm that uses (o) order costing. 0n 6anuar7 1,1%:" the com/an7Ds inventor7 )alances were as follows* >aw materials .. +",""" Wor# in /rocess 1!,""" Finished goods.. -",""" The com/an7 a//lies overhead cost to (o)s on the )asis of machineBhours wor#ed. For 1%:", the com/an7 estimated that it would wor# &!,""" machineBhours and incur '!",""" in manufacturing overhead cost. The following transactions were recorded for the 7ear* a. >aw materials were /urchased on account, '1",""". ). >aw materials were re4uisitioned for use in /roduction de/artment , -,",""" 9 -2",""" direct and +",""" indirect3. c. The following cost was incurred for em/lo7ee services* direct la)or, &!,"""5 indirect la)or, 11","""5 sales commission, %","""5 and administrative salaries, +"",""". d. sales travel costs were incurred, 1&,""" e. Etilit7 costs were incurred in the factor7, '-,""". f. Advertising cost were incurred, 1,",""". g. Ce/reciation were recorded for the 7ear, -!",""" 9 ,"8 relates to factor7 o/erations, and +" 8 relates to selling and administrative salaries3. h. Insurance e:/ired during the 7ear, 1",""" 9 &"8 relates to factor7 o/erations, and the remaining -" 8 relates to selling and administrative salaries. i. Manufacturing overhead was a//lied to /roduction. Cue to greater than e:/ected demand for its /roducts, the com/an7 wor#ed ,",""" machineBhours during the 7ear. (. Goods costing %"",""" to manufacture were com/leted during the 7ear. #. Goods were sold on account to customers during the 7ear at a total selling /rice of 1,!"",""". The goods cost ,&",""" to manufacture. -",""" '&,""" 1+,""" WI$ A .a)or .. +",""" WI$Bfactor7 overhead 1!,"""

and sold, using three

>e4uired* 1. $re/are (ournal entries to record the transaction a)ove. +. $ost the entries in 913 to T accounts including o/ening )alances. -. Is manufacturing over head is over a//lied or under a//lied for the 7earF $re/are a (ournal entr7 to close an7 )alance in the manufacturing overhead account to cost of goods sold. '. $re/are an income statement for the 7ear. Include a schedule of cost of goods manufactured and cost of goods sold. Problem No 4

$ardee =om/an7 /roduces dis/osa)le food containers. This com/an7 uses a (o) order cost s7stem. The firmGs managerial accountant com/iled the following information* $urchased raw material on account, %!,""". Issued raw materials to /roduction, ,",""" 9%!8 direct, remainder indirect3 Cirect la)or cost incurred, %",""". Indirect la)or cost incurred 1!,""". 0ther manufacturing overhead cost incurred are /aid, '",""", are de/reciation e:/ense for /roduction e4ui/ment is '!,""". 23 Manufacturing overhead is a//lied to (o)s on the )asis of % /er direct la)or hour. There were 1+,""" direct la)or hours for the /eriod. &3 6o)s amounting to ++!,""" were com/leted. ,3 6o)s costing +"",""" were shi//ed to customers. $ardee =om/an7 uses a -"8 mar#u/ on cost rate. These orders were sold on account. >e4uired* Give the (ournal entries for the transactions a)ove. If wor# on /rocess inventor7 had a )alance of ,",""" at the )eginning of the /eriod, what is the ending )alance for wor# in /rocess inventor7F What is the ending )alance for manufacturing overheadF 13 +3 -3 '3 !3

Problem No 5

The Glavine =or/oration manufactures /recision e4ui/ment made to order for the semiconductor industr7. Glavine uses two manufacturing over head cost /ools B one for the overhead costs incurred n its highl7 automated Machining Ce/artment and another for overhead costs incurred in its la)orB/aced Assem)l7 de/artment. Glavine uses a normal costing s7stem. It allocates Machining Ce/artment overhead costs to (o)s on the )asis of actual machine hours using a )udgeted machineBhour rate. It allocated Assem)l7 Ce/artment overhead costs to (o)s on the )asis of actual direct manufacturing la)orBhours using a )udgeted direct manufacturing la)or hour rate. The following data are for the 7ear +""".

Machining Ce/artment

Assem)l7 Ce/artment

<udgeted overhead <udgeted machine hours <udgeted direct manufacturing la)or hours Actual manufacturing overhead costs 2,""",""" 1"",""" 2,+"",""" !,""",""" 1+!,""" ',&"","""

Machine hours and direct manufacturing la)orBhours and the ending )alance 9)efore /roration of under a//lied over head 3 are as follows*

=ost of Goods sold Finished Goods Wor# in /rocess >e4uired*

Actual Machine hours 2&,!"" ',!"" 1,,"""

Actual direct .a)or hours %",""" ',,"" +!,+""

<al )efore /roration Cec -1,+""" 12,""",""" &!",""" -,+!","""

1. =om/ute the )udgeted overhead rates for the 7ear+""" in the Machining and Assem)l7 Ce/artments. +. =om/ute the under A or over allocated overhead in each de/artment in +""". $rorate the under over allocated amount in each de/artment using* 9a3 Immediate writeBoff to =ost of Goods sold. 9)3 $roration )ased on ending )alances 9 )efore /roration3 in cost of goods sold, Finished goods, and Wor#BinB/rocess 9c3 $roration )ased on the allocated overhead amount 9 )efore /roration3 in the ending )alances of =ost of goods sold, Finished goods, and Wor#BinB/rocess -. Which /roration method do 7ou /refer in re4uirement +.H:/lainF Problem No 6

Mar#ham =om/an7 uses a normal (o) order costing s7stem. 0verhead rates are a//lied on the )asis of machine hours in Ce/artment 1 and direct la)or dollars in Ce/artment +. <udgeted data for the two de/artments are as follows. Ce/ortment 1 1!",""" !",""" -",""" +" /er C.1 Ce/artment + -"",""" 1"",""" !",""" -" /er C.1

<udgeted overhead <udgeted Activit7* Cirect la)or hours9C.13 Machine hours 9M13 Cirect la)or wage rate

The following data /ertains to 6o)B22% which was com/leted during the 7ear*

Cirect materials Cirect la)or hours 9C.13 Ce/artment 1 Ce/artment + Machine 1ours 9M13 Ce/artment 1 Ce/artment + >e4uired*

-!",""" 1,""" +,""" !,""" +,"""

1. What is the total factor7 overhead a//lied to 6o) %'B22%. +. Curing the 7ear, actual direct la)or wage rates and factor7 overhead incurred in Ce/artment 1 and + were as )udgeted. Also !+,""" direct la)or hours and -!,""" machine hours were used in Ce/artment 1 for /roduction, whereas %,,""" C.1 and '2,""" M1 were used in Ce/artment+. =alculate the overhead for Mar#ham =om/an7.

Problem No 7

Quick-Print Com !n"

The 4uic#B/rint com/an7 /u)lishes mailBorder catalogs and /hone )oo#s for firms located throughout the ?outheast. A (o) order costing s7stem is used to accumulate the costs incurred or each /rinting (o). At the )eginning of August 1%%", two (o)s were in /rocess* (o) ,11 with assigned costs of 1',!2" and (o) ,1- with assigned costs of +,1"". The following transactions were recorded )7 the /rint sho/ during August* >e4uired* A. <. =. Was sho/ overhead or under a//lied during AugustF What was the cost of the com/lete (o)s for the monthF What was the total cost of the (o)s in /rocess on AugustF $ouden Com !n" >aw material costing 2!,""" were /urchased on accounts. ?ho/ su//lies costing ',+"" were /urchased on accounts. >aw materials and sho/ su//lies re4uisitioned during August were* >aw materials* 6o) ,1- 9 ,,!""3 , 6o) ,1' 9 12,!""3 , 6o) ,1! 9 1+,"""3, ?ho/ ?u//lies -,-"" .a)or hours wor#ed during the month were* 6o) ,11 9 '1" 3 , 6o) ,1- 9 2+"3 , 6o) ,1' 9 &!"3, 6on 1,!911"3,indirect la)or 91'"3 Hach wor#er is /aid 1+ /er hour. Ce/reciation on sho/ e4ui/ment was !,+"". 0ther sho/ overhead was %,1!" ?ho/ overhead was a//lied to the /rinting (o)s at the rate of 1".!" /er direct la)or hour. 6o)s ,11, ,1-, and ,1' were com/leted and sold during the month.

Problem No #

.ouden =om/an7 had the following inventor7 )alances on 6anuar7 1, 1%%"* >aw materials WI$ Finished goods 1,,""" 1",""" !","""

Curing 1%%", the firm recorded these transactions* 1. >aw materials amounting to 11!,""" were /urchased on account. +. 1"",""" of raw materials was re4uisitioned to /roductionB %",""" direct and 1",""" indirect. -. $a7roll e:/enses during 1%%" were* Cirect la)or, manufacturing 9'',""" hours3 Indirect la)or, manufacturing ?ales re/resentative salaries Administrative salaries '. !. 2. &. ,. %. 1". 11. -!+, """ 1,,""" -",""" '!,"""

$lant utilit7 e:/enses were +&,""". $lant insurance e:/enses were 1',!"". Advertising e:/ense was 1!,""". !,""" of de/reciation e:/ense was recorded on /lant e4ui/ment. -",""" of de/reciation e:/ense was recorded on the factor7 )uilding. 0ther manufacturing overhead was 12,""". 0ther selling and administrative e:/enses were 1,,""". Manufacturing overhead was a//lied to wor# in /rocess using a /redetermined overhead rate of +.," /er direct la)or hour. 1+. 6o)s com/leted and transferred to finished goods were !!-,!"". 1-. Finished goods totaling !2-,!"" were sold at a mar#u/ of '"8 a)ove cost. >e4uired* A. $re/are (ournal entries to record the 1%%" transactions. <. $re/are a (ournal entr7 to close an7 )alance in the manufacturing overhead account to =G?. =. $re/are an income statement for 1%%".

Problem No %

&!" Com !n"

Curing the month of Fe), >a7 =om/an7 started (o)s 2&, 2,, 2%, and &". 6o) 22 was started in 6an, and was in /rogress with direct materials cost of -",""", direct la)or cost of 1+,""", and a//lied manufacturing overhead of %,""" as of Fe) 1. Cirect materials issued during Fe)* '+,""" 9(o) 2&3, !1,""" 9 (o) 2,3, +&,""" 9 (o) 2%3, 1%,""" 9 (o) &"3 Cirect la)or cost during Fe)* &,""" 9 (o) 223, +",""" 9 (o) 2&3, '+,""" 9 (o) 2,3, +,,""" 9 (o) 2%3, 1",""" 9 (o) &"3 Manufacturing overhead is a//lied at &!8 of direct la)or cost. 6o)s 22, 2&, 2,, and &" were com/leted and sold during Fe). >e4uired* A. <' =. Cetermine the cost of each (o). Cetermine the amount of cost of goods sold for Fe). What was the total cost of direct materials re4uisitioned in Fe) and transferred to WI$. C. What was the WI$ inventor7 on Fe) +,F