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ACG 2071 Managerial Accounting

Product Costing and Cost Flows - Sample Problems for Chs 28-34
Answers appear in red.

DRAFT
Problem 1ThebalancesheetdatedDecember31,2003,hasabalancein
theFinishedGoodsInventoryaccountof$26,200.TheDecember31,2004,
balancesheethasabalanceintheFinishedGoodsInventoryaccountof
$24,000.WorkinProcessInventoryaccounthasabeginningbalanceof
$20,000andanendingbalanceof$30,000.Ifthecostofgoods
manufacturedis$340,000,howmuchiscostofgoodssold?
BeginningFGinventory
+CGM
=Available
EndingFGinventory
=Costofgoodssold

$26,200
340,000
366,200
(24,000)
$342,200

Problem 2 AlexCompanysWorkinProcessInventoryaccounthasabeginning
balanceof$60,000andanendingbalanceof$50,000.Current
manufacturingcoststotal$200,000.Howmuchiscostofgoods
manufactured?
$60,000+$200,000$50,000=$210,000

Problem 3Hernandez,Inc.manufacturescalculators.Thecompanyemploysan
actualcostingsystem.DuringMay,Hernandezstransactionsincludedthe
following:
Directlaborcostincurred
Totalmanufacturingoverheadcost
Directmaterialspurchased
Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Sales
Sellingexpenses
Workinprocessinventory,
beginning
Workinprocessinventory,ending

$5,400
6,650
11,500
160
280
23,000
2,100
220
250

A.Brieflylistanyadditionalinformationyouneedtocalculatecostofgoods
soldforthiscompany.(Bespecific.)
Beginningfinishedgoodsinventoryandendingfinishedgoodsinventory(You
haveenoughinformationtocalculatecostofgoodsmanufacturedsoyou
don'tneedtobetoldthatamount.)

B.HowmuchisthecostofdirectmaterialsissuedtoproductionduringMay?
Rawmaterialsinventory,beginning
Directmaterialspurchased
LessRawmaterialsinventory,
ending
Costofdirectmaterialsissuedto
production

$160
11,500

(280)
$11,380

C.HowmuchiscostofgoodsmanufacturedforMay?
Materialsissuedtoproduction
Directlaborcostincurred
Manufacturingoverheadcost
Totalmanufacturingcosts
Add:Workinprocessinventory,
beginning
Less:Workinprocessinventory,
ending
CostofGoodsManufacturing

$11,380
5,400
6,650
22,430
220
(250)
$23,400

Problem 4 Culvyhouse Company uses an actual product costing system. It


reported the following amounts for 2003:
Rawmaterialspurchased
Directmaterialsused
Indirectmaterialsused
Directlaborused
Indirectdirectlaborused

$72,000
70,000
4,000
66,000
7,000

Beginningworkinprocessinventory
Endingworkinprocessinventory
Sellingandadministrativeexpensesincurred
Othermanufacturingoverheadcostsincurred
Beginningfinishedgoodsinventory
Endingfinishedgoodsinventory

$21,000
16,000
23,000
18,000
6,000
9,000

A.Calculatethecostofgoodsmanufactured.
Costofdirectmaterialsused
Costofdirectlaborused
CostofMOH:$18,000+$4,000+$7,000
Totalmanufacturingcosts
AddbeginningWIP
LessendingWIP
Costofgoodsmanufactured

$70,000
66,000
29,000
$165,000
21,000
(16,000)
$170,000

B.Calculatecostofgoodssold.
BeginningFGinventory
AddCGM(partA)
LessendingFGinventory
=Costofgoodssold

$6,000
170,000
(9,000)
$167,000

Problem 5Listedbelowareselectedchangesduetovarioustransactionsin
themanufacturingprocessusinganactualcostingsystem.Identifywhich
accountischangedasaresultofeachactionlistedinitems1through10
belowbyprintingthecodeoftheaccount(s)inthespaceprovided. Some
changesmayhavemorethanoneanswer.

Accounts
RMRawMaterialsInventory
FGFinishedGoodsInventory
WIPWorkinProcessInventory
MOHManufacturingOverhead
CGSCostofGoodsSold

Answers
WIP
WIP
RM
RM
WIP
FG
WIP
WIP
FG
CGS

Changes
1.Increaseswhenmanufacturingoverheadisincurred
2.Increaseswhenindirectmaterialsaretransferredtoproduction
3.Increaseswhenrawmaterialsarepurchasedonaccount.
4.Decreaseswhendirectmaterialsareusedinproduction
5.Increaseswhendirectlaborcostsareincurred
6.Increaseswhengoodsarefinished.
7.Decreaseswhengoodsarefinished.
8.Increaseswhenindirectlaborcostsareincurred
9.Decreaseswhengoodsaresold.
10.Increaseswhengoodsaresold.

Problem 6Norris,Inc.manufacturescalculators.Norrisusesanactualcosting
system.DuringJune,Norrisstransactionsandaccountsincludedthefollowing:

Workinprocessinventory,beginning
Workinprocessinventory,ending
IndirectmaterialsissuedfromSupplies
Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Totalmanufacturingoverheadincurred

$8,800
7,500
3,600
4,600
5,800
49,600

Sales
Directlaborcost(3,100hours)
Rawmaterialspurchased
Finishedgoodsinventory,beginning
Finishedgoodsinventory,ending
.

$42,000
55,000
143,500
12,300
11,600

A.HowmuchisthecostofdirectmaterialsissuedtoproductionduringJune?
Beginninginventory
+Rawmaterialpurchases
=Available
Lessendingraw materials
=Costofmaterialsused

$4,600
143,500
148,100
(5,800)
$142,300

B.Calculatethecostofgoodsmanufactured.
MATERIALS:

Beginninginventory

+Rawmaterialpurchases

=Available

Lessendingrawmaterials

=Costofmaterialsused
LABOR
OVERHEADINCURRED
MANUFACTURINGCOSTS
AddbeginningWIP
Lessendingworkinprocess
Costofgoodsmanufactured

$4,600
143,500
148,100
(5,800)

$142,300
55,000
49,600
246,900
8,800
(7,500)
$248,200

C.HowmuchisthecostofinventoryontheMay31stbalancesheet?
Rawmaterials
$4,600
Workinprocess
8,800
Finishedgoods
12,300
TotalinventoryatMay31st $25,700

Problem 7 - Heath Company uses an actual product costing system. The


company reported the following amounts for 2003:
Rawmaterialspurchased
Beginningrawmaterialsinventory
Endingrawmaterialsinventory
Beginningfinishedgoodsinventory
Endingfinishedgoodsinventory

$120,000
16,000
5,000
11,000
8,000

Directlaborused
Manufacturingoverheadcostsincurred
Sellingandadministrativeexpenses
Beginningworkinprocessinventory
Endingworkinprocessinventory

$44,000
36,000
21,000
17,000
16,000

A.Calculatethecostofmaterialsusedinproduction.
Beginningrawmaterialsinventory
Rawmaterialspurchased
=Materialsavailableforuse
Lessendingrawmaterialsinventory
=Materialsusedinproduction

$16,000
120,000
$136,000
5,000
$131,000

B.Calculatethecostofgoodsmanufactured.
Materialsusedinproduction(partA)
Directlaborused
Manufacturingoverheadcostsincurred
Totalmanufacturingcosts
Addbeginningworkinprocess
Lessendingworkinprocess
Costofgoodsmanufactured

$131,000
44,000
36,000
$211,000
17,000
(16,000)
$212,000


Problem 8 - Peters,Inc.manufactureshomeworkmachines.Itusesanactual
costingsystem.Peter'skeepsa'Supplies'accountforit'sindirectmaterials.
DuringJune,Peterstransactionsandaccountsincludedthefollowing:
Finishedgoodsinventory,ending
Finishedgoodsinventory,beginning
Indirectmaterialsissuedtoproduction
Generaladministrativeexpenses
Rawmaterialsinventory,ending
Rawmaterialsinventory,beginning

$11,600
12,300
3,200
9,400
7,700
5,100

Sales
Directlaborcost
Directmaterialspurchased
Workinprocessinventory,ending
Workinprocessinventory,beginning
Totalmanufacturingoverheadincurred

$324,000
72,400
178,000
12,800
10,500
56,100

A.Howmuchiscostofgoodsmanufactured?
Beginningrawmaterialsinventory
Rawmaterialspurchased
=Materialsavailableforuse
Lessendingrawmaterialsinventory
=Materialsusedinproduction
Directlaborused
Manufacturingoverheadcostsincurred
Totalmanufacturingcosts
Addbeginningworkinprocess
Lessendingworkinprocess
Costofgoodsmanufactured

$5,100
178,000
$183,100
(7,700)
$175,400
72,400
56,100
$303,900
10,500
(12,800)
$301,600

B.Calculatethecostofgoodssold
Beginningfinishedgoods
Costofgoodsmanufactured
Lessendingfinishedgoodsinventory
=Costofgoodssold

$12,300
301,600
(11.600)
$302,300

C.HowmuchwillthecompanyreportasproductcostsontheJune30th
balancesheet?
Rawmaterials
Workinprocess
Finishedgoods
=Totalinventoryat63003

$11,600
12,800
7,700
$32,100

Problem 9 - ThemanufacturingoperationsofHoncho,Inc.hadthefollowing
balancesforthemonthofMarch:
Inventories
RawMaterials
Workinprocess
Finishedgoods

3/1/03
10,000
6,000
30,000

3/31/03
12,000
7,000
22,000

fHonchotransferred$38,000ofcompletedgoodsoutofworkinprocess
duringMarch,howmuchwastheamountofthecostofgoodssold?
Amountstransferredoutofworkinprocessaremovedintofinishedgoodsas
'costofgoodsmanufactured'.Beginningfinishedgoodspluscostofgoods
manufacturedlessendingfinishedgoods=costofgoodssold
$30,000+$38,000$22,000=$46,000

Problem 10 -Saman,Inc.manufacturescoastersandusesanactualcosting
system.DuringAugust,Samansaccountsincludedthefollowingbalancesand

transactions:
Workinprocess,beginning
Workinprocess,ending
Finishedgoodsbeginning
Finishedgoods,ending
Administrativeexpenses
Directlaborcostincurred
Materialspurchased
Rawmaterials,beginning
Directmaterialsused
Manufacturingoverheadcostincurred
Sales
Marketingexpenses

$25,200
27,600
7,300
6,800
12,000
20,400
78,000
3,300
76,400
20,100
167,000
11,000

A.HowmuchisendingrawmaterialsatAugust31
Beginninginventory
+Materialpurchases
Directmaterialsused
=Endingrawmaterials

$3,300
78,000
(76,400)
$4,900

B.Howmuchiscostofgoodsmanufactured?
Directmaterials
Directlabor
Manufacturingoverhead
Totalmanufacturingcosts
AddbeginningWIP
LessendingWIP
Costofgoodsmanufactured

$76,400
20,400
20,100
116,900
25,200
(27,600)
$114,500

C.Howmuchiscostofgoodssold?
BeginningFGinventory
AddCGM(partB)
LessendingFGinventory
=Costofgoodssold

$7,300
114,500
(6,800)
$115,000

Problem 11Deegan,Inc.manufacturesweathermachinesandusesanactual
costingsystem.DuringJune,Deegansaccountsincludedthefollowing
balancesandtransactions:
Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Manufacturingoverheadcostincurred
Marketingexpenses
Sales

$700
4,850
9,500
11,000
98,000

Directmaterialspurchased
Directlaborcostincurred
Administrativeexpenses
Workinprocessinventory,beginning
Workinprocessinventory,ending

$45,000
16,400
13,000
7,800
6,600

A.
A.HowmuchisthecostofdirectmaterialsissuedtoproductionduringJune?
$40,850
Rawmaterialsinventory,beginning
Directmaterialspurchased
Goodsavailable
Lessrawmaterialsinventory,ending
Costofdirectmaterialsissuedtoproduction

$700
45,000
45,700
(4,850)
$40,850

B.Howmuchiscostofgoodsmanufactured?$67,950
Directmaterialsusedinproduction(frompartA)
Directlaborcostincurred
Manufacturingoverheadcostincurred
Totalmanufacturingcosts
Add:Workinprocessinventory,beginning
Less:Workinprocessinventory,ending
CostofGoodsManufactured

$40,850
16,400
9,500
66,750
7,800
(6,600)
$67,950


C.Brieflylistanyadditionalinformationyouneedtocalculatecostofgoods
soldforthiscompany.(Bespecific.)
Beginningfinishedgoodsinventoryandendingfinishedgoodsinventory
NotethatyoualreadyhavecostofgoodmanufacturedfrompartB,soit
shouldnotbelistedhereasanadditionalitemneeded.

Problem 12Costofgoodsmanufacturedequals$44,000for2006.Finished
goodsinventoryis$2,000atthebeginningoftheyearand$5,500attheend
oftheyear.Totalmanufacturingoverheadis$4,500.Beginningandending
workinprocessfor2006are$4,000and$5,000respectively.Howmuchis
costofgoodssoldfortheyear?
BeginningFG+CGMCGS=endingFG
$2,000+$44,000x=$5,500
CGS=$40,500

Problem13 SoundCompanyusesanactualcostingsystem.Itreportedthe
followingamountsforMay,2006:
Rawmaterialspurchased
Beginningrawmaterialsinventory
Endingrawmaterialsinventory
Beginningfinishedgoodsinventory
Endingfinishedgoodsinventory
Directlaborincurred
Sellingandadministrativeexpenses
Actualmanufacturingoverheadcosts
Beginningworkinprocessinventory
Endingworkinprocessinventory

$254,000
12,000
7,900
7,400
8,000
51,000
22,300
36,800
15,100
12,000

A.Calculatethecostofdirectmaterialsusedinproduction.
Beginningrawmaterialsinventory
Rawmaterialspurchased
=Materialsavailableforuse
Lessendingrawmaterialsinventory
=Materialsusedinproduction

$12,000
254,000
$266,000
(7,900)
$258,100

B.Calculatethecostofgoodsmanufactured.
Beginningworkinprocess
Rawmaterialsusedinproduction(part
A)
Directlaborused
Manufacturingoverheadcosts
Totalmanufacturingcostsadded
Lessendingworkinprocess
Costofgoodsmanufactured

$15,100
$258,100
51,000
36,800

$346,100
(12,000)
$349,200

C.HowmuchwillSoundreportastotalinventoriesonitsMay31balance
sheet?
Rawmaterials
Workinprocess
Finishedgoods
TotalinventoryatMay31

$7,900
12,000
8,000

$27,900

Problem 14EngManufacturingCompanydevelopedthefollowingdata:
Beginningworkinprocessinventory
Directmaterialsused
Actualmanufacturingoverhead
Costofgoodsmanufactured
Endingworkinprocess

$10,000
150,000
85,000
295,000
15,000

Howmucharetotalmanufacturingcostsfortheperiod?

Totalmanufacturingcostsfortheperiodarethecostsincurredthatare
addedduringthecurrentperiod:
Beginningworkinprocess(given)
Totalcurrentmanufacturingcosts
Lessendingworkinprocess(given)
Costofgoodsmanufactured(given)

$10,000
??
(15,000)
$295,000

SincethebeginningandendingWIPamountsandCGMisknown,work
backwardstodeterminehowmuchthetotalcurrentperiodmanufacturing
costsare:$10,000$15,000$295,000=$300,000.NotethatDM,DL,and
MOHareaddedtogethertogettotalcurrentmanufacturingcostsforthe
period.

Problem 15TheaccountingrecordsofCinottiManufacturingCompany
includethefollowinginformation:

Workinprocessinventory
Finishedgoodsinventory
Materialspurchased
Rawmaterialsinventory
Directmaterialsused
Manufacturingoverheadincurred
Directlabor
Sellingexpenses

Dec.31,
2004
$15,000
45,000
331,000
?
325,000
132,000
120,000
70,000

Dec.31,
2003
$12,000
51,000

24,000

Cinottiusesanactualcostsystem.Calculatethefollowing:

1.Rawmaterialsinventoryat123104
Beginningrawmaterialsinventory
Rawmaterialspurchased
=Materialsavailableforuse
Lessmaterialsusedinproduction
Endingrawmaterialsinventory

$24,000
331,000
$355,000
(325,000)
$30,000

2.TotalmanufacturingcostsaddedtoWorkinProcessInventoryduring
2004

Materialsusedinproduction
Directlaborused
Manufacturingoverheadcosts
TotalmanufacturingcostsaddedtoWIP

$325,000
120,000
132,000
$577,000

3.Costofgoodsmanufacturedduring2004
Totalmanufacturingcostsadded(From
part2)
Addbeginningworkinprocess
Lessendingworkinprocess
Costofgoodsmanufactured

$577,000
12,000
(15,000)
$574,000

4.TotalinventoriesonCinottisDecember31,2004balancesheet
Rawmaterials(frompart1)
Workinprocess
Finishedgoods
Totalinventoryat63003

$30,000
15,000
45,000
$90,000

5.AssumeCGMis$500,000.Howmuchiscostofgoodssoldfor2004?
Beginningfinishedgoods
Costofgoodsmanufactured
Lessendingfinishedgoodsinventory
Costofgoodssold

$51,000
500,000
(45,000)
$506,000

Problem 16Earl,Inc.manufacturesbaseballsusesanormalcostingsystem
andallocatesoverheadbasedondirectlaborcost.DuringJune,Earls
accountsincludedthefollowingbalancesandtransactions:

Manufacturingoverheadcostincurred
Marketingexpenses
Administrativeexpenses
Directlaborcostincurred
Costofmaterialspurchased
Directmaterialsusedinproduction

$33,300
27,000
24,000
32,000
138,600
143,000

Rawmaterials,beginning
Finishedgoodsbeginning
Finishedgoods,ending
Workinprocess,beginning
Workinprocess,ending
Sales

$11,500
8,400
9,600
21,500
18,900
285,000

A.HowmuchisendingrawmaterialsatJune30$7,100
Rawmaterialsinventory,beginning
Directmaterialspurchased
Goodsavailable
Lesscostofdirectmaterialsissuedtoproduction
Rawmaterialsinventory,ending

$11,500
138,600
150,100
(143,000)
$7,100

B.HowmuchiscostofgoodsmanufacturedforJune?$210,900
Directmaterialsusedinproduction
Directlaborcostincurred
Manufacturingoverheadcost
Totalmanufacturingcosts
Add:Workinprocessinventory,
beginning
Less:Workinprocessinventory,ending
CostofGoodsManufactured

$143,000
32,000
33,300
208,300
21,500
(18,900)
$210,900

C.Howmuchiscostofgoodsold?
Beginningfinishedgoods
Costofgoodsmanufactured(partB)
Lessendingfinishedgoodsinventory
Costofgoodssold

$8,400
210,900
(9,600)
$209,700

Problem 17 - ThemanufacturingoperationsofDarden,Inc.hadthefollowing
balancesforthemonthofMarch:
Inventories
RawMaterials
Workinprocess
Finishedgoods

3/1/03
$10,000
6,000
30,000

3/31/03
$12,000
7,000
22,000

IfDardenreportedcostofgoodssoldtotaling$46,000inMarch,howmuch
didittransferoutofworkinprocessascompletedgoods?
Amountstransferredoutofworkinprocessaremovedintofinishedgoodsas
'costofgoodsmanufactured'.Beginningfinishedgoodspluscostofgoods
manufacturedlessendingfinishedgoods=costofgoodssold
$30,000+?$22,000=$46,000soCGM=$38,000

Problem 18 - AldersonBucketCompanyincurredthefollowingcosts:$100of
plastic,25hoursat$10perhour,$50ofindirectmaterials,$50ofindirect
labor,$200foradvertising,and$75toshipthebucketstothecustomers.How
mucharetotalproductcosts?
$100+(25x$10)+$50+$50=$450Advertisingandshippingtocustomers
(deliverycosts)areperiodcostssincetheydonotrelatetotheproductionof
theproducts.

Problem 20 - TopoftheHeadCombCompanyincurredthecostslistedbelow
duringMaytomanufacturecombs.ThecompanyusesaJITinventorysystem.
Plasticresin
Factorymachineblades(replaced
daily)
Costtoshiptocustomers
Productionsupervisorssalary
Productadvertisingcosts
Productionlabor

$3,500
500
600
2,100
1,200
42hoursat$20perhour

Calculatetotalproductcostsassuming10,000combsareproduced.
Plasticresin
Factorymachineblades(replaceddaily)
Productionsupervisorssalary
Productionlabor42hoursat$20perhour
Totalproductcosts

$3,500
500
2,100
840
$6,940

Costtoshiptocustomersisdeliveryexpense,aproductcost.Product
advertisingcostsareperiodcostsaswell.Notethatthesecostsarenopartof
thecostofgettingtheproductsreadytosell.

Howmuchisthecostpercomb?
$6,940/10,000=$0.694each

Problem 21Mitchell,Inc.manufacturescalculatorsandemploysanactual
costingsystem.DuringMarch,Mitchellstransactionsandaccountsincluded
thefollowing:
Sales
Rawmaterialsacquired(cashpaid)
Rawmaterialsreceivedonaccount
Directlaborcostincurred
Costtodeliverproductstocustomers
Totalmanufacturingoverheadincurred

$320,000
135,000
30,000
42,000
800
72,000

Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Finishedgoodsinventory,beginning
Finishedgoodsinventory,ending
Workinprocessinventory,beg.
Workinprocessinventory,ending

$6,500
5,800
11,200
12,400
18,700
19,700

A.Howmuchisthecostofdirectmaterialstransferredtoproductionduring

June?
Rawmaterialsinventory,beginning
Rawmaterialspurchased($135,000+$30,000)
Goodsavailable
Lessrawmaterialsinventory,ending
Costofdirectmaterialsissuedtoproduction

$6,500
165,000
171,500
(5,800)
$165,700

B.Calculatethecostofgoodsmanufactured.
Directmaterialsusedinproduction(frompartA)
Directlaborcostincurred
Manufacturingoverheadcostincurred
Totalmanufacturingcosts
Add:Workinprocessinventory,beginning
Less:Workinprocessinventory,ending
CostofGoodsManufactured

$165,700
42,000
72,000
279,700
18,700
(19,700)
$278,700

Problem 22 CT,Inc.reported$22,000inworkinprocessatJune1and
$21,300atJune30.Finishedgoodswas$4,500onJune1and$5,100on
June30.DirectmaterialusedinJunetotaled$88,000.CTincurred$46,000for
Junesmanufacturingoverhead.Costofgoodsmanufacturedtotaled
$199,000.HowmucharetotalmanufacturingcostsforJune?
WIP
Beginning
Mfg.costs
Ending

22,000

21,300

199,000
X

CGM

BeginningWIP+TotalmanufacturingcostsCGM=EndingWIP
$22,000+X$199,000=$21,300soTotalMfg.Costs=$198,300

Problem 23 - Zimmerman,Inc.manufacturescalculatorsandemploysanactual
costingsystem.DuringJune,Zimmermanstransactionsandaccountsincluded
thefollowing:
Rawmaterialsacquired(cashpaid)
Rawmaterialsreceivedonaccount
Directlaborcostincurred
Totalmanufacturingoverheadincurred

$117,000
12,000
52,000
72,800

Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Finishedgoodsinventory,beginning
Finishedgoodsinventory,ending
Workinprocessinventory,beginning
Workinprocessinventory,ending

$6,500
5,800
11,200
12,400
26,000
22,000

A.Howmuchisthecostofdirectmaterialstransferredtoproductionduring
June?
Rawmaterialsinventory,beginning
Directmaterialspurchased($117K+$12K)
LessRawmaterialsinventory,ending
Costofdirectmaterialsissuedtoproduction

$6,500
129,000
(5,800)
$129,700

B.Calculatethecostofgoodsmanufactured.
Materialsissuedtoproduction(partA)
Directlaborcostincurred

$129,700
52,000

Manufacturingoverheadcost
Totalmanufacturingcosts
Add:Workinprocessinventory,beginning
Less:Workinprocessinventory,ending
CostofGoodsManufacturing

72,800
254,500
26,000
(22,000)
$258,500

Problem 25ThefollowinginformationhasbeencollectedfromGreen
CompanysaccountingrecordsforthemonthofApril:
DirectmaterialsaddedtoWorkinProcessInventory
IndirectmaterialsaddedtoManufacturingOverhead
DirectlaboraddedtoWorkinProcessInventory
IndirectlaboraddedtoManufacturingOverhead

$160,000
40,000
150,000
65,000

ManufacturingoverheadaddedtoWorkinProcessInventory

100,000

DepreciationExpenseincludedinManufacturingOverhead
Beginningworkinprocessinventory
Costofgoodsmanufactured

50,000
22,000
415,000

HowmuchisthebalanceofWorkinProcessinventoryifGreenusesanormal
costingmethod?
DirectmaterialsaddedtoWorkinProcessInventory
DirectlaboraddedtoWorkinProcessInventory
ManufacturingoverheadaddedtoWorkinProcessInventory
Totalmanufacturingcostsadded
Addbeginningworkinprocess
LessCGM

$160,000
150,000
100,000
$410,000
22,000
(415,000
$17,000

Endingworkinprocess

Problem 26Hernandez,Inc.manufacturescalculators.Thecompanyemploysa
normal costing system.Anyamountofoverorunderappliedoverheadis
immaterial.DuringMay,Hernandezstransactionsincludedthefollowing:
Directlaborcostincurred
Totalmanufacturingoverheadcostapplied
Totalmanufacturingoverheadcostincurred
Directmaterialspurchased
Indirectmaterialsissuedtoproduction
Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Sales
Sellingexpenses
Workinprocessinventory,beginning
Workinprocessinventory,ending

$5,400
6,650
6,300
11,500
1,100
160
280
23,000
2,100
220
250

A.HowmuchisthecostofdirectmaterialsissuedtoproductionduringMay?
Rawmaterialsinventory,beginning
Directmaterialspurchased
Indirectmaterialsissued
LessRawmaterialsinventory,ending
Costofdirectmaterialsissuedtoproduction

$160
11,500
(1,100)
(280)
$10,280

B.HowmuchiscostofgoodsmanufacturedforMay?
Materialsissuedtoproduction
Directlaborcostincurred
Manufacturingoverheadcostapplied
Totalmanufacturingcosts
Add:Workinprocessinventory,beginning
Less:Workinprocessinventory,ending
CostofGoodsManufacturing

$10,280
5,400
6,650
21,330
220
(250)
$22,300

Note:Indirectmaterialsissuedtoproductionareconsideredmanufacturing
overheadcostsandassuch,arealreadyincludedinthetotalmanufacturing

overheadcostamountgiven.

Problem 27CulvyhouseCompanyusesanormalproductcostingsystem.Any
amountofoverorunderappliedoverheadisimmaterial.Itreportedthe
followingamountsfor2003:
Rawmaterialspurchased
Directmaterialsused
Indirectmaterialsused
Directlaborused
Indirectdirectlaborused
Manufacturingoverheadapplied

$72,000
70,000
4,000
66,000
7,000
29,000

Beginningworkinprocessinventory
Endingworkinprocessinventory
Sellingandadministrativeexpensesincurred
Othermanufacturingoverheadcostsincurred
Beginningfinishedgoodsinventory
Endingfinishedgoodsinventory

$21,000
16,000
23,000
17,000
6,000
9,000

A.Calculatethecostofgoodsmanufactured.
Costofdirectmaterialsused
Costofdirectlaborused
CostofMOHapplied
Manufacturingcosts
AddbeginningWIP
LessendingWIP
Costofgoodsmanufactured

$70,000
66,000
29,000
$165,000
21,000
(16,000)
$170,000

B.Calculatecostofgoodssold.Ignoreanyoverorunderappliedoverhead.
BeginningFGinventory
AddCGM(partA)
LessendingFGinventory
=Costofgoodssold

$6,000
170,000
(9,000)
$167,000

Problem 28 Listedbelowareselectedchangesduetovarioustransactions
inthemanufacturingprocessusinganormal costing system.Identifywhich
accountischangedasaresultofeachactionlistedinitems1through10
belowbyprintingthecodeoftheaccount(s)inthespaceprovided. Some
changesmayhavemorethanoneanswer.

Accounts
RMRawMaterialsInventory
FGFinishedGoodsInventory
WIPWorkinProcessInventory
MOHManufacturingOverhead
CGSCostofGoodsSold

Answers
MOH
MOH
RM
RM
WIP
FG
WIP
MOH
FG
CGS
WIP
MOH

Changes
1.Increaseswhenmanufacturingoverheadisincurred
2.Increaseswhenindirectmaterialsaretransferredtoproduction
3.Increaseswhenrawmaterialsarepurchasedonaccount.
4.Decreaseswhendirectmaterialsareusedinproduction
5.Increaseswhendirectlaborcostsareincurred
6.Increaseswhengoodsarefinished.
7.Decreaseswhengoodsarefinished.
8.Increaseswhenindirectlaborcostsareincurred
9.Decreaseswhengoodsaresold.
10.Increaseswhengoodsaresold.
11.Increaseswhenmanufacturingoverheadisapplied
12.Decreaseswhenmanufacturingoverheadisapplied

Problem 29Norris,Inc.manufacturescalculators.Norrisusesanormalcosting
system.Anyamountofoverorunderappliedoverheadisimmaterial.During

June,Norrisstransactionsandaccountsincludedthefollowing:
Workinprocessinventory,beginning
Workinprocessinventory,ending
Indirectmaterialsissuedtoproduction
Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Totalmanufacturingoverheadapplied

$8,800
7,500
3,600
4,600
5,800
49,600

Sales
Directlaborcost(3,100hours)
Rawmaterialspurchased
Finishedgoodsinventory,beginning
Finishedgoodsinventory,ending
Totalmanufacturingoverheadincurred

$42,000
55,000
143,500
12,300
11,600
49,000

A.HowmuchisthecostofdirectmaterialsissuedtoproductionduringJune?
Beginninginventory
+Rawmaterialpurchases
Indirectmaterialsissued
=Available
Lessendingraw materials
=Costofmaterialsused

$4,600
143,500
(3,600)
144,500
(5,800)
$138,700

B.Calculatethecostofgoodsmanufactured.
MATERIALS:
Beginninginventory
+Rawmaterialpurchases
Indirectmaterialsissued
=Available
Lessendingrawmaterials
=Costofmaterialsused
LABOR
OVERHEADAPPLIED
MANUFACTURINGCOSTS
AddbeginningWIP
Lessendingworkinprocess
Costofgoodsmanufactured

$4,600
143,500
(3,600)
144,500
(5,800)
$138,700
55,000
49,600
243,300
8,800
(7,500)
$244,600

C.HowmuchisthecostofinventoryontheMay31stbalancesheet?
Rawmaterials
Workinprocess
Finishedgoods
TotalinventoryatMay31st

$4,600
8,800
12,300
$25,700

Problem 30 HeathCompanyusesanormalproductcostingsystem.Any
amountofoverorunderappliedoverheadisimmaterial.Thecompanyapplies
manufacturingoverheadbasedon80%ofdirectlaborcost.Thecompany
reportedthefollowingamountsfor2003:
Rawmaterialspurchased
Beginningrawmaterialsinventory
Endingrawmaterialsinventory
Beginningfinishedgoodsinventory
Endingfinishedgoodsinventory

$120,000
16,000
5,000
11,000
8,000

Directlaborused
Manufacturingoverheadcostsincurred
Sellingandadministrativeexpenses
Beginningworkinprocessinventory
Endingworkinprocessinventory

$44,000
36,000
21,000
17,000
16,000

A.Calculatethecostofmaterialsusedinproduction.
Beginningrawmaterialsinventory
Rawmaterialspurchased
=Materialsavailableforuse
Lessendingrawmaterialsinventory
=Materialsusedinproduction

$16,000
120,000
$136,000
5,000
$131,000

B.Calculatethecostofgoodsmanufactured.
Materialsusedinproduction(partA)
Directlaborused
Manufacturingoverheadcostsapplied(80%*44,000)
Totalmanufacturingcosts
Addbeginningworkinprocess
Lessendingworkinprocess

$131,000
44,000
35,200
$210,200
17,000
(16,000)

Costofgoodsmanufactured

$211,200

Problem 31 - Peters,Inc.manufactureshomeworkmachines.Itusesanormal
costingsystem.Anyamountofoverorunderappliedoverheadisimmaterial.
Actualmanufacturingoverheadfortheyearis$55,500.Overheadisapplied
basedondirectlaborcost.DuringJune,Peterstransactionsandaccounts
includedthefollowing:
Finishedgoodsinventory,ending
Finishedgoodsinventory,beginning
Indirectmaterialsissuedtoproduction
Generaladministrativeexpenses
Rawmaterialsinventory,ending
Rawmaterialsinventory,beginning

$11,600
12,300
3,200
9,400
4,500
5,100

Sales
Directlaborcost
Directmaterialspurchased
Workinprocessinventory,ending
Workinprocessinventory,beginning
Totalmanufacturingoverheadapplied

$324,000
72,400
178,000
12,800
10,500
56,100

A.Howmuchiscostofgoodsmanufactured?
Beginningrawmaterialsinventory
Rawmaterialspurchased
=Materialsavailableforuse
Lessindirectmaterialsused
Lessendingrawmaterialsinventory
=Materialsusedinproduction
Directlaborused
Manufacturingoverheadcostsapplied
Totalmanufacturingcosts
Addbeginningworkinprocess
Lessendingworkinprocess
Costofgoodsmanufactured

$5,100
178,000
$183,100
(3,200)
(4,500)
$175,400
72,400
56,100
$303,900
10,500
(12,800)
$301,600

B.Calculatethecostofgoodssoldafteradjustmentforover/underapplied
overhead.
Beginningfinishedgoods
Costofgoodsmanufactured
Lessendingfinishedgoodsinventory
=Costofgoodssold
Overappliedoverhead($55,500$56,100)
Adjustedcostofgoodssold

$12,300
301,600
(11.600)
$302,300
(600)
$301,700

C.HowmuchistotalinventoryontheJune30thbalancesheet?
Rawmaterials
Workinprocess
Finishedgoods
=Totalinventoryat63003

$11,600
12,800
4,500
$28,900

Problem 32 - ThemanufacturingoperationsofHoncho,Inc.hadthefollowing
balancesforthemonthofMarch:
Inventories
RawMaterials
Workinprocess
Finishedgoods

3/1/03
$10,000
6,000
30,000

3/31/03
$12,000
7,000
22,000

IfHonchotransferred$38,000ofcompletedgoodsoutofworkinprocess
duringMarch,whatwastheamountofthecostofgoodssold?
Amountstransferredoutofworkinprocessaremovedintofinishedgoodsas
'costofgoodsmanufactured'.Beginningfinishedgoodspluscostofgoods
manufacturedlessendingfinishedgoods=costofgoodssold
$30,000+$38,000$22,000=$46,000


Problem 33 -UnderCompanyestimatesthefollowingoverheadcostsfor
2003:
Equipmentdepreciation
Equipmentmaintenance
Factorymanagementsalaries
Factoryrent
Totalmanufacturing
overhead

$30,000
64,000
150,000
50,000
$294,000

UnderCompanyincurredthefollowingcostsfor2003forjob23:
Directmaterial
Directlabor

$80,000
60,000

Otherjobsincurred$320,000ofdirectlabor.UnderCompanyisalso
budgeting$350,000indirectlaborcostsand20,000machinehoursfor2003.
Actualmanufacturingoverheadfor2003was$300,000.

A.Calculatethepredeterminedoverheadrateusingdirectlaborcostsasthe
allocationbase.
$294,000/$350,000=$0.84perdirectlabordollar

B.Whichoftheallocationbasesispreferred?Why?
Sincemostoftheoverheadcostsarerelatedtoequipment,machinehoursis
thepreferredallocationbase.

C.HowmuchoverheadwillUnderapplytojob23?
$0.84x$60,000=$50,400

D.Whatisthetotalcostofjob23?
$50,400+$80,000+$60,000=$190.400

Problem 34 - StranahanCompanyallocatesoverheadbasedonmachine
hours.Estimatedoverheadcostsfortheyeartotal$217,000andthecompany
estimatesthatitwilluse31,000machinehoursduringtheyear.Actual
overheadfortheyearwas$220,000andthecompanyused30,000machine
hours.IfJob45requires1,000machinehours,howmuchoverheadwillbe
allocatedtoJob45?
$217,000/31,000machinehours=$7.00permachinehour
$7.00permachinehour*1,000machinehours=$7,000

Problem 35 - FaneCompanyestimatesthatitsemployeeswillwork80,000
directlaborhoursduringthecomingyear.Totaloverheadcostsfortheyear
areestimatedtobe$1,000,000andthedirectlaborcostsareexpectedto
be$1,300,000.Actualoverheadfortheyearwas$980,000andthecompany
used82,000directlaborhours.Ifthecompanyallocatesoverheadbasedon
directlaborhours,whatisthepredeterminedoverheadrate?
$1,000,000/80,000=$12.50perdirectlaborhour


Problem 36 -Hernandez,Inc.manufacturescalculators.Thecompanyusesa
normalcostingsystem.Thecompanyallocatesoverheadat$25perdirect
laborhour.Overorunderappliedoverheadisnotmaterial.DuringMay,
Hernandezstransactionsincludedthefollowing:
Directlaborcostincurred@$20anhour
Manufacturingoverheadcostincurred
Directmaterialspurchased
Indirectmaterialsissuedtoproduction
Manufacturingoverheadcostapplied
Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Sales
Sellingexpenses
Workinprocessinventory,beginning
Workinprocessinventory,ending

$5,400
6,800
11,500
1,100
6,650
160
280
23,000
2,100
220
250

A.Brieflylistanyadditionalinformationyouneedtocalculatecostofgoods
soldforthiscompany.(Bespecific.)
Beginningfinishedgoodsinventoryandendingfinishedgoodsinventory(You
haveenoughinformationtocalculatecostofgoodsmanufacturedsoyou
don'tneedthatamount.)

B.HowmuchisthecostofdirectmaterialsissuedtoproductionduringMay?
Rawmaterialsinventory,beginning
Directmaterialspurchased
Indirectmaterialsissued
LessRawmaterialsinventory,ending
Costofdirectmaterialsissuedtoproduction

$160
11,500
(1,100)
(280)
$10,280

C.HowmuchoverheadwouldbeappliedduringMay?
Directlaborcost/Costperhour=numberofdirectlaborhoursincurred
$5,400/$20=270hours
Applied=270hoursx$25=$6,750

D.HowmuchisoverorunderappliedoverheadforMay?
$6,750$6,800=$50underapplied

Problem 37 - Attheendoftheyear,DearyCompanyhadthefollowing
balancesinselectedaccountsrelatedtoitsjobcostsystem:
RawMaterialsInventory
FinishedGoods

$40,000
60,000

WorkinProcessInventory
CostofGoodsSold

$100,000
800,000

Informationconcerningmanufacturingoverheadandlaborfortheyear
follows:
Actualmanufacturingoverhead
Estimatedmanufacturingoverhead
Actualdirectlaborcostperhour

$290,000
$300,000
$17

Directlaborhoursincurred
Directlaborhoursestimated
MOHappliedbasedon

15,600
15,000
Directlaborhours

A.Calculatethepredeterminedmanufacturingoverheadrate.
EstimatedMOH/Est.DLhours=
$300,000/15,000=

$20perDLhour

Note:ThisisthenumberweusetoapplyMOHtojobsasweareworkingon

them.inthiscase,foreachdirectlaborhourourpeoplework,weadd$20
forMOHcosts.

B.HowmuchoverheaddidDearyapplytojobsduringtheyear?
MustbeappliedbasedontheestimatedcostperDLhourcalculatedinpart
Asincewedontknowhowmuchtheactualcostwillbeuntiltheendofthe
period.
$20x15,600hours=

$312,000

C.HowmuchisCGSafterDearyproperlyallocatesanyunderorover
appliedmanufacturingoverhead?

Step1:Determinehowmuchisoverorunderapplied:
ActualamountintheMOHexpenseaccount
Applied(frompartB)
(thisishowmuchwetookoutoftheMOHexpenseaccount)
Overapplied(anegativebalanceleftintheMOHexpenseaccount)
[NOTE:ThisamountcannotstaytherewemusttakeitoutandmoveitalltoCGS.

CGS=$800,000$22,000=$778,000

$290,000
312,000
($22,000)

Problem 38 - Saman,Inc.manufacturescoastersandallocatesoverhead
basedondirectlaborcost.Samanusesanormalcostsystem.DuringAugust,
Samansaccountsincludedthefollowingbalancesandtransactions:
Workinprocess,beginning
Workinprocess,ending
Finishedgoodsbeginning
Finishedgoods,ending
Administrativeexpenses
Directlaborcostincurred
Materialspurchased
Rawmaterials,beginning
Directmaterialsused
Manufacturingoverheadcostapplied
Indirectmaterialsissuedtoproduction
Sales
Marketingexpenses
Manufacturingoverheadcostincurred

$25,200
27,600
7,300
6,800
12,000
20,400
78,000
3,300
76,400
20,100
2,200
167,000
11,000
21,,000

A.HowmuchisendingrawmaterialsatAugust31
Beginninginventory
+Materialpurchases
Indirectmaterialsissued
Directmaterialsused
=Endingrawmaterials

$3,300
78,000
(2,200)
(76,400)
$2,700

B.Howmuchiscostofgoodsmanufactured?
Directmaterials
Directlabor
Manufacturingoverhead
Totalmanufacturingcosts
AddbeginningWIP
LessendingWIP
Costofgoodsmanufactured

$76,400
20,400
20,100
116,900
25,200
(27,600)
$114,500

C.Howmuchiscostofgoodssold?(Besuretoconsidertheunderor
overappliedoverhead.)
BeginningFGinventory

$7,300

AddCGM(partB)
LessendingFGinventory
=Costofgoodssold
Underappplied($21,000$20,100)
Adjustedcostofgoodssold

114,500
(6,800)
$115,000
900
$115.900

Problem 39 - HagerInc.appliesoverheadbasedondirectlaborcostusinga
normalcostsystem.Thecompanyestimatedthefollowingannualamounts:
Estimatedmanufacturingoverhead
Estimateddirectlabor

$42,000
1,600hoursat$15perhour

Actualamountsfortheyearwere:
Actualmanufacturingoverhead
Actualdirectlabor

$44,000
1,550hoursat$16perhour

A.Howmuchisthepredeterminedoverheadrate?
Estimatedmanufacturingoverhead/Estimateddirectlaborcost=
$42,000/(1,600*$15)=$1.75perdirectlabordollar

B.Howmuchoverheadwasappliedduringtheyear?
OverheadratexDL$incurred=
$1.75x[1,550*$16]=$43,400

C.Determinetheamountofoverorunderappliedoverhead.
AppliedActual=$43,400$44,000=$600underapplied

Problem 40 - JiffyFabricatorsappliesoverheadbasedondirectlaborcost.
Thecompanyprovidedthefollowingannualamounts:
Estimateddirectlabor
Actualdirectlabor
Estimatedmanufacturingoverhead
Actualmanufacturingoverhead

2,000hoursat$12.50perhour
1,900hoursat$13perhour
$30,000
$31,000

A.Howmuchoverheadwasappliedduringtheyear?$29,640
Overheadapplicationrate=EstimatedMOHcost/EstimatedDL$
=$30,000/[2,000*$12.50]=$1.20perDL$
Overheadapplied=$1.20x[1,900*$13]=$29,640

B.Determinetheamountofoverorunderappliedoverhead.$1,360Under
applied
AppliedMOHActualMOH=$29,640$31,000=$1,360underapplied

Remembermesayingthatsomeofyouwouldforgetthat'estimatedMOH'does
notappearanywhereintheaccountingrecords?

Problem 41 - Deegan,Inc.manufacturesbligglesandallocatesoverhead

basedondirectlaborcost.DuringJune,Deegansaccountsincludedthe
followingbalancesandtransactions:
Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Manufacturingoverheadcostapplied
Marketingexpenses
Manufacturingoverheadcostincurred
Sales

$700
850
9,500
11,000
9,000
98,000

Directmaterialspurchased
Directlaborcostincurred
Indirectmaterialsissuedtoproduction
Workinprocessinventory,beginning
Workinprocessinventory,ending
Administrativeexpenses

$45,000
16,400
4,000
7,800
6,600
13,000

Underandoverappliedoverheadareconsideredimmaterial.

A.HowmuchisthecostofdirectmaterialsissuedtoproductionduringJune?
$40,850

Rawmaterialsinventory,beginning
Directmaterialspurchased
Goodsavailable
Lessrawmaterialsinventory,ending
Lessindirectmaterialstoproduction
Costofdirectmaterialsissuedtoproduction

$700
45,000
45,700
(850)
(4,000)
$40,850

B.Howmuchiscostofgoodsmanufactured?$67,950

Directmaterialsusedinproduction(frompartA)
Directlaborcostincurred
Manufacturingoverheadcostapplied
Totalmanufacturingcosts
Add:Workinprocessinventory,beginning
Less:Workinprocessinventory,ending
CostofGoodsManufactured

$40,850
16,400
9,500
66,750
7,800
(6,600)
$67,950

Note:Indirectmaterialsissuedtoproductionareconsideredmanufacturing
overheadcostsandassuch,arealreadyincludedinactualmanufacturing
overhead.

Problem 42 - TheaccountingrecordsofCinottiManufacturingCompany
includethefollowinginformation:

Workinprocessinventory
Finishedgoodsinventory
Materialspurchased
Rawmaterialsinventory
Directmaterialsused
Manufacturingoverheadincurred
Directlabor
Sellingexpenses

Dec.31,2004
$15,000
45,000
331,000
?
325,000
124,000
120,000
70,000

Dec.31,2003
$12,000
51,000

24,000

Manufacturingoverheadisappliedatarateof110%ofdirectlaborcost.
Calculatethefollowing:

1.Rawmaterialsinventoryat123104
Beginningrawmaterialsinventory
Rawmaterialspurchased
=Materialsavailableforuse
Lessmaterialsusedinproduction
Lessendingrawmaterialsinventory

$24,000
331,000
$355,000
(325,000)
$30,000

2.TotalmanufacturingcostsaddedtoWorkinProcessInventoryduring
2004


Materialsusedinproduction
Directlaborused
Manufacturingoverheadcostsapplied(110%*$120,000
TotalmanufacturingcostsaddedtoWIP

$325,000
120,000
132,000
$577,000

3.Costofgoodsmanufacturedduring2004
Totalmanufacturingcostsadded(Frompart2)
Addbeginningworkinprocess
Lessendingworkinprocess
Costofgoodsmanufactured

$577,000
12,000
(15,000)
$574,000

4.TotalinventoriesonCinottisDecember31,2004balancesheet
Rawmaterials(frompart1)
Workinprocess
Finishedgoods
Totalinventory

$30,000
15,000
45,000
$90,000

5.AssumeCGMis$500,000.Howmuchiscostofgoodssoldfor2004?
Beginningfinishedgoods
Costofgoodsmanufactured
Lessendingfinishedgoodsinventory
Costofgoodssold

$51,000
500,000
(45,000)
$506,000

Problem 43 - Earl,Inc.manufacturesbaseballsandallocatesoverheadbased
ondirectlaborcost.DuringJune,Earlsaccountsincludedthefollowing
balancesandtransactions:

Manufacturingoverheadcostapplied
Indirectmaterialsissuedtoproduction
Administrativeexpenses
Directlaborcostincurred
Costofmaterialspurchased
Directmaterialsusedinproduction
Manufacturingoverheadcostincurred

$33,300
1,400
24,000
32,000
140,000
143,000
35,000

Rawmaterials,beginning
Finishedgoodsbeginning
Finishedgoods,ending
Workinprocess,beginning
Workinprocess,ending
Marketingexpenses
Sales

Underandoverappliedoverheadareconsideredimmaterial.Ignoreover/
underappliedeliminationinpartsBandC.

A.HowmuchisendingrawmaterialsatJune30
Rawmaterialsinventory,beginning
Directmaterialspurchased
Goodsavailable
Lesscostofdirectmaterialsissuedtoproduction
Lessindirectmaterialstoproduction
Rawmaterialsinventory,ending

$11,500
140,000
151,500
(143,000)
(1,400)
$7,100

B.HowmuchiscostofgoodsmanufacturedforJune?
Directmaterialsusedinproduction
Directlaborcostincurred
Manufacturingoverheadcostapplied
Totalmanufacturingcosts
Add:Workinprocessinventory,beginning
Less:Workinprocessinventory,ending
CostofGoodsManufactured

$143,000
32,000
33,300
208,300
21,500
(18,900)
$210,900

C.Howmuchiscostofgoodsold?
Beginningfinishedgoods
Costofgoodsmanufactured(partB)
Lessendingfinishedgoodsinventory

$8,400
210,900
(9,600)

$11,500
8,400
9,600
21,500
18,900
27,000
285,000

Costofgoodssold

$209,700

D.Isthiscompanyusinganactualornormalcostingsystem?
Normalcosting

Problem 44 - WalkerCompanyappliesmanufacturingoverheadbasedon
directlaborhours.Informationconcerningmanufacturingoverheadandlabor
forMayof2005asfollows:
Actualmanufacturingoverhead
Estimatedmanufacturingoverhead
Directlaborincurred
Directlaborestimated

$163,800
$158,600
2,500hours@$22=$55,000
2,600hours@$21=$54,600

A.Howmuchisthemanufacturingoverheadrate?
Estimatedmanufacturingoverhead/estimateddirectlaborhours=
$158,600/2,600hours=$61.00perDLhour

B.HowmuchoverheaddidWalkerapplyduringtheyear?
OverheadratetimesactualDLhours=
$61x2,500=$152,500

C.HowmuchisoverorunderappliedoverheadatMay31?
Actualoverheadappliedoverhead=
$163,800$152,500=$11,300underapplied

Problem 45 -HarmonCompanybeganjobs35,36,37,and38duringJuly.At
thebeginningofJuly,jobs31,33,and34wereinproduction,whilejobs30
and32werecompletedandwaitingtobeshippedtocustomers.Jobs31,33,
34,36,and37werecompletedduringJuly.Jobs30,31,32,34,and36were
shippedtocustomersduringJuly.
WhichjobswerecompletedandtransferredoutduringJuly?31,33,34,36,37
WhichjobsareinworkinprocessatJuly31?35and38
WhichjobsareinfinishedgoodsatJuly31?33and37
Calculations:
WIPbeginning=31,33,34
Jobsadded=35,36,37,38
Jobsworkedon=31,33,34,35,36,37,38
Lessjobscompletedandtransferredout=31,33,34,36,37
EndingjobsremaininginWIP=35and38
EndingjobsremaininginFG=33and37

Problem 46 TheunderappliedbalanceoftheManufacturingOverhead

accountis$30,000.Theamountisconsideredmaterial.Theendingbalances
ofRawmaterials,WorkinProcess,FinishedGoods,andCostofGoodsSold
are$10,000,$25,000,$50,000,and$425,000,respectively.Whatamountof
theunderappliedbalanceshouldbeallocatedtoCostofGoodsSold?
Sincetheamountisconsideredmaterial,theunderappliedamountmustbe
allocatedtothethreeaccountswithoverheadinthem:WorkinProcess,
FinishedGoods,andCostofGoodsSold,basedontheirbalances:
WorkinProcess
FinishedGoods
CostofGoodsSold
Total
AllocatedtoCGS:$425,000/$500,000x$30,000=$25,500

$25,000
50,000
425,000
$500,000

Problem 47 HoartCompanyappliesoverheadbasedondirectlaborhours
andcalculatedanoverheadrateof$2.Job55used$500ofdirect
materials,100machinehours,$750ofdirectlabor.Thelaborrateperhouris
$15.Howmuchisthecostofjob55?
Numberofhours=$750/$15=50DLhours
DM+DL+MOH=$500+$750+50*$2=$1,350

Problem 24 GottbergCompanybasesitspredeterminedoverheadrateson
machinehours.Atthebeginningoftheyear,thecompanyestimatedits
manufacturingoverheadfortheyearwouldbe$56,000andtherewouldbea
totalof40,000machinehours.Actualmanufacturingoverheadforyear
amountedto$58,000andtheactualmachinehourstotaled44,800.How
muchmanufacturingoverheadwasappliedfortheyear?
Appliedattherateof:$56,000/40,000=$1.40permachinehour
$1.40x44,800MH=$62,720Actualamountscannotbeusedtodetermine
theratebecausetheyarenotknownuntiltheendoftheyear.

Problem 48 - MossCompanyappliesmanufacturingoverheadbasedondirect
laborhours.Itprovidedthefollowinginformationfromitsaccountingrecords
for2003:

Expectedproduction
Actualproduction
Budgetedoverhead
Actualoverhead

30,000laborhours
28,000laborhours
$1,500,000
$1,450,000

Jobs102&103arecompletedduringtheperiod.
A.Whatistheoverheadapplicationrate?
$1,500,000/30,000=$50perhour

B.Howmuchoverheadwillbeappliedtojob103ifitstotallaborcostwas

$4,320andlaboris$18perhour?
Numberoflaborhours=$4,320/$18=240hours
Overheadapplied=240hours*$50=$12,000

Problem 49SatCompanysfactoryoverheadaccountshoweda$8,000
underappliedoverheadbalanceonDecember31.Otheraccountsshowed
thefollowingbalancesatyearend:

Rawmaterials
WorkinProcess
FinishedGoods
CostofGoodsSold

$100,000
40,000
60,000
700,000

Whichwillbethebalancesofeachaccountlistedbelowafterdisposingthe
$8,000?
CostofGoodsSold
$700,000+$8,000=$708,000

WorkinProcess
$40,000nochange

FinishedGoods
$60,000nochange

WorkinProcess
$40,000nochange

Underappliedoverheadismovedtocostofgoodssoldsincemostofthe
overheadcostwouldlikelybeinthataccountbyyearend.

Problem 50 - BennyCompanyallocatesoverheadat$4perdirectlabor
dollar.Job52required6casesofdirectmaterialsatacostof$6percase
andtookemployeesof5hourstocomplete.Employeesearn$10perhour.
HowmuchisthetotalcostofJob52?
DM=6x$6=$36
DL=$10x5hrs.=$50
MOH=$4x$50=$200
Totalcost=$286

Problem 51 -Clinton'sFurnitureCompanyestimatesitsannualfactory
overheadtobe$47,000.Thecompanyassignsfactoryoverheadusingthe
numberofpiecesproduced.Clintonbudgetsannualproductionat70,000

piecesofglassware.Atyearend,youfindoutClintonincurred$52,000of
factoryoverheadfortheyear.Supposethecompanyproduced75,000
piecesin2002.
A.Whatisthetotalamountoffactoryoverheadappliedtoproductionfor
theyear?
($47,000/70,000)x75,000=$50,357

B.Howmuchisfactoryoverheadunderoroverapplied?
Answer:$50,357$52,000=$1,643underapplied

Problem 52 -Actualmanufacturingoverheadcosts$120,000estimated
manufacturingoverheadcosts$100,000actualmachinehours25,000and
estimatedmachinehours20,000.Theonlycostdriverismachinehours.
A.Usingjobordercosting,howmuchisthe2002predeterminedoverhead
applicationrate?
$100,000/20,000=$5.00perhour
B.Howmuchistheamountofmanufacturingoverheadallocatedtojobs
during2003?
$100,000/20,000=$5.00/machinehour$5.00x25,000=$125,000

Problem 53 -Dougan,Inc.allocatesoverheadbasedonapredetermined
overheadrateof$16.00perdirectlaborhour.Employeesarepaid$12.00
perhour.Job24requires4poundsofdirectmaterialatacostof$30.00per
pound.Itisestimateditwilltakeemployeesatotalof20hourstocomplete
thejob.Actualmanufacturingoverheadcoststotaled$80,000fortheyearfor
thecompany.HowmuchisthecostofJob24?
Directmaterials(4x$30)
Directlabor($12x20)
Manufacturingoverhead($16x20)
Totaljobcost

$120
240
320
$680

Problem 54 DuckworthCompanyusesapredeterminedoverheadratebased
ondirectlaborhourstoapplymanufacturingoverheadtojobs.Atthe
beginningoftheyear,thecompanyestimatedmanufacturingoverheadwould
be$100,000anddirectlaborhourswouldbe10,000.Theactualfiguresfor
theyearwere$110,000formanufacturingoverheadand10,500directlabor
hours.Howmuchisoverorunderappliedoverheadfortheyear?
Actualmanufacturingoverhead
Appliedoverhead:
RatexDLhoursincurred=
[$100,000/10,000]x10,500=
Underappliedoverhead

$110,000
105,000
$5,000

Problem 55 CarrCompanyhasthefollowingestimatedcostsfornextyear:
Directmaterials
Directlabor
Factoryoperatingcosts

$30,000
110,000
144,000

Salaryofproductionsupervisor
Indirectmaterials
Advertisingexpense

$70,000
10,000
32,000

Carrappliesmanufacturingoverheadonthebasisofmachinehours.Carr
estimatesthat20,000directlaborand32,000machinehourswillbeworked
duringtheyear.Actualdirectlaborandmachinehoursfortheyearwere
19,600and33,000,respectively.Actualoverheadwas$226,000fortheyear.
Howmuchoverheadisoverorunderappliedatyearend?
Overheadrate=EstimatedOverhead/EstimatedActivity
=[$144,000+$70,000+$10,000]/32,000=$7.00permachinehour
Applied=$7.00x33,000machinehours=$231,000
Overappliedoverhead=Actualoverheadappliedoverhead=$226,000
$231,000=$5,000

Problem 56 MartinCompanyappliesmanufacturingoverheadbasedon
directlaborhours.Informationconcerningmanufacturingoverheadandlabor
fortheyearfollows:
Actualmanufacturingoverhead
Estimatedmanufacturingoverhead

$150,000
$140,000

Directlaborhoursincurred
Directlaborhoursestimated

4,800
5,000

Howshouldthemanufacturingoverheadallocationratebecalculated?
$140,0005,000=$28

Problem 57 - ThefollowingamountswerereportedbyWinklerCompanybefore
adjustingitsoverappliedmanufacturingoverheadof$20,000.
RawMaterialsInventory
FinishedGoods

$40,000
60,000

WorkinProcessInventory
CostofGoodsSold

$100,000
840,000

HowmuchwillWinklerreportascostofgoodssoldafteritdisposesofits
overappliedoverhead?
Sinceoverheadisoverapplied,toomuchwasaddedtotheproduct
accounts.Toremoveoverapplied,youmustsubtract.Sincetheamountis
immaterial,theentireamountisremovedfromcostofgoodssold:$840,000
$20,000=$820,000.

Problem 58 - OnMonday,JanuFlowerspurchasesrosescosting$8,000.On
Tuesday,Januuses$5,000oftheflowerstobeginpreparingforFriday
evening'sLoversDance.OnWednesday,Janupaid$1,500oflaborforits
employeesforworkingonthejob.Overheadisappliedat80%ofdirectlabor
cost.WhatistheendingaccountbalanceofFinishedGoodsafterthese
transactionswhenthejobiscomplete?
Materials=$5,000+Labor$1,500+Mfg.overhead($1,500*80%)$1,200=
$7,700

Problem 59 - During2003LawsonManufacturingexpectedtoproduce
100,000unitswith$300,000ofoverhead,$500,000ofmaterial,and$200,000
inlabor.Actualproductionwas110,000unitswithanoverheadcostof
$280,000,$550,000inmaterialsusedand$220,000inlabor.Allofthegoods
werecompletedandtransferredtoFinishedGoods.

A.WhatamountwastransferredtoFinishedGoods?
Overheadisappliedbasedontheestimatesofoverheadandactivity:
$300,000/100,000=$3perunitproduced
Asactivityoccurs(i.e.,unitsareproduced)thecompanyappliesoverhead.In
thiscase,thecompanyadds$3toWIPeachtimeoneunitisproduced.Total
applied:110,000unitsx$3=$330,000applied.Totalcosttransferred:DM+
DL+OHapplied=$550,000+$220,000+$330,000=$1,100,000

B.Howmuchistheamountofover/underappliedoverhead?
Applied=$330,000lessactual$280,000=$50,000overapplied

Problem 60 - Hernandez,Inc.paysitsemployees$12perhour.Itallocates
overheadat$3perdirectlaborhour.JobR45required5poundsofdirect
materialsatacostof$5perpoundandtookemployeesof2hoursto
complete.HowmuchisthetotalcostofJobR45?
DM+DL+MOH=totalcost
[5x$5]+[2x$12]+[2x$3]=$55

Problem 61 - BuilderBobCompanyallocatesoverheadat$9perdirectlabor
hour.JobA45required5boxesofdirectmaterialsatacostof$30perbox
andtookemployees12hourstocomplete.Employeesearn$15perhour.How
muchisthetotalcostofJobA45?
DM+DL+MOH=(5x$30)+($15x12)+($9x12)=$438

Problem 62 - HollCompanyincurreddirectmaterialscostsof$30,000during
theyear.Manufacturingoverheadappliedwas$28,000andisapplied
basedondirectlaborcosts.Thepredeterminedoverheadrateis70%.How
muchareHollCompanystotalmanufacturingcostsfortheyear?
$28,000=.70(DL)soDL=$40,000
DM+DL+MOH=totalmanufacturingcostsfortheyear
$30,000+$40,000+$28,000=$98,000

Problem 63 BellManufacturingassignsoverheadbasedondirectlabor
dollars.ThecompanyincurredthefollowingforJobB22:$2,500fordirect
materialsand20hoursofdirectlabor.Employeesarepaid$11perhour.The
followingestimatesweremadebythecompanyatthebeginningoftheyear
for2004operations:
Expectedannualdirectlaborhours
Expectedannualdirectlaborcost
Expectedmanufacturingoverheadcosts

10,000
$250,000
$300,000

HowmuchisoverheadappliedtojobB22?
Rate=$300,000/$250,000=$1.20perDLdollar
Overheadappliedat$1.20foreachdollaroflaborincurredonthejob:
$1.20x[$11x20]=$264

Problem 64 ZingManufacturingassignsoverheadbasedondirectlabor
dollars.ThecompanyincurredthefollowingforjobA24:$200fordirect
materialsand30hoursofdirectlabor.Employeesarepaid$12perhour.The
predeterminedoverheadratewascalculatedat$1.10basedondirectlabor
dollars.Estimatedmanufacturingoverheadfortheyearwas$38,000.The
companyexpectedtocomplete100jobsduringtheyear.Howmuchisthe
totalcostofjobA24?
Directmaterials
Directlabor[30hoursx$12]
MOH[$1.10x$360oflabor]
Totaljobcost

$200
360
396
$956

Problem 65 McCargoRepairhasthejob26($4,000)inbeginningworkin
process,andjob25($3,000)inbeginningfinishedgoods.Additionaljob
costsincurredduringtheyearwere:Job27$5,000,Job28$4,500,andJob
29$5,500.Jobs26,27and29arecompleted.Jobs25,26and29aresold.
Whatisthecostofendingfinishedgoods?
Onlyjob27Cost=$5,000
Jobs26,27,and29weretransferredfromWIPintoFGtojoinjob25during
theyear.Jobs(25,26,and29)weremovedouttoCGSwhensold.Thisleaves
onlyjob27inFG.

Problem 66 McLeodCompanysfactoryoverheadaccountshoweda$4,000
overappliedbalanceonDecember31.Otheraccountsshowedthefollowing
balancesatyearend:

Rawmaterials
WorkinProcess
FinishedGoods
CostofGoodsSold

$25,000
20,000
30,000
450,000

Determinethebalancesoftheaccountslistedbelowafterdisposingthe
$4,000.


A.CostofGoodsSold=$450,000$4,000=$446,000
B.WorkinProcess=$20,000
C.FinishedGoods=$30,000
D.RawMaterials=$25,000

Problem 67 TimberCompanyusesapredeterminedoverheadrateof$7.00
permachinehour.Ifestimatedoverheadcostswere$350,000,overheadcosts
incurredwere$360,000,estimatedmachinehourswere50,000,andmachine
hoursworkedwere51,000thisyear,howmuchisappliedoverhead?
Overheadisappliedbasedontheactualactivity.Theactivityforthe$7rate
is'machinehour.'Everytimeonemachinehourisincurred,$7isaddedasMOH
toWIP.TheratewascalculatedbytakingtotalestimatedMOHcostsdivided
byestimatedmachinehours:
$350,000/50,000=$7.Applied=$7x51,000=$357,000

Problem 68 FibbeCompanyestimateditwouldincur$65,000of
manufacturingoverheadduring2004.Ananalysisindicatesthatoverhead
appliedtotaled$68,000.Theactualmanufacturingoverheadcostduringthe
yearwas$66,000.Howmuchisoverorunderappliedoverhead?
ActualmanufacturingoverheadcostsincreasetheMOHexpenseaccount.
AppliedMOHcostsdecreaseit.Thedifferenceisoverorunderapplied.Note
thattheestimatedMOHamountdoesnotgetrecordedintotheaccounting
records.
ActualMOHcosts
AppliedMOH
Overappliedoverhead

($66,000)
68,000
$2,000

Problem 69 - Calky,Inc.completedJobNo.G23during2004.Thejobcost
sheetlistedthefollowing:
Directmaterials
Directlabor
Manufacturingoverhead
Unitsproduced
Unitssold

$15,000
$5,000
$10,000
1,000units
800units

Howmuchisthecostofthefinishedgoodsonhandfromthisjob?
Accrualbasisaccountingtellsusthatthecoststoproducearethecoststhat
becomeinventory:
Costsofall1,000units=DM+DL+MOH=$15,000+$5,000+$10,000=
$30,000
Costperunittoproduce=$30,000/1,000=$30perunit
Costofgoodsonhand(endinginventory)=$30x(1,000800)=$6,000


Problem 70 PuertoCompanyallocatesoverheadbasedonapredetermined
overheadrateof$3.00perdirectlaborhour.Job51required2casesof
directmaterialatacostof$10.00percaseandtookemployeeswhoearn
$12.00perhouratotalof3hourstocomplete.WhatisthetotalcostofJob
51?
DM+DL+MOH=[2casesx$10]+[3hrsx$12]+[3hrs.x$3]=$65

Problem 71SingletonCompanyappliesoverheadbasedonanoverhead
rateof$0.25perdirectlabordollar.Job24used$800ofdirectmaterials,
620machinehours,and150hoursofdirectlabor.Thelaborrateperhouris
$18.Howmuchisthecostofjob24?
Directmaterials
Directlabor(150*$18)
MOH($2,700*$0.25)
Costofjob24

$800
2,700
675
$4,175

Problem 72HangCompanysfactoryoverheadaccountshoweda$9,000
underappliedoverheadbalanceonDecember31.Otheraccountsshowed
thefollowingbalancesatyearend:

Rawmaterials
WorkinProcess
FinishedGoods
CostofGoodsSold

$100,000
120,000
80,000
2,200,000

Howmuchwillcostofgoodssoldbeafterdisposingofthe$9,000?


Costofgoodssoldadjustedbalance=$2,200,000+$9,000=$2,209,000

Underappliedoverheadisaddedtotheaccountstowhichitisallocated
becausenotenoughoverheadwasallocated.

Problem 73- YetterCompanyappliesmanufacturingoverheadbasedon


directlaborhours.Informationconcerningmanufacturingoverheadandlabor
forMayof2005asfollows:
Actualmanufacturing
overhead
Estimatedmanufacturing
overhead
Directlaborincurred
Directlaborestimated

$180,000
$188,600
4,000hours@$23=
$92,000
4,100hours@$22=
$90,200

A.Howmuchisthepredeterminedoverheadrate?
Sincetheactualamountofoverheadandactualdirectlaborincurredisnot
knownuntiltheendoftheperiod,wemustuseestimatedamountstodetermine
thePOHR.

EstimatedMOH/EstimatedDLH=$188,600/$4,100=$46perDirectlabor
hour

B.HowmuchoverheadshouldbeappliedintotalduringMay?
Eachtimeonedirectlaborhourisincurred,wemustapply(add)$46of
manufacturingoverhead.
$46/DLHx4,000hours=$184,000

C.HowmuchisoverorunderappliedoverheadatMay31?
ActualMOHAppliedMOH=Over/Underapplied
$180,000$184,000=$4,000overapplied

Problem 74Zimmerman,Inc.manufacturescalculatorsandemploysanormal
costingsystem.DuringJune,Zimmermanstransactionsandaccountsincluded
thefollowing:
Rawmaterialsacquired(cashpaid)
Rawmaterialsreceivedonaccount
Indirectmaterialsissuedtoproduction
Directlaborcostincurred
Totalmanufacturingoverheadapplied
Totalmanufacturingoverheadincurred

$124,000
12,000
7,000
52,000
72,800
82,000

Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Finishedgoodsinventory,beginning
Finishedgoodsinventory,ending
Workinprocessinventory,beginning
Workinprocessinventory,ending

$6,500
5,800
11,200
12,400
26,000
22,000

A.Howmuchisthecostofdirectmaterialstransferredtoproductionduring
June?
Rawmaterialsinventory,beginning
Directmaterialspurchased($124K+$12K)
Indirectmaterialsissued
LessRawmaterialsinventory,ending
Costofdirectmaterialsissuedtoproduction

$6,500
136,000
(7,000)
(5,800)
$129,700

B.Calculatethecostofgoodsmanufactured.
Materialsissuedtoproduction(partA)
Directlaborcostincurred
Manufacturingoverheadcostapplied
Totalmanufacturingcosts
Add:Workinprocessinventory,beginning
Less:Workinprocessinventory,ending
CostofGoodsManufacturing

$129,700
52,000
72,800
254,500
26,000
(22,000)
$258,500

Becausethisisjobcostingandanormalcostingsystemisused,onlyapplied
overheadisaddedtoWIP.
Problem 75 - NiebaumCompanyusesanormalproductcostingsystem.Any
amountofoverorunderappliedoverheadismaterial.Niebaum'saccounts
showedunderappliedoverheadof$5,000atDecember31.Otheraccounts
showedthefollowingbalancesatyearend:

Rawmaterials
Workinprocess
Finishedgoods
Salesrevenue
Costofgoodssold

$30,000
50,000
80,000
830,000
620,000

Calculategrossprofitafterthedisposalofunderoroverapplied
manufacturingoverhead.

$620,000
5,000

Sales
Costofgoodssold:
Adjustmentforunderappliedoverhead
Newcostofgoodssold
GrossProfit

$830,000

625,000
$205,000

Problem 77 -Dasani,Inc.considersanyoverorunderappliedoverheadtobe
immaterial.Thecompanyreportedthefollowingamountsfor2006:
Rawmaterialspurchased
Directmaterialsused
Indirectmaterialsused

$88,000
83,000
6,000

Directlaborused

42,000

Indirectdirectlaborused
Manufacturingoverheadapplied

5,000
45,000

Beginningworkinprocessinventory
Endingworkinprocessinventory
Sellingandadministrativeexpensesincurred
Othermanufacturingoverheadcosts
incurred
Beginningfinishedgoodsinventory
Endingfinishedgoodsinventory

$17,000
19,000
16,000
36,000
7,000
10,000

A.Calculatetotalmanufacturingcostsifthecompanyusesanactual
costingsystem.
Directmaterialsused
Directlaborcost
Manufacturingoverhead:
Indirectmaterialsused
Indirectdirectlaborused
Othermanufacturingoverheadcostsincurred
Totalmanufacturingcosts

$83,000
42,000

6,000
5,000
36,000
$172,000

Notethatanactualcostingsystemallocatestheactualmanufacturing
overheadcostsdirectlytoWIP.

B.Calculatethecostofgoodsmanufacturedassuminganormalcosting
system.
Directmaterialsused
Directlaborcost
Manufacturingoverheadapplied
Totalmanufacturingcosts
AddBeginningWIP
LessEndingWIP
CGM

$83,000
42,000
45,000
$170,000
17,000
(19,000)
$168,000

Problem 78 - Winfrey,Inc.manufacturescalculators.Thecompanyemploysa
normalcostingsystemandkeepallmaterialsinamaterialsstoreroom.Wallaces
relatedtransactionsforJunefollow:
Directlaborcostincurred
Materialspurchasedonaccount
Materialspurchasedforcash
PaymentmadeformaterialspurchasedinMay
Totalmanufacturingoverheadcost

$17,800
42,500
11,500
3,300
23,500

Workinprocessinventory,beginning
Workinprocessinventory,ending
Rawmaterialsinventory,beginning
Rawmaterialsinventory,ending
Indirectmaterialsissuedtoproduction

$10,200
11,100
1,400
1,150
2,200

HowmuchisthecostofdirectmaterialsissuedtoproductionduringJune?
Rawmaterialsinventory,beginning
Directmaterialspurchased($42,500+$11,500)
Indirectmaterialsissued
LessRawmaterialsinventory,ending

$1,400
54,000
(2,200)
(1,150)

Costofdirectmaterialsissuedtoproduction

$52,050

Problem 79 - DanielsManufacturingused30hoursofdirectlaborand$340of
direct materials for job 66. Employees are paid $13 per hour. Fringe benefits
cost$3perhour.Theoverheadratewascalculatedat$24basedondirect
labor hour. Estimated manufacturing overhead for the year was $52,000. The
companyexpectedtocomplete60jobsduringtheyear.Howmuchisthetotal
costofjob66?
Directmaterials
Directlabor:($13+$3)*30
MOHapplied:$24*30DLH
Totaljobcost

$340
480
720
$1,540

Problem 80 SalongaCompanyappliesmanufacturingoverheadbasedon
directlabordollars.InformationforJunefollows:
Directlaborincurred
Directlaborestimated
Actualmanufacturingoverhead
Estimatedmanufacturingoverhead
Directmaterialsincurred

5,100hours@$20=$102,000
5,240hours@$20=$104,800
$172,920
$178,160
$234,000

A.Howmuchisthemanufacturingoverheadrate?
EstimatedMOH/EstimatedDL$=$178.160/$104,800=$1.70perDL$
Note that both amounts are estimated because this rate is created at the
beginningoftheaccountingperiodandactualamountsarenotknow.

B.HowmuchoverheaddidSalongaapplyduringJune?
MOHrate*ActualDL$=$1.70*$102,000=$173,400

C.1.Postallnecessaryamountstothet
accountinwhichyouwouldfindtheamountof
overorunderappliedoverheadatJune30.
2.Labeltheaccountwiththecorrectname.
3.Calculatethebalanceandlabelifover
orunderapplied.

ManufacturingOverhead
172,920 173,400

480Overapplied

D.Brieflystatethetworeasonsthatmanufacturingoverheadisapplied.
1TimelyinformationisneededfordecisionmakingandtheactualOHcostis
notknowuntiltheendoftheperiod.
2Itisnotfeasiblenorinothercasespossibletotraceindirectcoststo
productsorservices.

Problem 82 - TheaccountingrecordsofCinottiManufacturingCompany
includethefollowinginformation:

Workinprocessinventory
Finishedgoodsinventory
Materialspurchased

Dec.31,2004
$15,000
45,000
331,000

Dec.31,2003
$12,000
51,000

Rawmaterialsinventory
Directmaterialsused
Manufacturingoverhead
incurred
Directlabor
Sellingexpenses

?
325,000

24,000

132,000

120,000
70,000

Cinottiusesanactualcostsystem.Calculatethefollowing:

A.Rawmaterialsinventoryat123104
B.TotalmanufacturingcostsaddedtoWorkinProcessInventoryduring
2004

A.Similartothecalculationofabankbalancebeginningplusincreasesless
decreasesequalsendingbalance.
Rawmaterialsinventory,beginning
AddMaterialspurchased
Lessdirectmaterialsused
Rawmaterialsinventory,ending

$24,000
331,000
(325,000)
$30,000

B.Totalmanufacturingcostsconsistofthethreemanufacturingcostsincurredin
productionwhichareaddedtoworkinprocessduringtheyear:
Directmaterialsused
Manufacturingoverheadincurred
Directlabor
Totalmanufacturingcostsincurred

$325,000
132,000
120,000
$577,000