Accounting week 4

1)Analyzing Activity in Inventory Accounts
Selected data concerning operations of Cascade Manufacturing Company for the past fiscal year follow:

Raw materials used	$300,000
Total manufacturing costs charged to production during the year (includes raw materials, direct labor, and manufacturing overhead applied at a rate of 60 percent of direct labor costs)	681,000
Cost of goods available for sale	826,000
Selling and general expenses	30,000

	Inventories
	Beginning	Ending
Raw materials	$70,000	$80,000
Work-in-process	85,000	30,000
Finished goods	90,000	110,000

Determine each of the following:

(a) Cost of raw materials purchased
$Answer

(b) Direct labor costs charged to production
$Answer

(c) Cost of goods manufactured
$Answer

(d) Cost of goods sold
$Answer

2) Statement of Cost of Goods
Manufactured from Percent Relationships
Information about NuWay Products Company for the year ending December 31, 2010, follows:

• Sales equal $500,000.
• Direct materials used total $51,000.
• Manufacturing overhead is 150 percent of direct labor dollars.
• The beginning inventory of finished goods is 20 percent of the cost of goods sold.
• The ending inventory of finished goods is twice the beginning inventory.
• The gross profit is 20 percent of sales.
• There is no beginning or ending work-in-process.

Prepare a statement of cost of goods manufactured for 2010. (Hint: Prepare an analysis of changes in Finished Goods Inventory.)

NuWay Products Company Statement of Cost of Goods Manufactured For the Year Ending December 31, 2010
Current manufacturing costs:
Direct materials	$Answer
Direct labor	Answer
Manufacturing overhead	Answer	Answer
Beginning work-in-process		Answer
Total costs in process		Answer
Ending work-in-process		Answer
Cost of goods manufactured		$Answer
Analysis of Finished Goods Inventory:
Finished goods, 1/1/10		$Answer
Cost of goods manufactured		Answer
Total goods available for sale		Answer
Finished goods, 12/31/10		Answer
Cost of goods sold		$Answer

3)

Manufacturing Cost Flows with Machine Hours Allocation
On November 1, Robotics Manufacturing Company's beginning balances in manufacturing accounts and finished goods inventory were as follows:

Raw Materials	$9,000
Manufacturing Supplies	500
Work-in-Process	5,000
Finished Goods	25,000

During November, Robotics Manufacturing completed the following manufacturing transactions:

1. Purchased raw materials costing $58,000 and manufacturing supplies costing $3,000 on account. (Single Transaction)
2. Requisitioned raw materials costing $40,000 to the factory.
3. Incurred direct labor costs of $27,000 and indirect labor costs of $4,800.
4. Used manufacturing supplies costing $3,000.
5. Recorded manufacturing depreciation of $17,000.
6. Miscellaneous payables for manufacturing overhead totaled $3,500.
7. Applied manufacturing overhead, based on 2,150 machine hours, at a predetermined rate of $10 per machine hour.
8. Completed jobs costing $84,000.
9. Finished goods costing $95,000 were sold.

(a) Prepare "T" accounts showing the flow of costs through all manufacturing accounts, Finished Goods Inventory, and Cost of Goods Sold.

(b) Calculate the balances at the end of November for Work-in-Process Inventory and Finished Goods Inventory. (Enter transactions in the T-accounts in the order they appear, including the beginning balances, if available. Compute the final balance, if requested.)

Raw Materials Inventory
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer
Work-in-Process Inventory
	Answer	Answer
	Answer	Answer
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer

Finished Goods Inventory
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer

Cost of Goods Sold
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer
Accumulated Depreciation- Factory Assets
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer

Accounts Payable
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer

Wages Payable
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer
Other Payables
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer

Manufacturing Supplies
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer

Manufacturing Overhead
	Answer	Answer
	Answer	Answer
	Answer	Answer
	Answer	Answer
Bal	Answer	Answer

4) Cost of Production Report: No Beginning Inventories
Oregon Paper Company produces newsprint paper through a special recycling process using scrap paper products. Production and cost data for October 2009, the first month of operations for the company's new Portland plant, follow:

Units of product started in process during October	90,000 tons
Units completed and transferred to finished goods	75,000 tons
Machine hours operated	10,000
Direct materials costs incurred	$495,000
Direct labor costs incurred	$182,055

Raw materials are added at the beginning of the process for each unit of product produced, and labor and manufacturing overhead are added evenly throughout the manufacturing process. Manufacturing overhead is applied to Work-in-Process at the rate of $24 per machine hour. Units in process at the end of the period were 65 percent converted.

Prepare a cost of production report for Oregon Paper Company for October. (Round answers to the nearest whole number unless otherwise noted.)

Oregon Paper Company Cost of Production Report For the Month Ending October 31, 2009
Summary of units in process (tons):
Beginning	Answer
Units started	Answer
In process	Answer
Completed (Enter as a negative number.)	Answer
Ending	Answer
Equivalent units in process:		Materials	Conversion	Total
Units completed		Answer	Answer
Plus equivalent units in ending inventory		Answer	Answer
Equivalent units in process		Answer	Answer
Total cost to be accounted for and cost per equivalent unit in process:
Beginning work-in-process		$Answer	$Answer	$Answer
Current costs		Answer	Answer	Answer
Total cost in process		$Answer	$Answer	$Answer
Equivalent units in process		÷Answer	÷Answer
Cost per equivalent unit in process (Do not round answers.)		$Answer	$Answer	$Answer
Accounting for total costs:
Transferred out				$Answer
Ending work-in-process:
Materials			$Answer
Conversion			Answer	Answer
Total cost accounted for				$Answer

5)Absorption and Variable Costing Income Statements: Production Exceeds Sales

Glendale Company sells its product at a unit price of $12.00. Unit manufacturing costs are direct materials, $2.00; direct labor, $3.00; and variable manufacturing overhead, $1.50. Total fixed manufacturing costs are $22,500 per year. Selling and administrative expenses are $1.00 per unit variable and $10,000 per year fixed. Though 25,000 units were produced during 2009, only 17,000 units were sold. There was no beginning inventory.

(a) Prepare a functional income statement using absorption costing. (Do not use negative signs with your answers.)

Glendale Company Functional (Absorption Costing) Income Statement For the year 2009
Sales		$Answer
Cost of goods sold		Answer
Gross profit		Answer
Other expenses:
Variable selling and administrative	$Answer
Fixed selling and administrative	Answer	Answer
Net income		$Answer

(b) Prepare a contribution income statement using variable costing. (Do not use negative signs with your answers.)

Glendale Company Contribution (Variable Costing) Income Statement For the year 2009
Sales		$Answer
Variable expenses:
Cost of goods sold	$Answer
Selling and administrative	Answer	Answer
Contribution margin		Answer
Fixed expenses:
Manufacturing overhead	Answer
Selling and administrative	Answer	Answer
Net income		$Answer

6) Developing and Using a Predetermined Overhead Rate
Assume that the following predictions were made for 2009 for one of the plants of Milliken & Company:

Total manufacturing overhead for the year	$42,000,000
Total machine hours for the year	2,000,000

Actual results for February 2009 were as follows:

Manufacturing overhead	$5,480,000
Machine hours	310,000

(a) Determine the 2009 predetermined overhead rate per machine hour.
$Answer

(b) Using the predetermined overhead rate per machine hour, determine the manufacturing overhead applied to Work-in-Process during February.
$Answer

(c) As of February 1, actual overhead was underapplied by $500,000. Determine the cumulative amount of any overapplied or underapplied overhead at the end of February.
$Answer

7)

Process Costing
Tempe Manufacturing Company makes a single product that is produced on a continuous basis in one department. All materials are added at the beginning of production. The total cost per equivalent unit in process in March 2009 was $4.60, consisting of $3.00 for materials and $1.60 for conversion. During the month, 8,900 units of product were transferred to finished goods inventory; on March 31, 4,000 units were in process, 10 percent converted. The company uses weighted average costing.

(a) Determine the cost of goods transferred to finished goods inventory.
$Answer

(b) Determine the cost of the ending work-in-process inventory.
$Answer

(c) What was the total cost of the beginning work-in-process inventory plus the current manufacturing costs?
$Answer

8)

Weighted Average Process Costing

Minot Processing Company manufactures one product on a continuous basis in two departments, Processing and Finishing. All materials are added at the beginning of work on the product in the Processing Department. During December 2009, the following events occurred in the Processing Department:

Units started	16,000 units
Units completed and transferred to Finishing Department	15,000 units

Costs assigned to processing: Raw materials (one unit of raw materials for each unit of product started)	$142,900
Manufacturing supplies used	18,000
Direct labor costs incurred	51,000
Supervisors' salaries	12,000
Other production labor costs	14,000
Depreciation on equipment	6,000
Other production costs	18,000

Additional information follows:

• Minot uses weighted average costing and applies manufacturing overhead to Work-in-Process at the rate of 100 percent of direct labor cost.
• Ending inventory in the Processing Department consists of 3,000 units that are one-third converted.
• Beginning inventory contained 2,000 units, one-half converted, with a cost of $34,500 ($24,500 for materials and $10,000 for conversion).

(a) Prepare a cost of production report for the Processing Department for December.

Minot Processing Company: Processing Department Cost of Production Report For the Month Ending December 31, 2009
Summary of units in process:
Beginning	Answer
Units started	Answer
In process	Answer
Completed	Answer
Ending	Answer
Equivalent units in process:		Materials	Conversion	Total
Units completed		Answer	Answer
Plus equivalent units in ending inventory		Answer	Answer
Equivalent units in process		Answer	Answer
Total cost to be accounted for and cost per equivalent unit in process:
Beginning work-in-process		$Answer	$Answer	$Answer
Current costs		Answer	Answer	Answer
Total cost in process		$Answer	$Answer	$Answer
Equivalent units in process		÷Answer	÷Answer
Cost per equivalent unit in process		$Answer	$Answer	$Answer
Accounting for total costs:
Transferred out				$Answer
Ending work-in-process:
Materials			$Answer
Conversion			Answer	Answer
Total cost accounted for				$Answer

(b) Prepare an analysis of all changes in Work-in-Process.

Work-in-process:
Beginning			$Answer
Current manufacturing costs:
Direct materials		$Answer
Direct labor		Answer
Applied overhead		Answer	Answer
Total			$Answer
Cost of goods manufactured			Answer
Ending			$Answer

Absorption and Variable Costing Comparisons
Peachtree Company manufactures peach jam. Because of bad weather, its peach crop was small. The following data have been gathered for the summer quarter of 2009:

Beginning inventory (cases)	0
Cases produced	10,000
Cases sold	9,300
Sales price per case	$60
Direct materials per case	$9
Direct labor per case	$8
Variable manufacturing overhead per case	$3
Total fixed manufacturing overhead	$400,000
Variable selling and administrative cost per case	$2
Fixed selling and administrative cost	$48,000

(a) Prepare a functional income statement for the quarter using absorption costing. (Do not use negative signs with your answers, EXCEPT if you calculate a net loss.)

Peachtree Company Functional (Absorption Costing) Income Statement For the Summer Quarter 2009
Sales		$Answer
Cost of goods sold:
Variable costs	$Answer
Fixed costs	Answer
Goods available	Answer
Ending inventory	Answer	Answer
Gross profit		Answer
Operating expenses:
Variable selling and administrative	$Answer
Fixed selling and administrative	Answer	Answer
Net income (loss)		$Answer

(b) Prepare a contribution income statement for the quarter using variable costing. (Do not use negative signs with your answers, EXCEPT if you calculate a net loss.)

Peachtree Company Contribution (Variable Costing) Income Statement For the Summer Quarter 2009
Sales		$Answer
Variable expenses:
Manufacturing	$Answer
Selling and administrative	Answer	Answer
Contribution margin		Answer
Fixed expenses:
Manufacturing overhead	$Answer
Selling and adminstrative	Answer	Answer
Net income (loss)		$Answer

(c) What is the value of ending inventory under absorption costing?
$Answer

(d) What is the value of ending inventory under variable costing?
$Answer

(e) The difference in the value of ending inventory in parts (c) and (d) is explained by the following difference between absorption an variable costing:

Variable costing treats all manufacturing costs as variable costs while absorption costing treats only variable manufacturing costs as variable costs.

Variable costing assigns only variable manufacturing costs to products while absorption costing assigns both variable and fixed manufacturing costs to products.

Absorption costing treats all manufacturing costs as period costs while variable costing treats only variable manufacturing costs as period costs.

Absorption costing treats fixed costs as period costs while variable costing treats fixed costs as product costs.