ACCT 390 Test 2 Fall 2014

ACCT 390 Test 2 Fall 2014

Student: ____________________________________________

1.(20 pts.)

The Smith Inc.produces a special kind of clay that is widely used by professional sports trainers. The clay is produced in three processes: Refining, Blending, and Mixing. Raw materials are introduced at the beginning of the refining process. A "mountain-air scent" material is added in the blending process when processing is 50% completed.
The following Work-in-Process account for the Refining Department is available for the month of July. The July 1 Work-in-Process Inventory contains $1,500 in material costs.



The following Work-in-Process account for the Blending Department is available for the month of July. The July 1 Work-in-Process inventory contains $5,920 in material costs, and $1.56/unit in costs transferred in from the Refining Department.


Smith Inc. uses first-in, first-out (FIFO) costing for the Refining Department and weighted-average costing for the Blending Department.
Required (use 4 decimal places for computations):

Part 1: Refining Department
(a) Compute the equivalent units of production for July.
(b) Compute the material cost per unit and the conversion cost per unit for July.
(c) Compute the costs transferred to the Blending Department for July.
(d) Compute the July 31 Work-in-Process Inventory balance.
Part 2: Blending Department
(e) Compute the equivalent units of production.
(f) Compute the unit costs in the Blending Department for the month of July. (HINT: There are three!!)
(g) Compute the costs transferred out for July.
(h) Compute the July 31 Work-in-Process Inventory balance.

2. (10 pts.)

William Corporation uses process costing. The following data pertain to its Assembly Department for February.



Required:

Determine the equivalent units of production for the Assembly Department for February using the weighted-average method.

3. (20 pts.)

Max Inc. is a manufacturer of boots. It produces all of its products in one department. The information for the current month is as follows:

Beginning work in process 22,000 units

Units started 44,000 units

Units completed 55,000 units

Ending work in process 10,000 units

Spoilage 1,000 units

Beginning work-in-process direct materials $15,000

Beginning work-in-process conversion $ 6,000

Direct materials added during month $70,800

Direct manufacturing labor during month $37,400

Beginning work in process was half complete as to conversion. Direct materials are added at the beginning of the process. Factory overhead is applied at a rate equal to 50% of direct manufacturing labor. Ending work in process was 60% complete. All spoilage is normal and is detected at end of the process.

Required:

Prepare a production cost worksheet if spoilage is recognized and the weighted-average method is used.

4. (10 pts.)

Johnston Incorporated manufactures and distributes small robotic tools. Because most of its orders are via telephone or fax, numerous orders have to be reworked. The average cost of the reworked orders is $12.45: $5 for labor, $5.15 for more materials, and $2.30 for overhead. This ratio of costs holds for the average original order. On a recent day, the shop reworked 80 orders out of 800. The original cost of the 80 orders totaled $2,000. The average cost of all orders is $26.245, including rework, with an average selling price of $35.

Required:

Prepare the necessary journal entry to record the rework for the day if the shop charges such activities to Johnston Department Overhead Control. Prepare journal entries to record all relevant rework charges as well as to transfer the reworked items finished goods to Finished Goods Inventory.

5. (15 pts.)

Adams Inc. has identified the following overhead costs and cost drivers for the coming year:



Budgeted direct labor cost was $400,000 and budgeted direct material cost was $600,000. The following information was collected on three jobs that were completed during the month:



Required:

a. If the company uses traditional costing and allocates overhead using direct labor cost, how much overhead cost should be assigned to Jobs 1, 2, and 3?
b. If the company uses activity-based costing (ABC), how much overhead cost should be assigned to Jobs 1, 2, and 3?

6. (15 pts.)

Jason Company manufactures two models of machinery, a standard and a deluxe model. The following activity and cost information has been compiled:



Assume a traditional costing system applies the overhead costs based on direct labor hours.

Required:

a. What is the total amount of overhead costs assigned to the standard model?
b. What is the total amount of overhead costs assigned to the deluxe model?
Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
c. What is the total amount of overhead costs assigned to the standard model?
d. What is the total amount of overhead costs assigned to the deluxe model?

7.(20 pts.)

Jones plans to sell 90,000 units of a certain product line at a price of $16. There are 7,500 units of the product in the inventory at January 1 and the inventory is to be increased 15% during the year.
Two types of materials are used to make the product. Three units of Material A, each costing 40 cents, are required for each unit of product, and two units of Material B, each costing 36 cents, are required for each unit of product. On January 1, there are 10,000 units of Material A in inventory and 5,000 units of Material B. Plans for the year indicate both Material A and B inventories will increase 10%.
Each unit of product can be produced in 20 minutes of direct labor time. Direct labor is paid at the rate of $12.00 an hour. The variable manufacturing overhead varies at the rate of $2.60 per direct labor hour and the fixed manufacturing overhead for the year is estimated at $175,000.

Required:

a. Prepare a production budget for the year.
b. Prepare a materials purchases budget for the year.
c. Prepare a labor cost budget for the year.
d. Prepare a budget for manufacturing overhead for the year.

8. (10 pts.) Fran is working on its direct labor budget for the next two months. Each unit of output requires 0.07 direct labor-hours. The direct labor rate is $8.50 per direct labor-hour. The production budget calls for producing 4,800 units in June and 5,300 units in July.

Required:

Construct the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month.