E2-28 and P3-46
2-28 Consider the
following costs that were incurred during the current year
P3-46 Finlon Upholstery, Inc
2-28 Consider the
following costs that were incurred during the current year:
1. Tire costs
incurred by Ford Motor Company.
2. Sales
commissions paid to the sales force of Dell Inc.
3. Wood glue
consumed in the manufacture of Thomasville furniture.
4. Hourly wages of
refinery security guards employed by ExxonMobil Corporation.
5. The salary of a
financial vice president of Hewlett Packard.
6. Advertising
costs of Coca-Cola.
7. Straight-line
depreciation on factory machinery of Boeing Corporation.
8. Wages of
assembly-line personnel of Whirlpool Corporation.
9. Delivery costs
on customer shipments of Ben & Jerry’s ice
cream.
10. Newsprint
consumed in printing The New York Times.
11. Plant insurance
costs of Texas Instruments.
12. Glass costs
incurred in light-bulb manufacturing of General Electric.
Required: Evaluate each
of the preceding and determine whether the cost is ( a ) a product cost
or a period cost, ( b ) variable or fixed in terms of behavior, and ( c
) for the product costs only, whether the cost is properly classified as direct
material, direct labor, or manufacturing overhead. Item 1 is done as an
example:
Tire costs: Product cost, variable, direct material
P3-46
Finlon Upholstery, Inc. uses a job order costing system to accumulate manufacturing
costs. The company’s work-in-process on December 31, 20x1, consisted of
one job (no. 2077), which was carried on the year-end balance sheet at
$156,800. There was no finished-goods inventory on this date.
Finlon applies manufacturing overhead to production
on the basis of direct-labor cost. (The budgeted direct-labor cost is the
company’s
practical capacity, in terms of direct-labor hours, multiplied by the budgeted
direct labor rate.) Budgeted totals for 20x2 for direct labor and manufacturing
overhead are $4,200,000 and $5,460,000, respectively. Actual results for the
year follow.
Direct material used
.......................................................................................
$5,600,000
Direct labor ......................................................................................................
4,350,000
Indirect material used
.......................................................................................
65,000
Indirect labor
...................................................................................................
2,860,000
Factory depreciation
.........................................................................................
1,740,000
Factory insurance
............................................................................................
59,000
Factory utilities
................................................................................................
830,000
Selling and administrative expenses
............................................................... 2,160,000
Total
............................................................................................................
$17,664,000
Job no. 2077 was completed in January 20x2; there
was no work in process at year-end. All jobs produced during 20x2 were sold
with the exception of job no. 2143, which contained direct-material costs of
$156,000 and direct-labor charges of $85,000. The company charges any under- or
over applied overhead to Cost of Goods Sold.
Required:
1. Determine the
company’s predetermined overhead application rate.
2. Determine the
additions to the Work-in-Process Inventory account for direct material used,
direct labor, and manufacturing overhead.
3. Compute the
amount that the company would disclose as finished-goods inventory on the
December 31, 20x2, balance sheet.
4. Prepare the
journal entry needed to record the year’s completed production.
5. Compute the
amount of under- or over applied overhead at year-end, and prepare the
necessary journal entry to record its disposition.
6. Determine the
company’s 20x2 cost of goods sold.
7. Would it be
appropriate to include selling and administrative expenses in either
manufacturing
overhead or cost of goods sold? Briefly explain
TUTORIAL PREVIEW
1 Predetermined overhead rate = budgeted overhead ÷
budgeted direct-labor cost
|
Budgeted
overhead
|
5,460,000
|
|
Budgeted
direct labor cost
|
4,200,000
|
File name: 2-28 and P3-46.xlsx File type: xlsx PRICE:$20
