P6-2 P6-9 P6-11 Week 6 Problems

P6-2 P6-9 P6-11 Week 6 Problems

P6-2:On December 1, Stone Mountain Production Company had a work in process inventory of 1,200 units that were complete as to materials and 50% complete as to labor and overhead. December 1 costs follow:

Materials.........$6,000

Labor..............2,000

Overhead.........2,000

During December the following transactions occurred:

a. Purchased materials costing $50,000 on account.

b. Placed direct materials costing $49,000 into production.

c. Incurred production wages totaling $50,500.

d. Incurred overhead costs for December:

Depreciation..........$20,000

Utilities.................28,000 (cash payment)

Salaries.................11,000 (cash payment)

Supplies..................2,000 (from inventory)

e. Applied overhead to work in process at a predetermined rate of 125% of direct labor cost.

f. Completed and transferred 10,000 units to Finished Goods. (Hint: You should first compute equivalent units and unit costs.)

 

Stone Mountain uses an average cost system. The ending inventory of work in process consisted of 1,000 units that were completed as to materials and 25% complete as to labor and overhead.

Prepare the journal entries to record the above information for the month of December.

 

P6-9:Mt. Orab Manufacturing Company uses a process cost system. Its manufacturing operation is carried on in two departments: Machining and Finishing. The Machining Department uses the average cost method and the Finishing Department uses the FIFO cost method. Materials are added in both departments at the beginning of operation, but the added materials do not increase the number of units being processed. Units are lost in the Manufacturing Department throughout the production process, and inspection occurs at the end of the process. The lost units have no scrap value and are considered to be normal loss.

Production statistics for July show the following data:

Machining              Finishing

Units in process, July 1 (all material

   40% of labor and overhead)……………………………….                20,000

Units in process, July 1 (all material

   80% of labor and overhead)……………………………….                                                    40,000

Units started in production……………………………………             140,000

Units completed and transferred………………………….              100,000

Units transferred from Machining………………………..                                                   100,000

Units completed and transferred to

   Finished goods…………………………………………………… 100,000

Units in process, July 31 (all material,

   60% of labor and overhead)………………………………                40,000

Units in process, July 31 (all material,

   40% of labor and overhead)………………………………                                                     40,000

Units lost in production………………………………………..               20,000

Production Costs                                             Machining             Finishing

Work in process, July 1:                    

    Materials………………………………………………………….  $40,000                     $110,000

    Labor……………………………………………………………24,000                         60,000

    Factory overhead……………………………………………. 8,000                         40,000

    Costs in Machining Department……………………..              240,000

Costs incurred during month:

    Materials…………………………………………………………280,000                       240,000

    Labor……………………………………………………………180,000                       160,000

    Materials…………………………………………………………60,000                         80,000

 

Required:

Prepare a cost of production summary for each department. (Round to three decimal places.)

 

P6-11Mega Oil Company transports crude oil to its refinery where it is processed into main products gasoline, kerosene, and diesel fuel, and by product base oil. The base oil is sold at the split-off for $500,000 of annual revenue, and the joint processing cost to the get the crude oil to split-off are $5,000,000. Additional information includes:

Product           Barrels produced         Cost of Split-off         Selling Price Per Barrel

Gasoline          500,000                       $2,000,000                  $25

Kerosene         100,000                       500,000                       30

Diesel fuel       250,000                       1,000,0000                  20

 

Determine the allocation of joint costs, using the relative sales value method, (Hint: Reduce the amount of the joint costs to be allocated by the amount of the by-product Revenue)

 

TUTORIAL PREVIEW

Problem 6-2

Journal Entries
a.	Materials	50,000
	Accounts Payable		50,000
b.	Work in Process	9,000
	Materials		49,000

 

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P8-3 P8-7 P8-13 Week 8 Problems

P8-3 P8-7 P8-13 Week 8 Problems

P8-3 Accelerator, Inc. manufactures a fuel additive, Stomp, that has a stable selling price of $44 per drum. The company has been producing and selling 80,000 drums per month. In connection with your examination of Accelerator’s financial statements for the year ended September 30, management has asked you to review some computations made by Accelerator’scost accountant. Your working papers disclose the following about the company’s operations:

Standard costs per drum of product manufactured:

Materials:

8 gallons of chemicals@$2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               $16

1 empty drum @ $1/drum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             1                  $17

Direct labor: 1 hour @ $8/hour  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               $ 8

Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                             $ 6

Costs and expenses during September:

Stomp: 600,000 gallons purchased at a cost of $1,140,000; 645,000 gallons used.

Empty drums: 94,000 purchased at a cost of $94,000; 80,000 drums used.

Direct labor: 81,000 hours worked at a cost of $654,480.

Factory overhead: $768,000.

 

Required:

Calculate the following variances for September

1. Materials quantity variance.

2. Materials purchase price variance.

3. Labor efficiency variance.

4. Labor rate variance.

P8-7 The standard cost summary for the most popular product of Excelsior Products Company is shown as follows, together with production and cost data for the period.

Standard Cost Summary

Materials:

2 gallons of liquid lead@$2.00/gallon . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             $4.00

2 gallons of varnish@$3.00/gallon . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      $6.00    $10.00

Labor:

1 hour@$12.00/hour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 12.00

Factory overhead:

$1.00 per direct labor hour . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  1.00

Total standard unit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              $23.00

Production and Cost Summary

Units completed during the month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               9,000

Ending units in process (one-fourth completed) . . . . . . . . . . . . . . . . . .                     2,000

Gallons of liquid lead used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             21,000

Gallons of varnish used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            20,000

Direct labor hours worked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            10,000

Cost of liquid lead used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            41,160

Cost of varnish used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           60,000

Cost of direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           117,000

 

One gallon each of liquid lead and varnish are added at the start of processing. The balance of the materials is added when the process is two-thirds complete. Labor and overhead are added evenly throughout the process.

 

Required:

1. Calculate equivalent production. (Be sure to refer to the standard cost summary to help determine the percentage of materials in ending work in process.)

2. Calculate materials and labor variances and indicate whether they are favorable or unfavorable.

3. Determine the cost of materials and labor in the work in process account at the end of the month.

4. Prove that all materials and labor costs have been accounted for.

 

P8-13 Folsom Shirts, Inc., manufactures men’s sport shirts for large stores. Folsom produces a single quality shirt in lots of a dozen according to each customer’s order and attaches the store’s label.

The standard costs for a dozen shirts include the following:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . .               24yards@$0.55/yard            $13.20

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             3hours@$7.35/hour                  22.05

Factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . .                3hours@$2.00/hour                   6.00

Standard cost per dozen . . . . . . . . . . . . . . . . . .                                                                     $41.25

 

During October, Folsum worked on three orders for shirts. Job cost records for the month disclose the following:

Lot                  Units in Lot                 Materials Used            Hours Worked

30                    1,000 dozen                24,100 yards                           2,980

31                    1,700 dozen                40,440 yards                          5,130

32                    1,200 dozen                28,825 yards                           2,890

 

The following information is also available:

a. Folsom purchased 95,000 yards of materials during October at a cost of $53,200. The materials price variance is recorded when goods are purchased, and all inventories are carried at standard cost.

b. Direct labor incurred amounted to $81,400 during October. According to payroll records, production employees were paid $7.40 per hour.

c. Overhead is applied on the basis of direct labor hours. Factory overhead totaling $22,800 was incurred during October.

d. A total of $288,000 was budgeted for overhead for the year, based on estimated production at the plant’s normal capacity of 48,000 dozen shirts per year. Overhead is 40% fixed and 60% variable at this level of production.

e. There was no work in process at October 1. During October, Lots 30 and 31 were completed, and all materials were issued for Lot 32, which was 80% completed as to labor and overhead.

 

Required:

1. Prepare a schedule computing the October standard cost of Lots 30, 31, and 32.

2. Prepare a schedule computing the materials price variance for October and indicate whether it is favorable or unfavorable.

3. For each lot produced during October, prepare schedules computing the following (indicate whether favorable or unfavorable):

a.Materials quantity variance in yards.

b. Labor efficiency variance in hours. (Hint: Don’t forget the percentage of completion.)

c. Labor rate variance in dollars.

4. Prepare a schedule computing the total controllable and volume overhead variances for October and indicate whether they are favorable or unfavorable.

 

Problem 8-3

		Standard Quantity or Hours		Actual Quantity or Hours		Difference		Standard Cost		Variance
1.	Materials quantity variance:
	Surge	640,000	gal.	645,000	gal.	5,000	U	$        2.00	/gal.	$    10,000	U
	Empty drums	80,000	ea.	80,000	ea.	-		$        1.00	ea.	$           -

 

 File name: Week 8 P8-3 P8-7 P8-13.xls File type: xls PRICE: $15

P7-2 P7-3 P7-6 - WEEK 7 Problems

P7-2 P7-3 P7-6 - WEEK 7 Problems

 

P7-2 Glide Tire Company's budgeted unit sales for the year 2008 were:                          

            Passenger car tires       120,000         

            Truck tires                   25,000                                              

 

The budgeted selling price for truck tires was $200 per tire and for passenger car tires was $65 per tire. He beginning finished goods inventories was expected to be 2,000 truck tires and 5,000 passenger tires, for a total cost of $326,478, with desired ending inventories at 2,500 and 6,000, respectively, with a total cost of $400,510. There was no anticipated beginning or ending work in process inventory for either type of tire.                                  

 

The standard materials quantities for each type of fire were as follows:                              

                                    Truck   Passenger

            Car Rubber      30lbs    10 lbs

            Steel belts        4 lbs     1.5 lbs

The purchase prices of rubber and steel were $2 and $3 per pound, respectively. The desired ending inventories for rubber and steel were 75,000 and 7,500 pounds respectively. The estimated beginning inventories for rubber and steel were 60,000 and 6,000 pounds, respectively.            

 

The direct labor hours required for each type of tire were as follows:                                  

                        Molding Department Finishing Department

Truck Tire                                0.25     0.15

Passenger car tire                    0.10    0.05

 

The direct labor rate for each department is as follows:                    

Molding department               $15 per hour

Finishing department              $13 per hour

 

Budgeted factory overhead costs for 2008 were as follows:                        

Indirect materials                                             198,500

Indirect labor                                                               213,200

Depreciation of building and equipment                    157,500

Power and light                                                122,900

Total                                                                            692,100

 

Required:                   

Prepare each of the following budgets for Glide for the year ended 2008:              

1. Sales budget                       

2. Production budget             

3. Direct material budget

4. Direct labor budget

5. Factory overhead budget

6. Cost of goods sold budget

 

P7-3 A listing of budgeted selling and administrative expenses for Glide Tire Company in P7-2 for the year ended December 31, 2008, were as follows:            

            Advertising expense                942,000

            Office rent expense                 125,000

            Office salaries expense           821,000

            Office supplies expense          45,500

            Officers' salaries expense        661,000

            Sales salaries expense              868,000

            Telephone and fax expense     33,500

            Travel expense                        443,000

 

Required:                   

Prepare a selling and administrative expenses budget, in good form, for the year 2008. 

Using the information above and the budgets prepared in P7-2, prepare a budgeted income statement for the year 2008, assuming an income tax rate of 40%.

 

P7-6 Flexible budget for factory overhead                

Presented below are the monthly factory overhead cost budget (at normal capacity of 5,000 units or 20,000 direct labor hours) and the production and cost data for a month. 

Factory Overhead Cost Budget

Fixed cost:                 

Depreciation on building and machinery        1,200

Taxes on building and machinery       500    

Insurance on building and machinery 500    

Superintendent's salary                                    1,500

Supervisors' salaries                                         2,300

Maintenance wages                              1,000  7,000

Variable cost:             

Repairs                                                            400    

Maintenance supplies                                      300    

Other supplies                                      200    

Payroll taxes                                                    800    

Small tools                                           300      2,000

Total standard factory overhead                                  $9,000

 

Required:                   

1.  Assuming that variable costs will vary in direct proportion to the change in volume, prepare a flexible budget for production levels of 80%, 90% and 110% of normal capacity.  Also determine the rate for application of factory overhead to work in process at each level of volume in both units and direct labor hours.

2.  Prepare a flexible budget for production levels of 80%, 90% and 110%, assuming that variable costs will vary in direct proportion to the change in volume, but with the following exceptions. (Hint:  Set up a third category for semi fixed expenses).              

a. At 110% of capacity, an assistant department head will be needed at a salary of $10,500 annually.

b. At 80% of capacity, the repairs expense will drop to one-half of the amount at 100% capacity. 

c. Maintenance supplies expense will remain constant at all levels of production.              

d. At 80% of capacity, one part-time maintenance worker, earning $6,000 a year, will be laid off.

e. At 110% of capacity, a machine not normally in use and on which no depreciation is normally recorded will be used in production.  Its cost was $12,000, it has a ten-year life, and straight-line depreciation will be taken.

3.  Using the facts and the flexible budget prepared in 1, determine the budgeted cost at 96% of capacity, using interpolation.

4.  Using the flexible budget prepared in 1, determine the budgeted cost at 104% capacity, using a method other than interpolation.

 

TUTORIAL PREVIEW

Glide Tire Company
Sales Budget
For the Year Ended December 31, 2008
Product	Unit Sales Volume	Unit Selling Price	Total Sales
Passenger car tires	120,000	$              65	$    7,800,000
Truck tires	25,000	$             200	5,000,000

 

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