ACG 2071 - Sample Problems For Product Costing & Cost Flows PDF

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?
LessRawmaterialsinventory,
ending
Costofdirectmaterialsissuedto
production
$160
11,500
(280)
$11,380
C.HowmuchiscostofgoodsmanufacturedforMay?
Materialsissuedtoproduction
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
AddbeginningWIP
LessendingWIP
Costofgoodsmanufactured
$70,000
66,000
29,000
$165,000
21,000
(16,000)
$170,000
B.Calculatecostofgoodssold.
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
IndirectmaterialsissuedfromSupplies
Totalmanufacturingoverheadincurred
$8,800
7,500
3,600
4,600
5,800
49,600
Sales
Directlaborcost(3,100hours)
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
=Available
Lessendingrawmaterials
LABOR
OVERHEADINCURRED
MANUFACTURINGCOSTS
AddbeginningWIP
Lessendingworkinprocess
$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:
Beginningrawmaterialsinventory
Endingrawmaterialsinventory
$120,000
16,000
5,000
11,000
8,000
Directlaborused
Manufacturingoverheadcostsincurred
Sellingandadministrativeexpenses
$44,000
36,000
21,000
17,000
16,000
A.Calculatethecostofmaterialsusedinproduction.
=Materialsavailableforuse
Lessendingrawmaterialsinventory
=Materialsusedinproduction
$16,000
120,000
$136,000
5,000
$131,000
Materialsusedinproduction(partA)
Directlaborused
Addbeginningworkinprocess
$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:
Indirectmaterialsissuedtoproduction
Generaladministrativeexpenses
$11,600
12,300
3,200
9,400
7,700
5,100
Sales
Directlaborcost
$324,000
72,400
178,000
12,800
10,500
56,100
A.Howmuchiscostofgoodsmanufactured?
Directlaborused
$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
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
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
AddbeginningWIP
LessendingWIP
$76,400
20,400
20,100
116,900
25,200
(27,600)
$114,500
C.Howmuchiscostofgoodssold?
AddCGM(partB)
=Costofgoodssold
$7,300
114,500
(6,800)
$115,000
Problem 11Deegan,Inc.manufacturesweathermachinesandusesanactual
costingsystem.DuringJune,Deegansaccountsincludedthefollowing
balancesandtransactions:
Marketingexpenses
Sales
$700
4,850
9,500
11,000
98,000
$45,000
16,400
13,000
7,800
6,600
A.
$40,850
Goodsavailable
Lessrawmaterialsinventory,ending
Costofdirectmaterialsissuedtoproduction
$700
45,000
45,700
(4,850)
$40,850
B.Howmuchiscostofgoodsmanufactured?$67,950
Directmaterialsusedinproduction(frompartA)
Add:Workinprocessinventory,beginning
Less:Workinprocessinventory,ending
CostofGoodsManufactured
$40,850
16,400
9,500
66,750
7,800
(6,600)
$67,950

C.Brieflylistanyadditionalinformationyouneedtocalculatecostofgoods
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:
Directlaborincurred
Actualmanufacturingoverheadcosts
$254,000
12,000
7,900
7,400
8,000
51,000
22,300
36,800
15,100
12,000
A.Calculatethecostofdirectmaterialsusedinproduction.
$12,000
254,000
$266,000
(7,900)
$258,100
Beginningworkinprocess
Rawmaterialsusedinproduction(part
A)
Directlaborused
Manufacturingoverheadcosts
Totalmanufacturingcostsadded
$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:
Directmaterialsused
Actualmanufacturingoverhead
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
Lessmaterialsusedinproduction
$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)
$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?
Costofgoodssold
$51,000
500,000
(45,000)
$506,000
Problem 16Earl,Inc.manufacturesbaseballsusesanormalcostingsystem
andallocatesoverheadbasedondirectlaborcost.DuringJune,Earls
accountsincludedthefollowingbalancesandtransactions:
Marketingexpenses
Costofmaterialspurchased
Directmaterialsusedinproduction
$33,300
27,000
24,000
32,000
138,600
143,000
Sales
$11,500
8,400
9,600
21,500
18,900
285,000
A.HowmuchisendingrawmaterialsatJune30$7,100
Goodsavailable
Lesscostofdirectmaterialsissuedtoproduction
$11,500
138,600
150,100
(143,000)
$7,100
B.HowmuchiscostofgoodsmanufacturedforJune?$210,900
Add:Workinprocessinventory,
beginning
$143,000
32,000
33,300
208,300
21,500
(18,900)
$210,900
C.Howmuchiscostofgoodsold?
Costofgoodsmanufactured(partB)
Costofgoodssold
$8,400
210,900
(9,600)
$209,700
Problem 17 - ThemanufacturingoperationsofDarden,Inc.hadthefollowing
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?
$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
Costtodeliverproductstocustomers
$320,000
135,000
30,000
42,000
800
72,000
Workinprocessinventory,beg.
$6,500
5,800
11,200
12,400
18,700
19,700
A.Howmuchisthecostofdirectmaterialstransferredtoproductionduring
June?
Rawmaterialspurchased($135,000+$30,000)
Goodsavailable
$6,500
165,000
171,500
(5,800)
$165,700
$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:
$117,000
12,000
52,000
72,800
$6,500
5,800
11,200
12,400
26,000
22,000
June?
Directmaterialspurchased($117K+$12K)
LessRawmaterialsinventory,ending
$6,500
129,000
(5,800)
$129,700
Materialsissuedtoproduction(partA)
$129,700
52,000
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
50,000
22,000
415,000
HowmuchisthebalanceofWorkinProcessinventoryifGreenusesanormal
costingmethod?
DirectmaterialsaddedtoWorkinProcessInventory
DirectlaboraddedtoWorkinProcessInventory
ManufacturingoverheadaddedtoWorkinProcessInventory
Totalmanufacturingcostsadded
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:
Totalmanufacturingoverheadcostapplied
Totalmanufacturingoverheadcostincurred
Sales
Sellingexpenses
$5,400
6,650
6,300
11,500
1,100
160
280
23,000
2,100
220
250
A.HowmuchisthecostofdirectmaterialsissuedtoproductionduringMay?
Indirectmaterialsissued
$160
11,500
(1,100)
(280)
$10,280
B.HowmuchiscostofgoodsmanufacturedforMay?
Materialsissuedtoproduction
Manufacturingoverheadcostapplied
$10,280
5,400
6,650
21,330
220
(250)
$22,300
Note:Indirectmaterialsissuedtoproductionareconsideredmanufacturing
overheadcostsandassuch,arealreadyincludedinthetotalmanufacturing
overheadcostamountgiven.
Problem 27CulvyhouseCompanyusesanormalproductcostingsystem.Any
amountofoverorunderappliedoverheadisimmaterial.Itreportedthe
followingamountsfor2003:
Directmaterialsused
Directlaborused
Manufacturingoverheadapplied
$72,000
70,000
4,000
66,000
7,000
29,000
$21,000
16,000
23,000
17,000
6,000
9,000
A.Calculatethecostofgoodsmanufactured.
Costofdirectmaterialsused
Costofdirectlaborused
CostofMOHapplied
Manufacturingcosts
AddbeginningWIP
LessendingWIP
$70,000
66,000
29,000
$165,000
21,000
(16,000)
$170,000
B.Calculatecostofgoodssold.Ignoreanyoverorunderappliedoverhead.
AddCGM(partA)
=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:
Totalmanufacturingoverheadapplied
$8,800
7,500
3,600
4,600
5,800
49,600
Sales
Directlaborcost(3,100hours)
$42,000
55,000
143,500
12,300
11,600
49,000
Beginninginventory
=Available
Lessendingraw materials
$4,600
143,500
(3,600)
144,500
(5,800)
$138,700
MATERIALS:
Beginninginventory
=Available
Lessendingrawmaterials
LABOR
OVERHEADAPPLIED
MANUFACTURINGCOSTS
AddbeginningWIP
$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:
$120,000
16,000
5,000
11,000
8,000
Directlaborused
$44,000
36,000
21,000
17,000
16,000
A.Calculatethecostofmaterialsusedinproduction.
$16,000
120,000
$136,000
5,000
$131,000
Materialsusedinproduction(partA)
Directlaborused
Manufacturingoverheadcostsapplied(80%*44,000)
$131,000
44,000
35,200
$210,200
17,000
(16,000)
$211,200
Problem 31 - Peters,Inc.manufactureshomeworkmachines.Itusesanormal
costingsystem.Anyamountofoverorunderappliedoverheadisimmaterial.
Actualmanufacturingoverheadfortheyearis$55,500.Overheadisapplied
basedondirectlaborcost.DuringJune,Peterstransactionsandaccounts
includedthefollowing:
Generaladministrativeexpenses
$11,600
12,300
3,200
9,400
4,500
5,100
Sales
Directlaborcost
$324,000
72,400
178,000
12,800
10,500
56,100
A.Howmuchiscostofgoodsmanufactured?
Lessindirectmaterialsused
Directlaborused
Manufacturingoverheadcostsapplied
$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.
=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
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?
$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
Sales
Sellingexpenses
$5,400
6,800
11,500
1,100
6,650
160
280
23,000
2,100
220
250
A.Brieflylistanyadditionalinformationyouneedtocalculatecostofgoods
Beginningfinishedgoodsinventoryandendingfinishedgoodsinventory(You
haveenoughinformationtocalculatecostofgoodsmanufacturedsoyou
don'tneedthatamount.)
B.HowmuchisthecostofdirectmaterialsissuedtoproductionduringMay?
$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:
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:
Materialspurchased
Directmaterialsused
Sales
Marketingexpenses
$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
Directmaterialsused
=Endingrawmaterials
$3,300
78,000
(2,200)
(76,400)
$2,700
B.Howmuchiscostofgoodsmanufactured?
Directmaterials
Directlabor
AddbeginningWIP
LessendingWIP
$76,400
20,400
20,100
116,900
25,200
(27,600)
$114,500
C.Howmuchiscostofgoodssold?(Besuretoconsidertheunderor
overappliedoverhead.)
$7,300
AddCGM(partB)
=Costofgoodssold
Underappplied($21,000$20,100)
Adjustedcostofgoodssold
114,500
(6,800)
$115,000
900
$115.900
Problem 39 - HagerInc.appliesoverheadbasedondirectlaborcostusinga
normalcostsystem.Thecompanyestimatedthefollowingannualamounts:
Estimateddirectlabor
$42,000
1,600hoursat$15perhour
Actualamountsfortheyearwere:
Actualdirectlabor
$44,000
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
2,000hoursat$12.50perhour
$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:
Marketingexpenses
Sales
$700
850
9,500
11,000
9,000
98,000
$45,000
16,400
4,000
7,800
6,600
13,000
Underandoverappliedoverheadareconsideredimmaterial.
$40,850
Goodsavailable
Lessindirectmaterialstoproduction
$700
45,000
45,700
(850)
(4,000)
$40,850
B.Howmuchiscostofgoodsmanufactured?$67,950
$40,850
16,400
9,500
66,750
7,800
(6,600)
$67,950
Note:Indirectmaterialsissuedtoproductionareconsideredmanufacturing
overheadcostsandassuch,arealreadyincludedinactualmanufacturing
overhead.
Problem 42 - TheaccountingrecordsofCinottiManufacturingCompany
Materialspurchased
Directmaterialsused
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
Lessmaterialsusedinproduction
$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)
$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?
Costofgoodssold
$51,000
500,000
(45,000)
$506,000
Problem 43 - Earl,Inc.manufacturesbaseballsandallocatesoverheadbased
ondirectlaborcost.DuringJune,Earlsaccountsincludedthefollowing
balancesandtransactions:
Costofmaterialspurchased
$33,300
1,400
24,000
32,000
140,000
143,000
35,000
Marketingexpenses
Sales
Underandoverappliedoverheadareconsideredimmaterial.Ignoreover/
underappliedeliminationinpartsBandC.
A.HowmuchisendingrawmaterialsatJune30
Goodsavailable
Lesscostofdirectmaterialsissuedtoproduction
Lessindirectmaterialstoproduction
$11,500
140,000
151,500
(143,000)
(1,400)
$7,100
B.HowmuchiscostofgoodsmanufacturedforJune?
$143,000
32,000
33,300
208,300
21,500
(18,900)
$210,900
C.Howmuchiscostofgoodsold?
Costofgoodsmanufactured(partB)
$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:
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?
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
fortheyearfollows:
$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
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

forMayof2005asfollows:
Actualmanufacturing
overhead
Estimatedmanufacturing
overhead
Directlaborincurred
$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:
$124,000
12,000
7,000
52,000
72,800
82,000
$6,500
5,800
11,200
12,400
26,000
22,000
June?
Directmaterialspurchased($124K+$12K)
$6,500
136,000
(7,000)
(5,800)
$129,700
Materialsissuedtoproduction(partA)
$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:
Directmaterialsused
$88,000
83,000
6,000
Directlaborused
42,000
5,000
45,000
Othermanufacturingoverheadcosts
incurred
$17,000
19,000
16,000
36,000
7,000
10,000
A.Calculatetotalmanufacturingcostsifthecompanyusesanactual
costingsystem.
Directmaterialsused
Directlaborcost
Manufacturingoverhead:
$83,000
42,000
6,000
5,000
36,000
$172,000
Notethatanactualcostingsystemallocatestheactualmanufacturing
overheadcostsdirectlytoWIP.
B.Calculatethecostofgoodsmanufacturedassuminganormalcosting
system.
Directmaterialsused
Directlaborcost
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:
Materialspurchasedonaccount
Materialspurchasedforcash
PaymentmadeformaterialspurchasedinMay
Totalmanufacturingoverheadcost
$17,800
42,500
11,500
3,300
23,500
$10,200
11,100
1,400
1,150
2,200
HowmuchisthecostofdirectmaterialsissuedtoproductionduringJune?
Directmaterialspurchased($42,500+$11,500)
$1,400
54,000
(2,200)
(1,150)
$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
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
Materialspurchased
Dec.31,2004
$15,000
45,000
331,000
Dec.31,2003
$12,000
51,000
Directmaterialsused
incurred
Directlabor
Sellingexpenses
?
325,000
24,000
132,000
120,000
70,000
Cinottiusesanactualcostsystem.Calculatethefollowing:
A.Rawmaterialsinventoryat123104
B.TotalmanufacturingcostsaddedtoWorkinProcessInventoryduring
2004
A.Similartothecalculationofabankbalancebeginningplusincreasesless
decreasesequalsendingbalance.
AddMaterialspurchased
Lessdirectmaterialsused
$24,000
331,000
(325,000)
$30,000
B.Totalmanufacturingcostsconsistofthethreemanufacturingcostsincurredin
productionwhichareaddedtoworkinprocessduringtheyear:
Directmaterialsused
Directlabor
Totalmanufacturingcostsincurred
$325,000
132,000
120,000
$577,000

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ACG 2071 Managerial Accounting

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

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