Practice Problems-Cost & Management Accounting
Content
CHAPTER 16 ALTERNATE PROBLEMS Problem 16.1A An Introduction to Product Costs Pisna, Inc. manufactures dowhats. The manufacturing costs incurred incurred during its first first year of operations are shown as follows: Direct Direct materials materials purchased..... purchased........... ............. .............. ............. ............. .............. .............. ............. ................ .......... Direct Direct material materialss used.. used...... ....... ...... ....... ....... ...... ....... ....... ....... ....... ...... ....... ....... ...... ....... ....... ...... ....... ....... ...... ....... ........ .... Direct Direct la"or la"or assign assigned ed to product production ion... ....... ....... ...... ....... ....... ...... ....... ....... ....... ........ ......... .......... .......... ....... #anufa #anufactu cturi ring ng oer oerhead head... ....... ....... ....... ....... ...... ....... ....... ...... ....... ....... ...... ....... ....... ....... ........ ......... .......... .......... ....... &ost &ost of fin finis ishe hed d goods goods manuf manufact actur ured ed '(00 '(00 dowh dowhat ats) s)... ...... ...... ...... ...... ...... ...... ...... ...... ...
$400,000 $400,000 3!,000 3!,000 3!0,000 3!0,000 4%!,000 4%!,000 *00,0 *00,000 00
During the year, (00 completed dowhats were manufactured, of which *0 were sold. '+ssume the amount of the ending inentory of finished goods and the cost of goods sold are determined using the aerageperunit cost of manufacturing a completed dowhat. Instructions a. &ompute each of the following and show all computations: co mpleted dowhat during the current 1. The aerage perunit cost of manufacturing a completed year. 2. The yearend "alances of the inentories of materials, wor- in progress, and finished goods. 3. The cost of goods sold during the year. b. or the current year, the costs of direct materials purchased, direct la"or assigned to production, and actual manufacturing oerhead total $(,(/!,000. Is this the amount of manufacturing costs deducted from reenue reenue in the current year 12plain fully. fully.
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Alternate Problems for
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Problem 16.A An Introduction to Product Costs 7ier 8ueen &orporation "egan operations early in the current year, "uilding lu2ury "oats. During the year, the company started and completed 40 "oats at a cost of $0,000 per unit. 9f these, 30 were sold for $(30,000 each and ten remain in finished goods inentory. In addition, the company had fie partially completed units in its factory at yearend. Total costs for the year 'summaried alpha"etically) were as follows: Direct materials used............................................................................. $ 00,000 Direct la"or applied to production........................................................ (,000,000 Income ta2es e2pense........................................................................... 0,000 5eneral and administratie e2penses.................................................... 00,000 #anufacturing oerhead....................................................................... %,000,000 ;elling e2penses.................................................................................... 400,000 Instructions &ompute the following for the current year: a. Total manufacturing costs charged to wor- in process during the period. b. &ost of finished goods manufactured. c. &ost of goods sold. d. 5ross profit on sales. e. 1nding inentories of '() wor- in process and '%) finished goods.
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Alternate Problems for
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Problem 16.!A T"e #lo$ o% M&nu%&cturin' Costs T"rou'" Led'er Accounts The flow of manufacturing costs through the ledger accounts of Inferior ;afes, Inc., in the current year is illustrated "elow in summaried form: Materials Inventory <eg. "alance $ (0,000 %0,000 1nding "alance $ (!,000
Direct Labor $(3,000 $(40,000 1nding "alance $
Work in Process Inventory <eg. "alance $ %0,000 (40,000 %(0,000 1nding "alance
(,000
Finished Goods Inventory <eg. "alance $ 4!,000 (,000
%,000 1nding "alance $ !0,000 Manufacturin !verhead $%(0,000
$%(0,000
"ost of Goods #old
Instructions Indicate the amounts re=uested "elow. ;ome amounts are shown in the T accounts a"oe> others re=uire short computations. ';how all computations.) a. Purchases of direct materials. b. The cost of direct materials used. c. Direct la"or costs assigned to production. d. The yearend lia"ility for direct wages paya"le. e. The oerhead application rate in use throughout the year, assuming that oerhead is applied as a percentage of direct la"or costs. f. Total manufacturing costs charged to the ?or- in Process Inentory account during the current year. . The cost of finished goods manufactured. h. The yearend "alance in the ?or- in Progress Inentory account. i. The cost of goods sold. $. The total amount of inentory listed in the yearend "alance sheet.
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Alternate Problems for
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Problem 16.(A T"e #lo$ o% M&nu%&cturin' Costs T"rou'" Per)etu&l In*entor+ Records The following T accounts summarie the flow of manufacturing costs during the current year through the ledger accounts of Pay"ac- &orporation: Materials Inventory <eg. "alance $ (,000 30,000 1nding "alance $ (4,000
Direct Labor $%%!,000 $%30,000 1nding "alance $
Work in Process Inventory <eg. "alance $ %0,000 %30,000 400,000 1nding "alance $%!,000 Finished Goods Inventory <eg. "alance $ *,000
!,000 1nding "alance $ ((0,000 Manufacturin !verhead $400,000
$400,000
"ost of Goods #old
Instructions rom the data supplied a"oe, indicate the following amounts. ;ome amounts are shown in the T accounts a"oe> others re=uire short computations. ';how all computations.) a. Purchases during the year of direct materials. b. The cost of direct materials used. c. Direct la"or payrolls paid during the year. d. Direct la"or costs assigned to production. e. The oerhead application rate in use throughout the year, assuming that oerhead is applied as a percentage of direct la"or costs. f. Total manufacturing costs charged to the ?or- in Process Inentory account during the current year. . The cost of finished goods manufactured. h. The cost of goods sold. i. The total costs to "e classified as inentory in the yearend "alance sheet.
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Alternate Problems for
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Problem 16.,A T"e #lo$ o% M&nu%&cturin' Costs- A Com)re"ensi*e Problem The "alances in the perpetual inentory accounts of #ountainside #anufacturing &orporation at the "eginning and end of the current year are as follows: %nd of 'ear
Inentory accounts: #aterials.................................................................. ?or- in Process...................................................... inished 5oods Inentory.......................................
$30,000 (0,000 %*,000
&einnin of 'ear
$%!,000 ,000 30,000
Total dollar amounts de"ited and credited during the year to the accounts used in recording manufacturing actiities are as follows:
+ccount: #aterials Inentory................................................. Direct @a"or............................................................ #anufacturing 9erhead........................................ ?or- in Process Inentory...................................... inished 5oods Inentory.......................................
Debit %ntries
"redit %ntries
$4%!,000 %00,000 4%0,000
$ %(0,000 4%0,000
Instructions a. Asing these data, state or compute for the year the following amounts: 1. Direct materials purchased. 2. Direct materials used. 3. Payments of direct la"or payrolls. (. Direct la"or cost assigned to production. ). The oerhead application rate used during the year, assuming that oerhead was applied as a percentage of direct la"or costs. *. Total manufacturing costs charged to the ?or- in Process Inentory account during the year. +. The cost of finished goods manufactured. ,. The cost of goods sold. -. The total amount to "e classified as inentory in the yearend "alance sheet. b. Prepare a schedule of the cost of finished goods manufactured.
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Alternate Problems for
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Problem 16.6A eterminin' &nd Re)ortin' Product Cost In%orm&tion The following are %00% data regarding 9ld Boe, one of the maCor products manufactured "y the &olum"us Toy &ompany: Purchases of direct materials............................................................. Direct materials used.......................................................................... Direct la"or payrolls 'paid during the year)....................................... Direct la"or costs assigned to production.......................................... #anufacturing oerhead 'incurred and applied)................................
$400,000 40%,000 (0,000 %%0,000 330,000
During the year !0,000 units of this product were manufactured and !(,!00 units were sold. ;elected information concerning inentories during the year follows:
#aterials.................................................................... ?or- in Process......................................................... inished 5oods, Ban. ( '4,000 units $(*)...................
Dec. 31 $ ,000
an. 1 $(!,000 !,000 /,000
Instructions a. Prepare a schedule of the cost of finished goods manufactured for the 9ld Boe product in %00%. b. &ompute the aerage cost of 9ld Boe completed %00%. c. &ompute the cost of goods sold associated with the sale of 9ld Boe in %00%. +ssume that there is a firstin, firstout 'I9) flow through the inished 5oods Inentory account and that all units completed in %00% are assigned the perunit costs determined in part b. d. &ompute the amount of inentory relating to 9ld Boe that will "e listed in the companys "alance sheet at Decem"er 3(, %00%. ;how supporting computations for the yearend amounts of materials inentory and finished goods inentory. e. 12plain where the $(0,000 in direct la"or costs assigned to production in %00% affect the companys %00% income statement and "alance sheet.
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Problem 16./A eterminin' &nd Re)ortin' Product Cost In%orm&tion The following are the "eginning and ending "alances in the inentory accounts of +ls Parts for %00%: %nd of 'ear
Inentory accounts: #aterials.................................................................. ?or- in Process....................................................... inished 5oods Inentory.......................................
&einnin of 'ear
$4/,000 3!,000
$4%,000 3,000 (0!,000
The amounts de"ited and credited during the year to the accounts used in recording manufacturing costs are as follows: Debit %ntries
+ccount: #aterials Inentory................................................. Direct @a"or............................................................. #anufacturing 9erhead......................................... &ost of 5oods ;old.................................................. ?or- in Process Inentory...................................... inished 5oods Inentory.......................................
$ *(0,000 40!,000 (,(00,000 %,340,000
"redit %ntries
$
4(0,000 (,(00,000 0
Instructions a. Asing the gien information data, state or compute for the %00% the following amounts: 1. Direct materials purchased. 2. Direct materials used. 3. Direct la"or payrolls paid during the year. (. Direct la"or costs assigned to units "eing manufactured. ). The yearend lia"ility for direct wages paya"le. *. The oerhead application rate, assuming that oerhead costs are applied to units "eing manufactured using %%,000 direct la"or hours as an estimated actiity "ase. +. Total manufacturing costs de"ited to the ?or- in Process Inentory account. ,. &ost of finished goods manufactured. -. 1nding inentory of finished goods. b. Prepare a schedule of the cost of finished goods manufactured.
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Alternate Problems for
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Problem 16.0A eterminin' nit Costs sin' t"e Cost o% #inis"ed 2oods M&nu%&ctured The accounting records of the #aine Products &ompany include the following information relating to the current year:
#aterials inentory.................................................... ?or- in process inentory......................................... inished goods inentory, Ban. ( ',000 units E %% per unit) Purchases of direct materials during year.................. Direct la"or costs assigned to production.................. #anufacturing oerhead applied to production.........
Dec. 31 $ %%,000 3*,000 %*0,000 3!0,000 !!%,000
an. 31 $ 30,000 3*,000 (/,000
The company manufactures a single product> during the current year, 0,000 units were manufactured and !0,000 units were sold. Instructions a. Prepares a schedule of the cost of finished goods manufactured for the current year. ';how a supporting computation of the cost of direct materials used during the year.) b. &ompute the aerage perunit cost of production during the year. c. &ompute the cost of goods sold during the year, assuming that the I9 'firstin, first out) method of inentory costing is used. d. &ompute the cost of the inentory of finished goods at Decem"er 3( of the current year, assuming that the I9 'firstin, firstout) method of inentory costing is used.
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Problem 16.3A Pre)&rin' &n Income St&tement sin' t"e Cost o% #inis"ed 2oods M&nu%&ctured ;allyton &ompany, a sole proprietorship, reports the following information pertaining to its %00% operating actiities:
#aterials Inentory.................................................... ?or- in Process Inentory......................................... inished 5oods Inentory..........................................
12/31/02 &alance $%!,000 33,000 /0,000
1/1/02 &alance $3%,000 !,000 0,000
During the year, the company purchased $40,000 of direct materials and incurred $3%,000 of direct la"or costs. Total manufacturing oerhead costs for the year amounted to $%0,000. ;elling and administratie e2penses amounted to $!!,000, and the companys annual sales amounted to $%!0,000 Instruction a. Prepare ;allytons schedule of the cost of finished goods manufactured for %00%. b. Prepare ;allytons %00% income statement 'ignore income ta2es).
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(*
Problem 16.14A Pre)&rin' &n Income St&tement sin' t"e Cost o% #inis"ed 2oods M&nu%&ctured Falley &ompany reports the following information pertaining to its %00% operating actiities:
#aterials Inentory.................................................... ?or- in Process Inentory......................................... inished 5oods Inentory..........................................
12/31/02 &alance $%,000 40,000 (,000
1/1/02 &alance $!!,000 30,000 %%,000
During the year, the company purchased $4%,000 of direct materials and incurred $3%,000 of direct la"or costs. Total manufacturing oerhead costs for the year amounted to $%0,000. ;elling and administratie e2penses amounted to $3%,000, and the companys annual sales amounted to $*!,000 Instruction a. Prepare 7idgeways schedule of the cost of finished goods manufactured for %00%. b. Prepare 7idgeways %00% income statement 'ignore income ta2es).
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Problem 16.11A Me&surin' nit Cost 1arly in the year, <ill 1dmond founded 1dmond 1ngineering &o. for the purpose of manufacturing a special plum"ing deice that he had designed. ;hortly after yearend, the companys accountant was inCured in an auto accident, and no yearend financial statements hae "een prepared. 6oweer, the accountant had correctly determined the yearend inentories at the following amounts: #aterials............................................................................................ ?or- in process.................................................................................. inished goods '4,000 units)..............................................................
$!%,000 3%,000 *(,000
+s this was the first year of operations, there were no "eginnings of inentories. ?hile the accountant was in the hospital, 1dmond improperly prepared the following income statement from the companys accounting records: Get sales.................................................................. ........................... &ost of goods sold: Purchases of direct materials................................... $(!,000 Direct la"or costs assigned to production................ ((!,000 #anufacturing oerhead applied to production...... (0,000 ;elling e2penses...................................................... /!,000 +dministratie e2penses.......................................... (3!,000 Total costs........................................................................................ Get loss for year................................................................... ..............
$%!,000
/0,000 $'4!,000)
1dmonds was ery disappointed in these operating results. 6e states, HGot only did we lose more than $40,000 this year, "ut loo- at our unit production costs. ?e sold (0,000 units this year at a cost of $/0,000> that amounts to a cost of $/ per unit. I -now some of our competitors are a"le to manufacture similar ales for a"out $30 per unit. I dont need an accountant to -now that this "usiness is a failure. Instructions a. Prepare a schedule of the cost of finished goods manufactured for the year. '+s there were no "eginning inentories, your schedule will start with H#anufacturing costs assigned to production:. ;how a supporting computation for the cost of direct materials used during the year. b. &ompute the aerage cost per unit manufactured. c. Prepare a corrected income statement for the year, using the multiplestep format. If the company has earned any operating income, assume an income ta2 rate of %0J. '9mit earnings per share figures.) d. 12plain whether you agree or disagree with 1dmonds remar-s that the "usiness is unprofita"le and that its unit cost of production '$/, according to 1dmond) is much higher than that of competitors 'around $30). If you disagree with 1dmond, e2plain any errors or shortcomings in his analysis. use with Financial and Managerial Accounting , (%e The #c5raw6ill &ompanies, %00%
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Problem 16.1A E%%ect on Income St&tement o% Errors in H&ndlin' M&nu%&cturin' Costs Bohn <ron2, the chief accountant of GK <anCo &ompany, was inCured in an automo"ile accident shortly "efore the end of the companys first year of operations. +t yearend, a cler- with a ery limited understanding of accounting prepared the following income statement, which is unsatisfactory in seeral respects: ' &! "!MP' Incoe #tateent For the 'ear %nded Deceber 314 2055 Get sales.................................................................. ........................... &ost of goods sold: Purchases of direct materials............................... $430,000 Direct la"or.......................................................... %00,000 Indirect la"or........................................................ (00,000 Depreciation on machinery L factory .................. 40,000 7ent...................................................................... (30,000 Insurance.............................................................. %0,000 Atilities................................................................. 30,000 #iscellaneous manufacturing oerhead.............. !0,000 9ther operating e2penses..................................... 300,000 Diidends declared on capital stoc-.................... 40,000 &ost of goods sold.............................................................................. @oss for year......................................................................................
$(,%!0,000
$(,340,000 '*0,000)
Kou are as-ed to help management prepare a corrected income statement for the first year of operations. #anagement informs you that /0J of the rent, insurance, and utilities applies to factory operations, and that the remaining 30J should "e classified as period e2pense. +lso, the correct ending inentories are as follows: #aterial.............................................................................................. ?or- in process.................................................................................. inished goods...................................................................................
$ !0,000 30,000 (%!,000
+s this is the first year of operations, there were no "eginning inentories.
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Instructions a. Identify the shortcomings and errors in the a"oe income statement. <ased on the shortcomings you hae identified, e2plain whether you would e2pect the companys actual net income for the first year of operations to "e higher or lower than the amount shown. b. Prepare schedules to determine: 1. The cost of direct materials used. 2. Total manufacturing oerhead. c. Prepare a schedule of cost of finished goods manufactured during the year. 'Ase the amounts computed in part b as the costs of direct materials used and manufacturing oerhead.) d. Prepare a corrected income statement for the year, using a multiplestep format. +ssume that income ta2es e2pense amounts to %!J of income "efore income ta2es.
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$400,000 $400,000 3!,000 3!,000 3!0,000 3!0,000 4%!,000 4%!,000 *00,0 *00,000 00
During the year, (00 completed dowhats were manufactured, of which *0 were sold. '+ssume the amount of the ending inentory of finished goods and the cost of goods sold are determined using the aerageperunit cost of manufacturing a completed dowhat. Instructions a. &ompute each of the following and show all computations: co mpleted dowhat during the current 1. The aerage perunit cost of manufacturing a completed year. 2. The yearend "alances of the inentories of materials, wor- in progress, and finished goods. 3. The cost of goods sold during the year. b. or the current year, the costs of direct materials purchased, direct la"or assigned to production, and actual manufacturing oerhead total $(,(/!,000. Is this the amount of manufacturing costs deducted from reenue reenue in the current year 12plain fully. fully.
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Alternate Problems for
((
Problem 16.A An Introduction to Product Costs 7ier 8ueen &orporation "egan operations early in the current year, "uilding lu2ury "oats. During the year, the company started and completed 40 "oats at a cost of $0,000 per unit. 9f these, 30 were sold for $(30,000 each and ten remain in finished goods inentory. In addition, the company had fie partially completed units in its factory at yearend. Total costs for the year 'summaried alpha"etically) were as follows: Direct materials used............................................................................. $ 00,000 Direct la"or applied to production........................................................ (,000,000 Income ta2es e2pense........................................................................... 0,000 5eneral and administratie e2penses.................................................... 00,000 #anufacturing oerhead....................................................................... %,000,000 ;elling e2penses.................................................................................... 400,000 Instructions &ompute the following for the current year: a. Total manufacturing costs charged to wor- in process during the period. b. &ost of finished goods manufactured. c. &ost of goods sold. d. 5ross profit on sales. e. 1nding inentories of '() wor- in process and '%) finished goods.
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Problem 16.!A T"e #lo$ o% M&nu%&cturin' Costs T"rou'" Led'er Accounts The flow of manufacturing costs through the ledger accounts of Inferior ;afes, Inc., in the current year is illustrated "elow in summaried form: Materials Inventory <eg. "alance $ (0,000 %0,000 1nding "alance $ (!,000
Direct Labor $(3,000 $(40,000 1nding "alance $
Work in Process Inventory <eg. "alance $ %0,000 (40,000 %(0,000 1nding "alance
(,000
Finished Goods Inventory <eg. "alance $ 4!,000 (,000
%,000 1nding "alance $ !0,000 Manufacturin !verhead $%(0,000
$%(0,000
"ost of Goods #old
Instructions Indicate the amounts re=uested "elow. ;ome amounts are shown in the T accounts a"oe> others re=uire short computations. ';how all computations.) a. Purchases of direct materials. b. The cost of direct materials used. c. Direct la"or costs assigned to production. d. The yearend lia"ility for direct wages paya"le. e. The oerhead application rate in use throughout the year, assuming that oerhead is applied as a percentage of direct la"or costs. f. Total manufacturing costs charged to the ?or- in Process Inentory account during the current year. . The cost of finished goods manufactured. h. The yearend "alance in the ?or- in Progress Inentory account. i. The cost of goods sold. $. The total amount of inentory listed in the yearend "alance sheet.
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Alternate Problems for
(3
Problem 16.(A T"e #lo$ o% M&nu%&cturin' Costs T"rou'" Per)etu&l In*entor+ Records The following T accounts summarie the flow of manufacturing costs during the current year through the ledger accounts of Pay"ac- &orporation: Materials Inventory <eg. "alance $ (,000 30,000 1nding "alance $ (4,000
Direct Labor $%%!,000 $%30,000 1nding "alance $
Work in Process Inventory <eg. "alance $ %0,000 %30,000 400,000 1nding "alance $%!,000 Finished Goods Inventory <eg. "alance $ *,000
!,000 1nding "alance $ ((0,000 Manufacturin !verhead $400,000
$400,000
"ost of Goods #old
Instructions rom the data supplied a"oe, indicate the following amounts. ;ome amounts are shown in the T accounts a"oe> others re=uire short computations. ';how all computations.) a. Purchases during the year of direct materials. b. The cost of direct materials used. c. Direct la"or payrolls paid during the year. d. Direct la"or costs assigned to production. e. The oerhead application rate in use throughout the year, assuming that oerhead is applied as a percentage of direct la"or costs. f. Total manufacturing costs charged to the ?or- in Process Inentory account during the current year. . The cost of finished goods manufactured. h. The cost of goods sold. i. The total costs to "e classified as inentory in the yearend "alance sheet.
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Alternate Problems for
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Problem 16.,A T"e #lo$ o% M&nu%&cturin' Costs- A Com)re"ensi*e Problem The "alances in the perpetual inentory accounts of #ountainside #anufacturing &orporation at the "eginning and end of the current year are as follows: %nd of 'ear
Inentory accounts: #aterials.................................................................. ?or- in Process...................................................... inished 5oods Inentory.......................................
$30,000 (0,000 %*,000
&einnin of 'ear
$%!,000 ,000 30,000
Total dollar amounts de"ited and credited during the year to the accounts used in recording manufacturing actiities are as follows:
+ccount: #aterials Inentory................................................. Direct @a"or............................................................ #anufacturing 9erhead........................................ ?or- in Process Inentory...................................... inished 5oods Inentory.......................................
Debit %ntries
"redit %ntries
$4%!,000 %00,000 4%0,000
$ %(0,000 4%0,000
Instructions a. Asing these data, state or compute for the year the following amounts: 1. Direct materials purchased. 2. Direct materials used. 3. Payments of direct la"or payrolls. (. Direct la"or cost assigned to production. ). The oerhead application rate used during the year, assuming that oerhead was applied as a percentage of direct la"or costs. *. Total manufacturing costs charged to the ?or- in Process Inentory account during the year. +. The cost of finished goods manufactured. ,. The cost of goods sold. -. The total amount to "e classified as inentory in the yearend "alance sheet. b. Prepare a schedule of the cost of finished goods manufactured.
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Problem 16.6A eterminin' &nd Re)ortin' Product Cost In%orm&tion The following are %00% data regarding 9ld Boe, one of the maCor products manufactured "y the &olum"us Toy &ompany: Purchases of direct materials............................................................. Direct materials used.......................................................................... Direct la"or payrolls 'paid during the year)....................................... Direct la"or costs assigned to production.......................................... #anufacturing oerhead 'incurred and applied)................................
$400,000 40%,000 (0,000 %%0,000 330,000
During the year !0,000 units of this product were manufactured and !(,!00 units were sold. ;elected information concerning inentories during the year follows:
#aterials.................................................................... ?or- in Process......................................................... inished 5oods, Ban. ( '4,000 units $(*)...................
Dec. 31 $ ,000
an. 1 $(!,000 !,000 /,000
Instructions a. Prepare a schedule of the cost of finished goods manufactured for the 9ld Boe product in %00%. b. &ompute the aerage cost of 9ld Boe completed %00%. c. &ompute the cost of goods sold associated with the sale of 9ld Boe in %00%. +ssume that there is a firstin, firstout 'I9) flow through the inished 5oods Inentory account and that all units completed in %00% are assigned the perunit costs determined in part b. d. &ompute the amount of inentory relating to 9ld Boe that will "e listed in the companys "alance sheet at Decem"er 3(, %00%. ;how supporting computations for the yearend amounts of materials inentory and finished goods inentory. e. 12plain where the $(0,000 in direct la"or costs assigned to production in %00% affect the companys %00% income statement and "alance sheet.
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Problem 16./A eterminin' &nd Re)ortin' Product Cost In%orm&tion The following are the "eginning and ending "alances in the inentory accounts of +ls Parts for %00%: %nd of 'ear
Inentory accounts: #aterials.................................................................. ?or- in Process....................................................... inished 5oods Inentory.......................................
&einnin of 'ear
$4/,000 3!,000
$4%,000 3,000 (0!,000
The amounts de"ited and credited during the year to the accounts used in recording manufacturing costs are as follows: Debit %ntries
+ccount: #aterials Inentory................................................. Direct @a"or............................................................. #anufacturing 9erhead......................................... &ost of 5oods ;old.................................................. ?or- in Process Inentory...................................... inished 5oods Inentory.......................................
$ *(0,000 40!,000 (,(00,000 %,340,000
"redit %ntries
$
4(0,000 (,(00,000 0
Instructions a. Asing the gien information data, state or compute for the %00% the following amounts: 1. Direct materials purchased. 2. Direct materials used. 3. Direct la"or payrolls paid during the year. (. Direct la"or costs assigned to units "eing manufactured. ). The yearend lia"ility for direct wages paya"le. *. The oerhead application rate, assuming that oerhead costs are applied to units "eing manufactured using %%,000 direct la"or hours as an estimated actiity "ase. +. Total manufacturing costs de"ited to the ?or- in Process Inentory account. ,. &ost of finished goods manufactured. -. 1nding inentory of finished goods. b. Prepare a schedule of the cost of finished goods manufactured.
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Problem 16.0A eterminin' nit Costs sin' t"e Cost o% #inis"ed 2oods M&nu%&ctured The accounting records of the #aine Products &ompany include the following information relating to the current year:
#aterials inentory.................................................... ?or- in process inentory......................................... inished goods inentory, Ban. ( ',000 units E %% per unit) Purchases of direct materials during year.................. Direct la"or costs assigned to production.................. #anufacturing oerhead applied to production.........
Dec. 31 $ %%,000 3*,000 %*0,000 3!0,000 !!%,000
an. 31 $ 30,000 3*,000 (/,000
The company manufactures a single product> during the current year, 0,000 units were manufactured and !0,000 units were sold. Instructions a. Prepares a schedule of the cost of finished goods manufactured for the current year. ';how a supporting computation of the cost of direct materials used during the year.) b. &ompute the aerage perunit cost of production during the year. c. &ompute the cost of goods sold during the year, assuming that the I9 'firstin, first out) method of inentory costing is used. d. &ompute the cost of the inentory of finished goods at Decem"er 3( of the current year, assuming that the I9 'firstin, firstout) method of inentory costing is used.
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Problem 16.3A Pre)&rin' &n Income St&tement sin' t"e Cost o% #inis"ed 2oods M&nu%&ctured ;allyton &ompany, a sole proprietorship, reports the following information pertaining to its %00% operating actiities:
#aterials Inentory.................................................... ?or- in Process Inentory......................................... inished 5oods Inentory..........................................
12/31/02 &alance $%!,000 33,000 /0,000
1/1/02 &alance $3%,000 !,000 0,000
During the year, the company purchased $40,000 of direct materials and incurred $3%,000 of direct la"or costs. Total manufacturing oerhead costs for the year amounted to $%0,000. ;elling and administratie e2penses amounted to $!!,000, and the companys annual sales amounted to $%!0,000 Instruction a. Prepare ;allytons schedule of the cost of finished goods manufactured for %00%. b. Prepare ;allytons %00% income statement 'ignore income ta2es).
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Problem 16.14A Pre)&rin' &n Income St&tement sin' t"e Cost o% #inis"ed 2oods M&nu%&ctured Falley &ompany reports the following information pertaining to its %00% operating actiities:
#aterials Inentory.................................................... ?or- in Process Inentory......................................... inished 5oods Inentory..........................................
12/31/02 &alance $%,000 40,000 (,000
1/1/02 &alance $!!,000 30,000 %%,000
During the year, the company purchased $4%,000 of direct materials and incurred $3%,000 of direct la"or costs. Total manufacturing oerhead costs for the year amounted to $%0,000. ;elling and administratie e2penses amounted to $3%,000, and the companys annual sales amounted to $*!,000 Instruction a. Prepare 7idgeways schedule of the cost of finished goods manufactured for %00%. b. Prepare 7idgeways %00% income statement 'ignore income ta2es).
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Problem 16.11A Me&surin' nit Cost 1arly in the year, <ill 1dmond founded 1dmond 1ngineering &o. for the purpose of manufacturing a special plum"ing deice that he had designed. ;hortly after yearend, the companys accountant was inCured in an auto accident, and no yearend financial statements hae "een prepared. 6oweer, the accountant had correctly determined the yearend inentories at the following amounts: #aterials............................................................................................ ?or- in process.................................................................................. inished goods '4,000 units)..............................................................
$!%,000 3%,000 *(,000
+s this was the first year of operations, there were no "eginnings of inentories. ?hile the accountant was in the hospital, 1dmond improperly prepared the following income statement from the companys accounting records: Get sales.................................................................. ........................... &ost of goods sold: Purchases of direct materials................................... $(!,000 Direct la"or costs assigned to production................ ((!,000 #anufacturing oerhead applied to production...... (0,000 ;elling e2penses...................................................... /!,000 +dministratie e2penses.......................................... (3!,000 Total costs........................................................................................ Get loss for year................................................................... ..............
$%!,000
/0,000 $'4!,000)
1dmonds was ery disappointed in these operating results. 6e states, HGot only did we lose more than $40,000 this year, "ut loo- at our unit production costs. ?e sold (0,000 units this year at a cost of $/0,000> that amounts to a cost of $/ per unit. I -now some of our competitors are a"le to manufacture similar ales for a"out $30 per unit. I dont need an accountant to -now that this "usiness is a failure. Instructions a. Prepare a schedule of the cost of finished goods manufactured for the year. '+s there were no "eginning inentories, your schedule will start with H#anufacturing costs assigned to production:. ;how a supporting computation for the cost of direct materials used during the year. b. &ompute the aerage cost per unit manufactured. c. Prepare a corrected income statement for the year, using the multiplestep format. If the company has earned any operating income, assume an income ta2 rate of %0J. '9mit earnings per share figures.) d. 12plain whether you agree or disagree with 1dmonds remar-s that the "usiness is unprofita"le and that its unit cost of production '$/, according to 1dmond) is much higher than that of competitors 'around $30). If you disagree with 1dmond, e2plain any errors or shortcomings in his analysis. use with Financial and Managerial Accounting , (%e The #c5raw6ill &ompanies, %00%
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Problem 16.1A E%%ect on Income St&tement o% Errors in H&ndlin' M&nu%&cturin' Costs Bohn <ron2, the chief accountant of GK <anCo &ompany, was inCured in an automo"ile accident shortly "efore the end of the companys first year of operations. +t yearend, a cler- with a ery limited understanding of accounting prepared the following income statement, which is unsatisfactory in seeral respects: ' &! "!MP' Incoe #tateent For the 'ear %nded Deceber 314 2055 Get sales.................................................................. ........................... &ost of goods sold: Purchases of direct materials............................... $430,000 Direct la"or.......................................................... %00,000 Indirect la"or........................................................ (00,000 Depreciation on machinery L factory .................. 40,000 7ent...................................................................... (30,000 Insurance.............................................................. %0,000 Atilities................................................................. 30,000 #iscellaneous manufacturing oerhead.............. !0,000 9ther operating e2penses..................................... 300,000 Diidends declared on capital stoc-.................... 40,000 &ost of goods sold.............................................................................. @oss for year......................................................................................
$(,%!0,000
$(,340,000 '*0,000)
Kou are as-ed to help management prepare a corrected income statement for the first year of operations. #anagement informs you that /0J of the rent, insurance, and utilities applies to factory operations, and that the remaining 30J should "e classified as period e2pense. +lso, the correct ending inentories are as follows: #aterial.............................................................................................. ?or- in process.................................................................................. inished goods...................................................................................
$ !0,000 30,000 (%!,000
+s this is the first year of operations, there were no "eginning inentories.
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Instructions a. Identify the shortcomings and errors in the a"oe income statement. <ased on the shortcomings you hae identified, e2plain whether you would e2pect the companys actual net income for the first year of operations to "e higher or lower than the amount shown. b. Prepare schedules to determine: 1. The cost of direct materials used. 2. Total manufacturing oerhead. c. Prepare a schedule of cost of finished goods manufactured during the year. 'Ase the amounts computed in part b as the costs of direct materials used and manufacturing oerhead.) d. Prepare a corrected income statement for the year, using a multiplestep format. +ssume that income ta2es e2pense amounts to %!J of income "efore income ta2es.
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