# Cost Accounting_ Three Questions

August 14, 2017

Problem 1

Mariya
Company uses a job-order costing system and applies manufacturing overhead cost
to jobs on the basis of the cost of direct materials used in production. Its
predetermined overhead rate was based on a cost formula that estimated \$221,200
of manufacturing overhead for an estimated allocation base of \$158,000 direct
material dollars. The following transactions took place during the year (all
purchases and services were acquired on account):
a. Raw materials purchased, \$145,000.
b. Raw materials requisitioned for use in
production (all direct materials), \$141,000.
c. Utility bills incurred in the factory,
\$24,000.
d. Costs for salaries and wages were
incurred as follows:

Direct
labor

\$223,000

Indirect
labor

\$61,700

Selling

\$143,000

e. Maintenance costs incurred in the
factory, \$17,000.
f. Advertising costs incurred, \$128,000.
g. Depreciation recorded for the year,
\$43,000 (70% relates to factory assets, and the remainder relates to selling
h. Rental cost incurred on buildings,
\$85,000 (80% of the space is occupied by the factory, and 20% is occupied by
i. Miscellaneous selling and
administrative costs incurred, \$11,000.
j. Manufacturing overhead cost was
applied to jobs, \$ ?
k. Cost of goods manufactured for the
year, \$555,000.
l. Sales for the year (all on account)
totaled \$1,100,000. These goods cost \$530,000 according to their job cost
sheets.

The
balances in the inventory accounts at the beginning of the year were as
follows:

Raw
materials

\$23,000

Work
in process

\$24,000

Finished
Goods

\$34,000

Required:

a. Using the above
data, prepare the following eight journal entries:
1. To record the purchase of raw materials
2. To
transfer cost of raw materials to production, record direct labor costs, and
apply overhead to work in process inventory
3. To
transfer cost of completed units to finished goods inventoryj
4. To
record sales
5. To
transfer cost of finished goods to cost of goods sold
6. To
record factory overhead costs
7. To
transfer over- or underapplied overhead to cost of goods sold
8. To
record selling and administrative expenses

As these are summary journal entries
for an entire accounting period, no dates are given. Use the number of the journal entry in place
of a date on the general journal page.
All of the information needed to correctly record the entries is
provided. However, you may find it
useful to prepare t-accounts on scratch paper to help you determine the correct
debits and credits for some entries.

b. Job 521 was one of the many jobs
started and completed during the year. The job required \$3,900 in direct
materials and 400 hours of direct labor time at a rate of \$14 per hour. If the
job contained 540 units and the company billed at 65% above the unit product cost
on the job cost sheet, what price per unit would have been charged to the
customer?

Problem 2

Broucek Inc.
makes baby furniture from fine hardwoods. The company uses a job-order costing
system and
predetermined overhead rates to apply manufacturing overhead cost to jobs. The
predetermined
overhead rate in the Preparation Department is based on machine hours, and
the rate in the
Fabrication Department is based on direct labor-hours. At the beginning of the
year, the
companyâs management prepared the following information for the year. All figures
are estimates,
except the fixed overhead and variable overhead rates, which are actual figures
from last year
and remain the same this year. In other
words, it is machine-hours and direct
labor-hours that
are estimated and used with fixed overhead and variable overhead per
machine-hour and
per direct labor-hour in order to calculate rates for applying overhead.

Department

Preparation

Fabrication

Machine-hours

83,000

32,000

Direct
labor-hours

33,000

57,000

Direct
materials cost

\$194,000

\$204,000

Direct
labor cost

\$280,000

\$521,000

Fixed

\$207,500

\$518,700

Variable
manufacturing overhead per machine-hour

\$3.00

â

Variable
manufacturing overhead per direct labor-hour

â

\$5.00

Job 135 was
started on April 1 and completed on May 12. The company’s cost records show the
following information concerning the job:

Department

Preparation

Fabrication

Machine-hours

360

67

Direct
labor-hours

80

133

Direct
materials cost

\$940

\$1,120

Direct
labor cost

\$690

\$970

Required:

a. Compute the
predetermined overhead rate used during the year in the Preparation Department.
Compute the rate used in the Fabrication
Department.

b. Compute the
total overhead cost applied to Job 135.

c. What would be
the total cost recorded for Job 135? If the job contained 29 units, what would
be the unit product cost?

d. At the end of the year, the records of
Broucek Inc. revealed the following actual cost and operating data for all jobs
worked on during the year:

Department

Preparation

Fabrication

Machine-hours

82,700

24,800

Direct
labor-hours

28,000

53,000

Direct
materials cost

\$165,800

\$412,000

Direct
labor cost

\$464,550

\$711,400

What was the amount of
underapplied or overapplied overhead in each department at the end of the year?

Problem 3

VitalVitamin is produced in
a three-step process consisting of mixing, shaping, and packaging. Direct materials like tars, acids, and inert
ingredients are all introduced at the beginning of the mixing cycle,
at a per unit cost of \$0.30. Direct
labor and factory overhead are incurred uniformly throughout each stage of
production, and in equal proportion (i.e., \$1 of overhead for each \$1 of
labor). Costs are very stable, and
there have been no changes in per unit costs for any element of production
over the past several months.
Information for the Mixing Department for the month of April, 2011,
follows.

Beginning of April: 100,000 units in process (40% complete at
a total cost of \$50,000)

During April: 800,000 units put into
production; additional costs into production
total
\$652,500

End of April: 70,000 units in process (50%
complete).

Required:

a.
Prepare a cost of production report for the
Mixing Department for April. Use the
weighted-average costing method.

b.
Prepare Aprilâs journal entries that affect the
Mixing Departmentâs Work in Process account (two entries).

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