1. The document provides exercises and problems related to job order costing. It includes validation steps for material and labor costs that exceed estimates, calculation of overhead rates, journal entries for job order costing, and calculation of total and unit costs for multiple jobs.
2. Specific examples include examining purchase invoices and material requisition forms to validate material costs, discussing labor rates with payroll, and ensuring overhead rates are properly determined using an appropriate level of activity in the denominator.
3. Solutions require calculating costs by job, comparing to estimates, and ensuring beginning and ending balances reconcile between periods.
1. The document provides exercises and problems related to job order costing. It includes validation steps for material and labor costs that exceed estimates, calculation of overhead rates, journal entries for job order costing, and calculation of total and unit costs for multiple jobs.
2. Specific examples include examining purchase invoices and material requisition forms to validate material costs, discussing labor rates with payroll, and ensuring overhead rates are properly determined using an appropriate level of activity in the denominator.
3. Solutions require calculating costs by job, comparing to estimates, and ensuring beginning and ending balances reconcile between periods.
1. The document provides exercises and problems related to job order costing. It includes validation steps for material and labor costs that exceed estimates, calculation of overhead rates, journal entries for job order costing, and calculation of total and unit costs for multiple jobs.
2. Specific examples include examining purchase invoices and material requisition forms to validate material costs, discussing labor rates with payroll, and ensuring overhead rates are properly determined using an appropriate level of activity in the denominator.
3. Solutions require calculating costs by job, comparing to estimates, and ensuring beginning and ending balances reconcile between periods.
1. The document provides exercises and problems related to job order costing. It includes validation steps for material and labor costs that exceed estimates, calculation of overhead rates, journal entries for job order costing, and calculation of total and unit costs for multiple jobs.
2. Specific examples include examining purchase invoices and material requisition forms to validate material costs, discussing labor rates with payroll, and ensuring overhead rates are properly determined using an appropriate level of activity in the denominator.
3. Solutions require calculating costs by job, comparing to estimates, and ensuring beginning and ending balances reconcile between periods.
13. a. The direct material charge of $658,000 is higher than the estimate by $158,000. Assuming that there were no errors in the estimated and actual amounts, then either the rice aid for the material or the !uantity of material used was substantially higher than expected. To begin the "alidation rocess, 1. details of the original estimate to identify rices and !uantities of materials for this #ob would need to be e$amined. The starting oint to "alidate the material rices and !uantities urchased is to e$amine "endor in"oices billed to %uindo. These in"oices will alidate !aterial purchase "uantities and prices paid by %uindo. &. Additionally, material re!uisition forms should be e$amined to alidate the "uantity o# !aterial actually used in production$ 3. 'e$t, an e$amination of the material cost (material !uantity multilied by material rice) on the %ob order cost sheet should reconcile to the !uantity of material shown on the material re!uisition forms. b. The direct labor charge of $6&5,000 is higher than the estimate by $&&5,000. Assuming that there were no errors in the estimated and actual amounts, then either the hourly rate aid to or the number of hours wor*ed by emloyees was substantially higher than e$ected. To begin the "alidation rocess, 1. details of the original estimate to identify rates and hours for labor on this #ob would need to be e$amined. The starting oint to "alidate the labor rates and hours wor*ed is to &. e$amine emloyee time sheets (or other labor accumulation documents). The time sheets will "alidate which emloyees wor*ed on the #ob and for what eriod of time. 3. A discussion with the ayroll manager should hel ascertain the actual or a"erage wage rates aid to emloyees. +. ,ossibly some of %uindo-s emloyees who were listed as wor*ing on the #ob should be inter"iewed to determine the accuracy of the time sheets. 1 Chapter 5 c. The redetermined o"erhead rate could ha"e been maniulated to a higher rate by using a lo&er deno!inator le"el of acti"ity than was aroriate. Additionally, inaroriate costs (such as eriod costs in addition to roduct o"erhead costs) could ha"e been included in the numerator. A large estimate for soilage and defect costs might also ha"e been included in the numerator when, in fact, such costs rarely occur at %uindo .ndustries. d. The comany-s beha"ior is at best !uestionable. /i"en that the di0erence between actual and estimated direct material cost was li*ely *nown at the oint of urchase, %uindo should ha"e noti1ed 2alem 3or. immediately of the e$cessi"e increase in cost. 2imilar noti1cation should ha"e been ro"ided when it was seen that direct labor and machine times were higher than e$ected. 1+. a. 4aw 5aterial .n"entory &0+,000 Accounts ,ayable &0+,000 6or* in ,rocess .n"entory78+&63 163,800 6or* in ,rocess .n"entory78+&6+ 1,890 5anufacturing :"erhead 1&,+60 4aw 5aterial .n"entory 198,130 6or* in ,rocess .n"entory78+&63 5+,000 6or* in ,rocess .n"entory78+&6+ 1,800 3ash (3,600 $ $15) 55,800 5anufacturing :"erhead 68,900 3ash ($18,000 ; $9,&00 ; $<,500) 3+,900 Accumulated =ereciation &1,500 6ages ,ayable 1&,500 6or* in ,rocess .n"entory78+&63 6+,800 6or* in ,rocess .n"entory78+&6+ &,160 5anufacturing :"erhead 66,<60 b. 45 .n"entory > $+,300 ; $&0+,000 7 $163,800 7 $1&,+60 7 $1,890 > $30,190 2 Chapter 5 c. ?ecause the comany wor*ed only on @ob 8+&63 until the end of Aril, all costs in beginning 6., for other #obs are still in that account at the end of the month. ?eginning 6., $11,+00 Aess costs associated with @ob 8+&63 (800) 3osts associated with other #obs $10,600 3osts for @ob 8+&6+ ($1,890 ; $1,800 ; $&,160) 5,830 Bnding 6., $16,+30 d. 3/5 > ?eginning 6., ; 3urrent eriod costs C Bnding 6., > $11,+00 ; $163,800 ; $1,890 ; $55,800 ; $66,<60 7 $16,+30 > $&83,+00 Dnit cost > $&83,+00 E 10,000 > $&8.3+ e. Alied :F C Actual :F > $66,<60 7 $68,900 > $1,9+0 underalied 15. a. :F rate > $&68,800 E $1<&,000 > 1+0G of direct labor b. Bnding 6., ?alanceH =5 $ 95,+50 =A 36,&00 :F ($36,&00 $ 1.+0) 50,680 Bnding balance $16&,330 c. 3/5 > ?eg. 6., ; 3urrent costs C 3ost of #obs comleted > $0 ; $&99,&00 ; $1<&,000 ; $&68,800 7 $16&,330 > $595,690 16. a. 4aw 5aterial .n"entory 96,000 Accounts ,ayable 96,000 6., 7 @ob 8&19 ++,800 6., 7 @ob 8&18 9,&00 6., 7 other #obs 53,600 =irect 5aterial .n"entory 105,600 6., 7 @ob 8&19 10,+00 6., 7 @ob 8&18 1+,000 6., 7 other #obs 1<,600 3ash (or 6ages ,ayable) ++,000 5anufacturing :"erhead &&0,000 Iarious accounts &&0,000 3 Chapter 5 6., 7 @ob 8&19 51,+80 6., 7 @ob 8&18 6<,300 6., 7 other #obs <9,0&0 5anufacturing :"erhead &19,800 (Actual rate er =A$ > $++,000 $ $+.<5) Jinished /oods .n"entory 119,880 6., .n"entory 7 @ob 8&19 119,880 ($11,&00 ; $++,800 ; $10,+00 ; $51,+80 > $119,880) 3ash 15<,138 2ales 15<,138 ($119,880 K 1.35 > $15<,138) 3ost of /oods 2old 119,880 Jinished /oods .n"entory 119,880 b. Bnding 6., > ?eg. 6., ; 3urrent costs C 3ost of @ob 8&19 comleted > $16,800 ; $105,600 ; $++,000 ; $&19,800 7 $119,880 > $&66,3&0 Bnding balance in @ob 8&18 > $5,600 ; $9,&00 ; $1+,000 ; $6<,300 > $<6,100 19. a. :F rate > $1&9,680 E 9,600 > $16.80 er =AF b. A"erage =A rate > $15<,600 E 9,600 > $&1 er =AF c. 15,&00 $ ($&1.00 ; $16.80) > 15,&00 $ $39.80 > $59+,560 =A L :F $<16,650 7 $59+,560 > $3+&,0<0 =5 in beginning 6., d. .f wor*ers on the #ob in ending 6., are assumed to be aid the a"erage =A rate, then the ending 6., balance isH =5 $ 93,&50 =A (&,850 $ $&1) 5<,850 :F (&,850 $ $16.80) +9,880 Bnding balance $180,<80 e. 3/5 > ?eg. 6., ; 3urrent eriod costs C Bnd. 6., 4 Chapter 5 > $<16,650 ; $58<,690 ; $15<,600 ; $1&9,680 7 $180,<80 > $1,61&,6&0 18. a. 3/2 is the amount credited to Jinished /oods .n"entory for the year > $1,8<0,000. b. ?eg. J/ ; 3/5 C Bnd. J/ > 3/2 $<0,000 ; 3/5 7 $59,000 > $1,8<0,000 3/5 ; $33,000 > $1,8<0,000 3/5 > $1,859,000 c. Alied :F > $3<5,000 K 1.+0 > $553,000 d. ?eg. 6., ; =5 used ; =A ; :F C Bnd. 6., > 3/5 $56,000 ; =5 ; $3<5,000 ; $553,000 7 $&9,6+0 > $1,859,000 =5 ; $<96,360 > $1,859,000 =5 > $880,6+0 e. ?eg. =5 ; , C =5 used > Bnd. =5 $&+,600 ; , 7 $880,6+0 > $+,100 , 7 $856,0+0 > $+,100 , > $860,1+0 1<. a. 3/2 > .95 $ 2ales > .95($1,5<8,000) > $1,1<8,500. b. ?eg. J/ ; 3/5 C Bnd. J/ > 3/2 $68,<00 ; 3/5 7 $165,600 > $1,1<8,500 3/5 7 $<6,900 > $1,1<8,500 3/5 > $1,&<5,&00 c. @ob ?3&5H Alied :F > 85G of =A$ > .85 (1&8 $ $1&.<0) > . 85 $ $1,651.&0 > $1,+03.5& @ob %+&8H Alied :F > 85G of =A$ > .85 (&+0 $ $1&.<0) > . 85 $ $3,0<6.00 > $&,631.60 d. @ob ?3&5 %+&8 =5 $&1,<80.00 $1+,900.00 =A 1,651.&0 3,0<6.00 :F 1,+03 .5& &,631 .60 $&5,03+ .9& $&0,+&9 .60 5 Chapter 5 e. 3/5 > ?eg. 6., ; =5 used ; =A ; :F C Bnd. 6., $1,&<5,&00 > $1+,600 ; =5 used ; $1&.<0(&5,960) ; . 85($1&.<0 $ &5,960) C ($&5,03+.9& ; $&0,+&9.60) $1,&<5,&00 > $1+,600 ; =5 used ; $33&,30+ ; $&8&,+58.+0 7 $+5,+6&.3& $1,&<5,&00 > $583,<00.08 ; =5 used =5 used > $911,&<<.<& ?eg. =5 ; ,urchases 7 =5 used > Bnd. =5 $1<,500 ; $8+3,&96 7 $911,&<<.<& > Bnd. =5 Bnd. =5 (destroyed) > $151,+96.08 &0. a. 3ase 81 3ase 8& 3ase 83 3ase 8+ =5 $ +80 $ 8,800 $ 3,900 $ 850 =A ($1<0 er hour) 9,600 19,100 13,300 &,850 :F ($150 er court hour) 1,800 <,950 18,000 6,000 Totals $<,880 $35,650 $35,000 $<,900 b. =5 $10,100 =A (19+ $ $1<0) 33,060 :F (9& $ $150) 10,800 Total cost $53,<60 5ar*u (+5G) &+,&8& Total billed to client $98,&+& &1. a. :"erhead rate > ?udgeted :F E ?udgeted =A$ $+.&5 > $1,&95,000 E ?udgeted =A$ ?udgeted =A cost > $1,&95,000 E $+.&5 ?udgeted =A cost > $300,000 :"erhead rate > $1,&95,000 E $300,000 > $+.&5 er =A$ b. 6or* in ,rocess .n"entory <6,+95 5anufacturing :"erhead <6,+95 ($&&,900 $ $+.&5 > $<6,+95) c. $+.&5 $ 3,<00 > $16,595 d. ?eginning balance $18,350 =irect material &<,600 =irect labor 3,<00 5anufacturing o"erhead 16,595 Bnding balance $68,+&5 6 Chapter 5 &&. a. =irect material $&,850 =irect labor ($800 E $&0 > +0 =AFs) 800 Alied o"erhead ($19 $ +0) 680 Total cost of @ob 8<&0 $+,330 b. ?. of 6., ($8,&50 ; $500 ; ($19 $ &5) $ <,195 =irect material $&1,650 =irect labor ($6,300 E $&0 > 315 =AFs) 6,300 Alied o"erhead ($19 $ 315) 5,355 33,305 $+&,+80 B. of 6., (+,330) 3ost of goods manufactured $38,150 c. Actual o"erhead $5,05+ Alied o"erhead (5,355) :"eralied :F $ 301 &3. a. 5i$ingH $+80,000 E 60,000 > $8 er 5F ,a"ingH $900,000 E &8,000 > $&5 er =AF b. 5i$ing (&<0 5Fs $ $8) $ &,3&0 ,a"ing (3+0 =AFs $ $&5) 8,500 Total o"erhead alied $10,8&0 c. ($+80,000 ; $900,000) E (60,000 ; 1&,000) > $1,180,000 E 9&,000 > $16.3< $16.3< $ 33+ > $5,+9+.&6 alied to @ob 8&&0 A lant7wide rate would not ha"e been indicati"e of the actual cost of each #ob because the 5i$ing deartment is "ery machine7intensi"e while the ,a"ing deartment is "ery labor7 intensi"e. &+. a. =eartment 1 > $+65,000 E 30,000 5Fs > $15.50 er 5F =eartment & > $380,600 E &&,000 =AFs > $19.30 er =AF b. 4aw 5aterial .n"entory 3+6,000 Accounts ,ayable 3+6,000 6or* in ,rocess .n"entory C @ob 8+6& 1<,000 6or* in ,rocess .n"entory C other #obs3&1,000 4aw 5aterial .n"entory 3+0,000 7 Chapter 5 6or* in ,rocess .n"entory C @ob 8+6& &95 6or* in ,rocess .n"entory C other #obs &,860 3ash (&85 $ $11) 3,135 6or* in ,rocess .n"entory C @ob 8+6& +,<60 6or* in ,rocess .n"entory C other #obs3&,&+0 :"erhead 3ontrol (&,+00 $ $15.50) 39,&00 6or* in ,rocess .n"entory C @ob 8+6& &,8++ 6or* in ,rocess .n"entory C other #obs&&,8<6 3ash (1,+30 $ $18) &5,9+0 6or* in ,rocess .n"entory C @ob 8+6& 3+6 6or* in ,rocess .n"entory C other #obs &,968 :"erhead 3ontrol (180 $ $19.30) 3,11+ Jinished /oods .n"entory C @ob 8+6& &9,+&5 6or* in ,rocess .n"entory C @ob 8+6& &9,+&5 ($1<,000 ; $&95 ; $+,<60 ; $&,8++ ; $3+6) Accounts 4ecei"able C ,ower 3&,<10 2ales ($&9,+&5 $ 1.&0) 3&,<10 3ost of /oods 2old &9,+&5 Jinished /oods .n"entory C @ob 8+6& &9,+&5 c. 3ost er unit > $&9,+&5 E 500 > $5+.85 2elling rice er unit > $65.8& 4aw material > $1<,000 E 500 > $38 d. Total 45 issued $3+0,000 Total units (500 ; &0,000) E &0,500 45 cost er unit $16.5< (rounded) Total cost er unit > $5+.85 7 $38.00 ; $16.5< > $33.++ 2elling rice er unit > $33.++ $ 1.& > $+0.13 (rounded) 2ales without error $3&,<10 2ales with error (500 $ $+0.13) &0,065 Total Msa"ingsN of the error $1&,8+5 &5. A standard costing system is most aroriate in roduction settings in which acti"ities are reetiti"e. That criterion is met in the case of Aatamore .ndustries. =e"eloment of such standards re!uires that reliable e$ectations about inut cost amounts and !uantities be determined for the more routine asects of client 8 Chapter 5 ser"ices. :nce the standards are de"eloed, actual costs and inut !uantities can be comared against the standards to better understand the causes of cost "ariability across the contracts. ?etter identi1cation and understanding of the causes of "ariances will allow managers to manage costs more e0ecti"ely and rice comany ser"ices more aroriately. &6. 5,I > Actual cost for aer urchasedC 2tandard cost for aer urchased > ($0.03& $ <80,000) C ($0.036 $ <80,000) > $31,360 7 $35,&80 > 7$3,<&0. 2ince actual cost was less than standard, the "ariance is fa"orable. 5%I > Actual cost for aer used C 2tandard cost for aer that should ha"e been used > ($0.036 $ <80,000) C ($0.036 $ <8+,000) > $35,&80 7 $35,+&+ > 7$1++. 2ince actual aer usage was less than the standard allowed, the "ariance is fa"orable. &9. a. Total ayroll > <,000 K $<.65 > $86,850 b. A4I > Actual ayroll C 2tandard cost for actual hours wor*ed > $86,850 C ($<.85 $ <,000) > $86,850 7 $88,650 > 7$1,800. 2ince direct labor emloyees were aid less than the standard rate, the "ariance is fa"orable. c. A%I > 2tandard cost for actual hours wor*ed C 2tandard cost for standard hours allowed for roduction > $88,650 C ($<.85 $ 8,600) > $88,650 7 $8+,910 > $3,<+0. 2ince the number of hours wor*ed was greater than the standard hours allowed, the "ariance is unfa"orable. d. :ne concern would be the reason the comany was aying its wor*ers less than the standard rate er hour. The other concern would be that the wor*ers, recogniOing that they were being aid less than the standard, chose to wor* more slowly than they normally would, to comensate (relati"e to total wages) for the reduced wage. .f this situation is the case, the comany would ha"e been better o0 aying the standard rate because the actual ayroll was ($86,850 7 $8+,910) or $&,1+0 greater than the standard would ha"e been. &8. a. 3urrently, ?oni"o has no data on the actual cost of building any of the comuters being con1gured. 3onse!uently, the 9 Chapter 5 comany is unable to determine the actual ro1t (loss) generated on any sales transaction. The #ob order cost system would allow ?oni"o to better understand what factors dri"e costs in the 1rm, measure the ro1t on sales transactions, and identify ways to better manage costs and re"enues. b. A ricing olicy that ignores the costs of direct labor and o"erhead (in addition to mar*eting and administrati"e costs) is Pawed. :nly if =A and :F are strictly roortional to direct material could their costs not be considered in determining the rice and ro1t of each comuter. Fowe"er, in this case, these costs are li*ely a ma#or ortion of the cost of building a made7to7order comuter. &<. a. 2ecretary ($+,800 E 160 hrs. $ 35 hrs.) $ 1,050 3oies (1,+50 ages $ $0.06 er age) 89 ,hone calls 1+5 :"erhead ($<,600 E 160 hrs. $ 35 hrs.) &,100 AttorneyQs time ($1<0 $ <5 hrs.) 18,050 Total charges $&1,+3& This means 3onroe would be charging $&1,+3& E <5 > $&&5.60 or $&30 er hour (rounded). Total bill to :li"gra > <5 hours $ $&30 > $&1,850 b. =irect costs ($89 ; $1+5 ; $18,050) $18,&8& Allocated secretarial costs 1,050 Allocated o"erhead &,100 5argin R($18,050 ; $&,100) K 0.+0S 8,060 Total billing $&<,+<&
c. A Pat charge er hour would be more li*ely to be accetable to clients because such a charge is more understandable than being charged an hourly rate lus a charge for the time that is not really being sent on their cases. 30. Bach student will ha"e a di0erent answer, but the memo should address the following issueH ?udgeted cost is far below each #ob-s actual cost, which indicates that the comany is not using ast #ob information as a basis for either controlling costs or increasing future bid rices. ?y not using a"ailable historical information to ad#ust oerations, the comany 10 Chapter 5 is acceting marginal #obs. Although each #ob generated a ositi"e gross margin, the actual gross margin is only a small fraction of the budgeted gross margin. .t is imortant that a comany learn from ast mista*es. 31. a. 2ome of the comanies that ha"e been found to engage in this ractice are Jamily =ollar, ,e ?oys, Taco ?ell, Toys747Ds, and 6al75art. b. .t is easier to doctor the records now than in the ast because records are comuteriOed and managers generally ha"e access to the 1les. ,re"iously, managers would ha"e had to consire with ayroll cler*s or accountants to change aer or unch7 card records. c. Bach student will ha"e a di0erent answer. Fowe"er, most students will robably indicate that store managers ma*ing such changes would be 1red (short7run). Jor the long7run, ethics training would robably be recommended and ossibly a change in the way store managers- bonuses are comuted. 3&. a. 5anufacturing :"erhead 1,150 4aw 5aterial .n"entory &50 6ages ,ayable <00 b. 6., 7 @ob 8?A+68 1,150 4aw 5aterial .n"entory &50 6ages ,ayable <00 /i"en that the rewor* costs were not necessary to the comletion of the #ob, 2an Angelo 3or. should robably not charge its mar*u ercentage on the $1,150 of rewor* costs unless the customer had already been informed that such charges might be charged and the customer had agreed to such charges. c. Aoss on Abnormal 4ewor* 1,150 4aw 5aterial .n"entory &50 6ages ,ayable <00 33. a. ,redetermined :F rate > $1,+&1,000 E 1+5,000 > $<.80 er 5F =irect material $+9,500 =irect labor &1,800 :"erhead (3&5 $ $<.80) 3,185 11 Chapter 5 Total cost $9&,+85 ,er unit cost > $9&,+85 E 1,500 > $+8.3& (rounded) b. The $950 rewor* cost is included in 5anufacturing :"erhead 3ontrol. c. Total original cost $9&,+85 3ost of new 30 units 1,3<0 Aess sale of defecti"e units (&+0) Total cost of @ob 8896 $93,635 3+. a. The estimated cost of the soilage should be included in calculating the redetermined o"erhead rate. This aroach sreads the cost of soilage across all good units roduced. b. The cost of this soilage should be charged to the seci1c #ob. 2ince there is no sal"age "alue for the soilage, no #ournal entry would be necessary as the cost of the soiled units would be included in the rior charges to the #ob for direct materials, direct labor and manufacturing o"erhead. c. .n this case, the soilage is une$ected and the net cost should be recorded as a loss of the eriod in which it occurred. Any sal"age "alue associated with the soilage will reduce the amount of the loss. To record the transaction, wor* in rocess (and the seci1c #ob-s #ob order cost sheet) should be credited for the cost of the soilage and the e$ected, net sal"age of the soilage should be debited (=isosal "alue of defecti"e wor*). A loss account (e.g., Aoss from abnormal soilage) should be debited to balance the transaction. ,roblems 35. 4aw 5aterial .n"entory 9<0,000 Accounts ,ayable 9<0,000 6or* in ,rocess .n"entory 590,000 4aw 5aterial .n"entory 590,000 5anufacturing :"erhead 1&0,000 4aw 5aterial .n"entory 1&0,000 6or* in ,rocess .n"entory 9<+,000 5anufacturing :"erhead 80,000 6ages ,ayable 89+,000 6or* in ,rocess .n"entory ($9<+,000 $ .55) +36,900 12 Chapter 5 5anufacturing :"erhead +36,900 Jinished /oods .n"entory 1,0+6,000 6or* in ,rocess .n"entory 1,0+6,000 3ost of /oods 2old 1,0+6,000 Jinished /oods .n"entory 1,0+6,000 3ash 1,3+&,000 2ales 1,3+&,000 36. a. $8&,000 E 8,000 =AF > $10.&5 er =AF b. =irect 5aterial .n"entory <0,000 Accounts ,ayable <0,000 6or* in ,rocess .n"entory 95,600 3ash 95,600 5anufacturing :"erhead 8&,000 Iarious accounts 8&,000 6or* in ,rocess .n"entory 8&,000 5anufacturing :"erhead 8&,000 6or* in ,rocess .n"entory 88,500 =irect 5aterial .n"entory 88,500 ($&,000 ; $<0,000 7 $3,500) Jinished /oods .n"entory &+8,850 6or* in ,rocess .n"entory &+8,850 3/5 > ?6., ; =5 ; =A ; :F C B6., 3/5 > $10,500 ; $88,500 ; $95,600 ; $8&,000 C$9,950 > $&+8,850 Accounts 4ecei"able 350,+00 2ales 350,+00 3ost of /oods 2old &+3,900 Jinished /oods .n"entory &+3,900 c. ?eginning J/ $ 6,500 3/5 &+8,850 13 Chapter 5 3/2 (&+3,900) Bnding J/ $ 11,650 39. a. <T1 4aw 5aterial .n"entory 1,<+0,000 Accounts ,ayable 1,<+0,000 <T+ 6or* in ,rocess .n"entory 1,8+6,800 5anufacturing :"erhead 53,&00 4aw 5aterial .n"entory 1,<00,000 .ssuances made to #obs as followsH 895, $&8<,600U 898, $&5&,600U 88&, $<<&,&00U 886, $31&,+00
<T15 6or* in ,rocess .n"entory 665,600 5anufacturing :"erhead <1,+00 3ash 959,000 Aabor charged to #obs as followsH 895, $8+,600U 898, $&69,&00U 88&, $&03,000U 886, $110,800 <T15 6or* in ,rocess .n"entory 83&,000 5anufacturing :"erhead 83&,000 :"erhead alied to #obs as followsH 895, $1&0,950U 898, $3&<,000U 88&, $&53,950U 886, $1&8,500. <T15 Jinished /oods .n"entory 1,081,350 6or* in ,rocess .n"entory 1,081,350 ($586,+00 ; $&8<,600 ; $8+,600 ; $1&0,950) Accounts 4ecei"able 1,+05,955 2ales 1,+05,955 ($1,081,350 $ 1.3) 3ost of /oods 2old 1,081,350 Jinished /oods .n"entory 1,081,350 <T&0 5anufacturing :"erhead 110,&00 Accounts ,ayable 1<6,800 3ash 309,000 <T&+ 4aw 5aterial .n"entory 6&+,000 Accounts ,ayable 6&+,000 <T&5 6or* in ,rocess .n"entory 916,+00 5anufacturing :"erhead 55,800 4aw 5aterial .n"entory 99&,&00 14 Chapter 5 .ssuances made to #obs as followsH 898, $15+,800U 88&, $&1&,600U 886, $3+<,000 <T30 5anufacturing :"erhead 1,&06,800 Accumulated =ereciation 80<,000 ,reaid .nsurance 165,+00 Ta$es L Aicenses ,ayable &3&,+00 <T30 6or* in ,rocess .n"entory 6+<,+00 5anufacturing :"erhead 65,000 3ash 91+,+00 Aabor charged to #obs as followsH 898, $199,+00U 88&, $&&8,+00U 886, $&+3,600 <T30 6or* in ,rocess .n"entory +09,1&5 5anufacturing :"erhead +09,1&5 To aly o"erhead to #obs as followsH 898, $111,950U 88&, $190,6&5U 886, $1&+,950 b. 4aw 5aterial .n"entoryVVVVV ?al. 33&,+00 <T+ 1,<00,000 <T1 1,<+0,000 <T&5 99&,&00 <T&+ 6&+,000 ?al. &&+,&00 6or* in ,rocess ?al. 1,51&,600 <T15 1,081,350 <T+ 1,8+6,800 <T15 665,600 <T15 83&,000 <T&5 916,+00 <T30 6+<,+00 <T30 +09,1&5 ?al. 5,5+8,595 3ost of /oods 2oldVVVVVVVV ?al. +,86+,000 895 1,081,350 ?al. 5,<+5,350 @ob 895 @ob 898 ?al. 586,+00 1,081,350 ?al. &66,600 =5 &8<,600 =5 &5&,600 =A 8+,600 =A &69,&00 15 Chapter 5 :F 1&0,950 :F 3&<,000 ?al. 0 =5 15+,800 =A 199,+00 :F 111,950 ?al 1,55<,350 @ob 88& @ob 886 ?al. 65<,600 =5 31&,+00 =5 <<&,&00 =A 110,800 =A &03,000 :F 1&8,500 :F &53,950 =5 3+<,000 =5 &1&,600 =A &+3,600 =A &&8,+00 :F 1&+,950 :F 190,6&5 ?al. &,9&0,195 ?al.1,&6<,050 c. 2chedule of @ob 3ost 4ecords 2etember 30, &010 @ob 898 $1,55<,350 @ob 88& &,9&0,195 @ob 886 1,&6<,050 Total $5,5+8,595 d. Actual o"erhead for 2etember <T+ $ 53,&00 <T15 <1,+00 <T&0 110,&00 <T&5 55,800 <T30 1,&06,800 <T30 65,000 $1,58&,+00 Alied o"erhead for 2etember <T15 $ 83&,000 <T30 +09,1&5 (1,&3<,1&5) Dnderalied o"erhead $ 3+3,&95 38. a. 4aw 5aterial .n"entory 5+&,000 3ash 5+&,000 5anufacturing :"erhead 5+,000 6or* in ,rocess .n"entory 60&,800 6agesT2alaries ,ayable (or 3ash) 656,800 16 Chapter 5 To record =A for #obs (@ob 8&+9, $19,+00U 8&51, $8,800U 8&53, $&1,000U 8&5+, $136,600U 8&55, $1+5,000U 8&56, $<+,600U and 8&59, $19<,+00) 5anufacturing :"erhead 96,000 6or* in ,rocess .n"entory +66,+00 4aw 5aterial .n"entory 5+&,+00 To record =5 for #obs (@ob 8&+9, $1&,+00U 8&51, $6,&00U 8&53, $16,800U 8&5+, $105,&00U 8&55, $11<,800U 8&56, $9&,800U and 8&59, $133,&00) 5anufacturing :"erhead 11+,+00 Iarious accounts 11+,+00 To record :F costs other than indirect labor and indirect materials ($&++,+00 7 $5+,000 7 $96,000) 6or* in ,rocess .n"entory &+1,1&0 5anufacturing :"erhead &+1,1&0 To aly :F at a rate of $0.+0 er =A$ (@ob 8&+9, $6,<60U 8&51, $3,5&0U 8&53, $8,+00U 8&5+, $5+,6+0U 8&55, $58,000U 8&56, $39,8+0U and 8&59, $91,960) Jinished /oods .n"entory 1,99<,0+0 6or* in ,rocess .n"entory 1,99<,0+0 (2ee schedule below.) 3ash &,&6+,99+ 2ales &,&6+,99+ 3ost of /oods 2old 1,99<,0+0 Jinished /oods .n"entory 1,99<,0+0
2chedule of 3omleted @obs @ob =irect 5aterial =irect Aabor Alied :F Total &+9 $ 8<,600 $108,800 $ +3,5&0 $ &+1,<&0 &51 18&,800 &18,600 89,++0 +88,8+0 &53 16&,&00 1<0,600 96,&+0 +&<,0+0 &5+ 105,&00 136,600 5+,6+0 &<6,++0 &55 11<,800 1+5,000 58,000 3&&,800 Totals $65<,600 $9<<,600 $31<,8+0 $1,99<,0+0 b. @ob =irect 5aterial =irect Aabor Alied :F Total &56 $ 9&,800 $ <+,600 $39,8+0 $&05,&+0 &59 133,&00 19<,+00 91,960 38+,360 Totals $&06,000 $&9+,000 $10<,600 $58<,600 c. Actual o"erhead $ &++,+00 17 Chapter 5 Alied o"erhead &+1,1&0 Dnderalied o"erhead $ 3,&80 Dnad#usted cost of #obs comleted 1,99<,0+0 Ad#usted cost of #obs comleted $1,98&,3&0 3<. a. Aluminum 2teel :ther Total ?. $ 8,300 $1&,800 $ 5,800 $ &6,<00 ,urchases <8,300 &6,500 &3,550 1+8,350 A"ailable $106,600 $3<,300 $&<,350 $195,&50 .ssuances (58,900) (3+,&00) (&5,<00) (118,800) B. $ +9,<00 $ 5,100 $ 3,+50 $ 56,+50 b. =irect material $ 6&0 =irect labor (8 $ $15) 1&0 :"erhead (16 $ $30) +80 Total $1,&&0 c. 6., C beginning W $ 6,&30 =irect material (total issuances) 118,800 =irect labor (680 K $15) 10,&00 :"erhead (1,&00 K $30) 36,000 Total manufacturing costs $191,&30 6., 7 ending (1,&&0) 3ost of goods manufactured $190,010 J/ 7 beginning &3,800 3ost of goods a"ailable for sale $1<3,810 J/ 7 ending (0) 3ost of goods sold $1<3,810 W @ob 8 5aterial Aabor :F Total +11 $1,<00 $ 5+0 $1,500 $3,<+0 +1& 1,&+0 150 <00 &,&<0 $3,1+0 $ 6<0 $&,+00 $6,&30 +0. a. Dsing any of the #obs, one can determine that the relationshi between direct labor and alied o"erhead is that o"erhead is 115G of direct labor cost. Jor e$amle, using #ob 869H $15,<16 E $13,8+0 > 1.15. b. =irect material $&5,800 =irect labor 9,&00 Alied o"erhead 8,&80 Total $+1,&80 18 Chapter 5 c. Total direct material $513,83+ Aess direct material in ?. (&5,800)$+88,03+ Total direct labor $ <3,9&0 Aess direct labor in ?. (9,&00) 86,5&0 Total direct cost added during 5ay $59+,55+ d. 6or* in rocess 7 beginning $ +1,&80 3osts added during 5ayH =irect material $+88,03+ =irect labor 86,5&0 Alied o"erhead ($86,5&0 $ 1.15) <<,+<8 69+,05& $915,33& 6or* in rocess 7 ending ($308,+30 ; $59,000 ; ($59,000 K 1.15) (+30,<80) 3ost of goods manufactured $&8+,35& +1. a. JabricationH $1,560,000 E 10+,000 5AFs > $15 er 5F AssemblyH $1,960,000 E 3&0,000 =AFs > $5.50 er =AF b. @ob 8&&<6H Jabrication (<00 hours X $1&) $10,800 Assembly (850 hours X $10) 8,500 Total =A $1<,300 @ob 8&&<9H Jabrication (+60 hours X $1&) $5,5&0 Assembly (+00 hours X $10) +,000 Total =A $<,5&0 c. @ob 8&&<6H Jabrication (1,800 hours X $15) $&9,000 Assembly (850 hours X $5.50) +,695 Total :F alied $31,695 @ob 8&&<9H Jabrication (<00 hours X $15) $13,500 Assembly (+00 hours X $5.50) &,&00 Total :F alied $15,900 d. @ob 8&&<6 @ob 8&&<9 =irect 5aterial $118,500 $1+9,&00 =irect Aabor 1<,300 <,5&0 19 Chapter 5 :"erhead 31,695 15,900 Total $16<,+95 $19&,+&0 e. JabricationH Alied (103,&00 K $15)$1,5+8,000 Actual (1,5&8,000) :"eralied $ &0,000 AssemblyH Alied (3&+,000 K $5.50)$1,98&,000 Actual (1,9<0,000) Dnderalied $ 8,000 The comany has o"eralied o"erhead of $1&,000 for the year. +&. a. @ob 3ost 2heet 7 @ob 8515 3ustomer 'ame and AddressH =escrition of @obH ,reare site, 3ity of /ulf 2hores build and install a edestrian /ulf 2hores, Alabama o"erass in /ulf 2horesH see bid seci1cations for details 3ontract Agreement =ateH 5T10 2cheduled 2tarting =ateH 9T10 Agreed Don 3omletion =ateH 1&T15T10 3ontract ,riceH $3,300,000 Actual 3omletion =ateH VVVVVVVVVVVVVVVV 2ecial .nstructionsH 'one
=irect 5aterial (Bst. $1,&+0,000) =ate 2ource 3ost &010 @uly 31 2ummary of material re!. $1&1,800 =irect Aabor (Bst. $690,000) :"erhead (Bst. $+0&,000) . =ate 2ource 3ost =ate 2ource 3ost &010 &010 @uly 31 2ummary of time @uly 31 @ournal entry sheets for direct of 9T31T10 $105,0&+ labor $195,0+0 20 Chapter 5 2ummary (as of 9T31T10) Actual ?udget Dnder(:"er) =irect material $1&1,800 $1,&+0,000 =irect labor 195,0+0 690,000 :"erhead 105,0&+ +0&,000 Totals $+01,86+ $&,31&,000 b. 6or* in ,rocess 7 @ob 8515 1&1,800 6or* in ,rocess C other #obs +59,500 =irect 5aterial .n"entory 59<,300 6or* in ,rocess 7 @ob 8515 195,0+0 6or* in ,rocess 7 other #obs +08,<60 5anufacturing :"erhead 55,800 2alaries and 6ages B$ense 3<,600 2alaries and 6ages ,ayable 69<,+00 5anufacturing :"erhead &6,+00 =ereciation B$ense 9,800 Accumulated =er. 7 3onst. Assets &6,+00 Accumulated =er. 7 :Yce Assets 9,800 2ales ,romotion B$ense 11,100 Accounts ,ayable 11,100 Ad"ertising B$ense 6,600 3ash 6,600 5anufacturing :"erhead 18,600 2ulies .n"entory 18,600 5iscellaneous B$ense 10,&00 Accounts ,ayable 10,&00 Dtilities B$ense 1,800 5anufacturing :"erhead 5,+00 Dtilities ,ayable 9,&00 6or* in ,rocess 7 @ob 8515 105,0&+ 6or* in ,rocess 7 other #obs &+5,396 21 Chapter 5 5anufacturing :"erhead 350,+00 Accounts 4ecei"able 1,&&+,000 2ales 1,&&+,000 Jinished /oods .n"entory 8&<,000 6or* in ,rocess .n"entory 8&<,000 3ost of /oods 2old 8&<,000 Jinished /oods .n"entory 8&<,000 c. 6or* in ,rocess 7 beginning $ 891,800 ,roduction costsH =irect material $59<,300 =irect labor 58+,000 Alied o"erhead 350,+00 1,513,900 $&,385,500 6or* in rocess C ending (1,556,500) 3ost of goods manufactured $ 8&<,000 d. ?irmingham 3ontractors .ncome 2tatement Jor the 5onth Bnded @uly 31, &010 4e"enues from comleted ro#ects $1,&&+,000 Aess 3ost of /oods 2old (8&<,000) /ross 5argin on 3omleted @obs $ 3<5,000 'on7,roduction B$ensesH 2alaries and 6ages B$ense $3<,600 =ereciation B$ense 9,800 Dtilities B$ense 1,800 2ales ,romotion B$ense 11,100 Ad"ertising B$ense 6,600 5iscellaneous B$ense 10,&00 (99,100) .ncome ?efore .ncome Ta$es $319,<00 .ncome Ta$es (+0G) (1&9,160) 'et .ncome $1<0,9+0 +3. a. @ob 8&01<H =esign ($81,600 K 30G) $&+,+80 ,roduction (9&0 K $15) 10,800 .nstallation ($10,080 K <0G) <,09& 22 Chapter 5 Total o"erhead alied $++,35& @ob 8&0&0H =esign ($6<,360 K 30G) $&0,808 ,roduction (&,+00 K $15) 36,000 .nstallation ($11,5&0 K <0G) 10,368 Total o"erhead alied $69,196 @ob 8&0&1H =esign ($93,++0 K 30G) $&&,03& ,roduction (<60 K $15) 1+,+00 .nstallation ($15,&00 K <0G) 13,680 Total o"erhead alied $50,11& =esign ,roduction .nstallation Actual $105,600 $60,000 $31,&00 Alied (69,3&0) (61,&00) (33,1&0) (:"er)Tunder alied $ 38,&80 $ (1,&00) $ (1,<&0) Actual :F for comany $1<6,800 Alied :F for comany (161,6+0) Total comany underalied :F $ 35,160 b. 6or* in ,rocess (=esign) C @ob 8&01< <,600 6or* in ,rocess (=esign) C @ob 8&0&0 8,&00 6or* in ,rocess (=esign) C @ob 8&0&1 19,600 4aw 5aterial .n"entory 35,+00 6or* in ,rocess (=esign) C @ob 8&01< 81,600 6or* in ,rocess (=esign) C @ob 8&0&0 6<,360 6or* in ,rocess (=esign) C @ob 8&0&1 93,++0 6ages ,ayable &&+,+00 6or* in ,rocess (=esign) C @ob 8&01< &+,+80 6or* in ,rocess (=esign) C @ob 8&0&0 &0,808 6or* in ,rocess (=esign) C @ob 8&0&1 &&,03& 5anufacturing :"erhead 69,3&0 6or* in ,rocess (,rod.) C @ob 8&01< 116,+00 6or* in ,rocess (,rod.) C @ob 8&0&0 &68,800 6or* in ,rocess (,rod.) C @ob 8&0&1 &3&,000 4aw 5aterial .n"entory 619,&00 23 Chapter 5 6or* in ,rocess (,rod.) C @ob 8&01< 3+,000 6or* in ,rocess (,rod.) C @ob 8&0&0 5<,600 6or* in ,rocess (,rod.) C @ob 8&0&1 &1,600 6ages ,ayable 115,&00 6or* in ,rocess (,rod.) C @ob 8&01< 10,800 6or* in ,rocess (,rod.) C @ob 8&0&0 36,000 6or* in ,rocess (,rod.) C @ob 8&0&1 1+,+00 5anufacturing :"erhead 61,&00 6or* in ,rocess (.nst.) C @ob 8&01< 10,+00 6or* in ,rocess (.nst.) C @ob 8&0&0 36,800 6or* in ,rocess (.nst.) C @ob 8&0&1 10,+00 4aw 5aterial .n"entory 59,600 6or* in ,rocess (.nst.) C @ob 8&01< 10,080 6or* in ,rocess (.nst.) C @ob 8&0&0 11,5&0 6or* in ,rocess (.nst.) C @ob 8&0&1 15,&00 6ages ,ayable 36,800 6or* in ,rocess (.nst.) C @ob 8&01< <,09& 6or* in ,rocess (.nst.) C @ob 8&0&0 10,368 6or* in ,rocess (.nst.) C @ob 8&0&1 13,680 5anufacturing :"erhead 33,1&0 c. @ob 8&01<H =irect material $136,+00 =irect labor 1&5,680 :"erhead ++,35& Total cost $306,+3& @ob 8&0&0H =irect material $313,800 =irect labor 1+0,+80 :"erhead 69,196 Total cost $5&1,+56 @ob 8&0&1H =irect material $&60,000 =irect labor 110,&+0 :"erhead 50,11& Total cost $+&0,35& ++. a. 4eliantH $5,580 E $+5 > 1&+ =AF wor*ed =umasH $18,000 E $+5 > +00 =AF wor*ed 24 Chapter 5 :mahaH $&8,350 E $+5 > 630 =AF wor*ed 4eliantH 1&+ =AF $ $58 > $9,1<& :F alied =umasH +00 =AF $ $58 > $&3,&00 :F alied :mahaH 630 =AF $ $58 > $36,5+0 :F alied 4eliant =umas :maha =irect material $ 9,800 $1+,&00 $ 1<,800 =irect labor 5,580 18,000 &8,350 :"erhead 9,1<& &3,&00 36,5+0 Total cost $&0,59& $55,+00 $8+,6<0 b. 4eliantH $&0,59& E 3 > $6,859 er ad =umasH $55,+00 E 10 > $5,5+0 er ad :mahaH $8+,6<0 E 8 > $10,586 er ad c. 2ales (&1 ads Z $8,600) $180,600 3ostsH =irect material $+1,800 =irect labor 51,<30 Alied o"erhead 66,<3& :"eralied o"erhead (16,<3&) (1+3,930) 'et income $ 36,890 d. 2alesH 4eliant ($&0,59& $ 1.3)$&6,9+3.60 =umas ($55,+00 $ 1.3) 9&,0&0.00 :maha ($8+,6<0 $ 1.3) 110,0<9 .00 $&08,860.60 3ostsH =irect material $+1,800.00 =irect labor 51,<30.00 Alied o"erhead 66,<3&.00 :"eralied o"erhead (16,<3& .00) (1+3,930 .00) 'et income $ 65,130 .60 .ncome using a cost7lus basis is substantially higher than that which is obtained using a Pat rate selling rice. =umas 5anufacturing will be more leased with the systemU rather than aying a rate of $8,600 er ad, =umas would be aying $9,&0&. :n the other hand, 4eliant-s and :maha-s costs er ad would increase from $8,600 er ad to $8,<15 and $13,96&, resecti"ely. Ads shouldnQt be billed at a Pat rate because some may ta*e much longer to de"elo than others. The 8 ads for :maha too* 630 hours to de"elo or about 9< hours each. .n contrast, the 3 ads were de"eloed for 4eliant in 1&+ hours (+1 hours 25 Chapter 5 each) and the 10 ads were de"eloed for =umas in only +00 hours (+0 hours each). Another ossibility for Ae?lanc is to bill based on a standard charge er labor hour[esecially if clients tend to change their minds after the ad de"eloment rocess begins. +5. a. :ct. 1 4aw 5aterial .n"entory 1,150,000 Accounts ,ayable 1,150,000 1 6or* in ,rocess 7 , 650,000 5anufacturing :"erhead 7 , 500,000 4aw 5aterial .n"entory 1,150,000 5 5anufacturing :"erhead 7 3 &5,000 Accounts ,ayable &5,000 8 5anufacturing :"erhead 7 , 5,000 3ash 5,000 15 'o entry needed. &0 5anufacturing :"erhead 7 3 60,000 3ash 60,000 &+ 4aw 5aterial .n"entory 1,+85,000 Accounts ,ayable 1,+85,000 31 5anufacturing :"erhead C , 36,3&0 6or* in ,rocess C , +5,000 3ash 66,1&0 Accumulated =er. 7 , 15,&00 31 5anufacturing :"erhead C 3 18,650 6or* in ,rocess C 3 16,300 3ash &6,&00 Accumulated =er. 7 3 8,950 31 Accounts ,ayable &,635,000 3ash &,635,000 31 6or* in ,rocess C , 150,000 5anufacturing :"erhead C , 150,000 (6,000 5F $ $&5) 26 Chapter 5 31 6or* in ,rocess C 3 &6,8<5 5anufacturing :"erhead C 3 &6,8<5 ($16,300 $ 1.65) 'o". 1 5anufacturing :"erhead C 3 5,000 3ash 5,000 + 6or* in ,rocess 7 , 8&5,000 5anufacturing :"erhead 7 , 195,000 4aw 5aterial .n"entory 1,000,000 8 5anufacturing :"erhead C , 5,000 3ash 5,000 15 6or* in ,rocess C 3 &00,000 5anufacturing :"erhead 7 3 &&5,000 4aw 5aterial .n"entory +&5,000 18 'o entry needed. &+ 'o entry needed. &< 'o entry needed. 30 5anufacturing :"erhead C , 5+,050 6or* in ,rocess C , 115,000 3ash 153,850 Accumulated =er. C , 15,&00 30 5anufacturing :"erhead C 3 +3,850 6or* in ,rocess C 3 13+,300 3ash 15<,800 Accumulated =er. 7 3 18,350 30 6or* in ,rocess C , <8,950 5anufacturing :"erhead C , <8,950 (3,<50 $ $&5) 30 6or* in ,rocess C 3 &&1,5<5 5anufacturing :"erhead 7 3 &&1,5<5 ($13+,300 $ 1.65) 30 3omleted ,ro#ects .n"entory &,+8&,8+0 6or* in ,rocess 7 , 1,883,950 6or* in ,rocess 7 3 5<<,0<0 27 Chapter 5 30 Accounts 4ecei"able 3,+50,000 3onstruction 4e"enue 3,+50,000 30 3ost of 3ontracts 2old &,+8&,8+0 3omleted ,ro#ects .n"entory &,+8&,8+0 b. ,recast 3onstruction 4aw 5aterial :"erheadC , :"erhead 7 3 1,150,000 1,150,000 500,000 150,000 &5,000 &6,8<5 1,+85,000 1,000,000 5,000 <8,950 60,000 &&1,5<5 +&5,000 36,3&0 18,650 195,000 5,000 5,000 &&5,000 5+,050 +3,850 bal 60,000 bal 5&6,6&0 bal 1&<,010 6., C ,recast 6., 7 3onstruction 650,000 1,883,950 16,300 5<<,0<0 +5,000 &6,8<5 150,000 &00,000 8&5,000 13+,300 115,000 &&1,5<5 <8,950 bal 0 bal 0 3omleted ,ro#ects .n". 3ost of 3ontracts 2old &,+8&,8+0 &,+8&,8+0 &,+8&,8+0 bal 0 bal &,+8&,8+0 c. (bottom section of #ob cost sheet) 28 Chapter 5 ,recast =eartment =5 (Bst. $1,550,000) =A (Bst. $&&0,000) :F (Bst. $&95,000) =ate Amount =ate Amount =ate Amount :ct. 1 $ 650,000 :ct. 31 $ +5,000 :ct. 31 $150,000 'o". + 8&5,000 'o". 30 115,000 'o". 30 <8,950 $1,+95,000 $160,000 $&+8,950 3onstruction =eartment =5 (Bst. $350,000) =A (Bst. $130,000) :F (Bst. $&1+,500) =ate Amount =ate Amount =ate Amount 'o". 15 $ &00,000 :ct. 31 $ 16,300 :ct. 31 $ &6,8<5 'o". 30 13+,300 'o". 30 &&1,5<5 $150,600 $&+8,+<0 d. Aincoln 3onstruction 3omany does not seem to ha"e a good estimation system in lace for its bid rocess, esecially in its ,recast =eartment. The comany may be losing a signi1cant number of bids because of inPated cost estimates. +6. a. A #ob order cost system is aroriate in any en"ironment in which costs can be readily identi1ed with seci1c roducts, batches, contracts, or ro#ects. Jor adoting this system there should be a #usti1cation on a cost7bene1t basis to trace costs to those seci1c roducts, batches, contracts, or ro#ects. b. The only #ob remaining in 6., at 5T31 is =4211+H =4211+ balance, +T30 $1,590,000 5ay additionsH 4aw material $1&+,000 ,urchased arts 89,000 =irect labor &00,500 :"erhead (1<,500 hrs. X $9.50W) 1+6,&50 559,950 6., balance, 5T31 $&,1&9,950 W:F rate > $+,500,000 E 600,000 hrs. > $9.50 er hour 29 Chapter 5 c. J/ in"entory of layens, +T30 1<,+00 Dnits comleted in 5ay 15,000 Dnits a"ailable 3+,+00 Dnits shied in 5ay (&1,000) J/ in"entory, 5T31 13,+00 2ince ,i 2!uea*s uses the J.J: in"entory method, all units remaining in J/ in"entory were comleted in 5ay. 6or* in rocess in"entory, +T30 $+&0,000 5ay additionsH 4aw material $ 3,000 ,urchased arts 10,800 =irect labor +3,&00 :"erhead (+,+00 Z $9.50) 33,000 <0,000 Total cost $510,000 Dnit cost > $510,000 E 15,000 units comleted > $3+ er unit J/ in"entory > $3+ Z 13,+00 > $+55,600 d. .f the amount of o"eralied or underalied :F is not material or the result of an error in the :F alication rate, the amount is normally charged directly to 3/2. .f the amount is signi1cant, the amount should be rorated o"er the rele"ant accounts (i.e., 6.,, J/, and 3/2). (35A adated) +9. a., b. Alied :F rate > $30&,+00 E 100,800 > $3 er =AF 3ost of goods manufactured $ <6,000 Add ending wor* in rocessH Two #obs oen ha"e =5 of $ +,800 Two #obs oen ha"e =A of <,000 Two #obs oen ha"e alied :F of ($3 K &,1++) 6,+3& &0,&3& Total costs accounted for $116,&3& Aess beginning wor* in rocess (15,+00) 3ost of roduction inuts $100,83& AessH =irect labor $36,+00 Alied :F ($3.00 K 8,800) &6,+00 (6&,800) 3ost of direct material used $ 38,03& 3ost of indirect material issued 11,600 Total cost of raw material used $ +<,63& c. ?eginning raw material $ <,600 30 Chapter 5 4aw material urchased 56,000 Total raw material a"ailable $65,600 4aw material issued (+<,63&) Bnding raw material $15,<68 d. :"erhead alied ($3 K 8,800) $ &6,+00 Actual o"erhead chargesH .ndirect labor $10,800 .ndirect material 11,600 All other 5,000 (&9,+00) Dnderalied o"erhead in Aril $ 1,000 e. ?eginning 1nished goods $ 16,800 Add cost of goods manufactured <6,000 3ost of goods a"ailable $11&,800 Aess ending 1nished goods (13,&00) 3ost of goods sold $ <<,600 +8. a. Actual =5 cost $11,600,000 2tandard =5 cost ($56,000 K &00) (11,&00,000) 5aterial ,rice Iariance $ +00,000 D Actual =A cost $6,<59,600 2tandard =A cost ($3+,+00 K &00) (6,880,000) =irect Aabor 4ate Iariance $ 99,600 D Actual :F cost $1+,800,000 2tandard :F cost ($96,000 K &00) (15,&00,000) :F Iariance $ (+00,000) J b. 5aterialH $11,600,000 E 6,000,000 > $1.<3 (rounded) actual cost er lb. "s. $&.00 standard cost er lb.U $0.09 $ 6,000,000 > $+&0,000 J rice "ariance 6,000,000 lbs. used "s. (&8,000 $ &00) standard > 6,000,000 C 5,600,000 > +00,000 lbs. more than standardU +00,000 $ $& > $800,000 D !uantity "ariance The rimary cause of the unfa"orable material "ariance is because of e$cess usage. +<. a. =5 cost $18.00 =A cost ($&0 $ (1& E 60)) + .00 Total standard rime costs $&& .00 31 Chapter 5 b. @ob 8<18 =5 cost ($18 $ 1,&00) $&1,600 =A cost ($+ $ 1,&00) +,800 Total standard direct cost $&6,+00 @ob 8&00& =5 cost ($18 $ &,000) $ 36,000 =A cost ($+ $ &,000) 8,000 Total standard direct cost $++,000 c. @ob 8<18 2tandard Actual Iariance =5 $ &1,600 $&3,5&5 $1,<&5 D =A +,800 +,8+0 +0 D Total $&6,+00 $&8,365 $1,<65 D
@ob 8&00& =5 $36,000 $39,++0 $1,++0 D =A 8,000 9,850 150 J Total $++,000 $+5,&<0 $1,&<0 D d. ?y comuting "ariances for each #ob, managers become aware of any trends in costs. .f costs are aggregated across #obs, any trends may be obscured. 50. a. ,ro1t on the 1$ed7rice contracts is constrained by the contract rice. ,ro1t can only be increased if ways are found to reduce costs. :ne way that costs can be reduced is to shift them to other contracts. This is a articularly e0ecti"e strategy if the costs that are shifted to another contract can be recoued under the terms of that other contract. ?y shifting some costs of the 1$ed7rice contracts to the cost7 lus contracts, the ro1t on the 1$ed7rice contracts rises and the shifted costs can be reco"ered under the terms of the cost7lus contracts. Jurther, this strategy may ha"e the e0ect of increasing costs under the cost7lus contracts if those contracts determine ro1t as a ercentage of total costs. b. This tye of cost shifting is dishonest and unethical. .t has the e0ect of increasing the total rices of cost7lus contracts, and, if those contracts are go"ernment related, those rices are 32 Chapter 5 tyically borne by ta$ayers. .n a sense it is a way for the stoc*holders and managers of the defense contractors to steal from the ta$ayers. .t is diYcult to imagine a setting in which this rocess could be labeled ethical. 51. a. Bach student will ha"e a di0erent answer. b. The comany is utiliOing the bene1ts of automation to reduce the costs of handling so many arts. ?y standardiOing rocesses, the comany can assemble a messenger bag with a di"erse set of arts in an amount of time that is similar to that re!uired for mass7roduced ones. Accordingly, although the comany is robably aying, on a"erage, more for arts on custom messenger bags than mass7roduced onesU it is holding the line on direct labor and roduction o"erhead. ?y holding costs down for labor and o"erhead, the total cost of the custom roduced messenger bags is not signi1cantly higher than that of the mass roduced messenger bags. c. %uality as "iewed from the ersecti"e of the consumer should be much higher with the custom7made messenger bags because customers are able to secify the "arious arts they want included. ?y getting the e$act combination of arts the customers desire, they will ercei"e the !uality of the roduct to be "ery high relati"e to the remium in rice they ay o"er the mass7roduced messenger bags. d. The answer is mostly re"ealed in art (c). ?y containing costs to le"els close to those of mass7roduced messenger bags, but allowing the customer to choose the arts they desire, a substantial gross ro1t can be achie"ed. The higher gross ro1t rePects the customersQ willingness to ay a remium for the e$act combination of arts desired, e"en though the comanyQs costs are not signi1cantly greater than those incurred to mass roduce messenger bags. 5&. a. .t is li*ely that the least oular thoughts and oinions would not be heard on camus. 2tudents would naturally suort those ideas and ositions that were consistent with their own ethics, hilosohies, and self interests. As a conse!uence, the o"erall di"ersity of ideas would robably decline. b. Assuming di"ersity of oinions ultimately bene1ts all students, the Dni"ersity of 6isconsin is ossibly suorting di"ersity with the only means a"ailable[student dollars. Fowe"er, this aroach may not be ethical because it forces students to suort oinions, beliefs, and ideas that may 33 Chapter 5 "iolate their ersonal ethics. Although the 2ureme 3ourt of the Dnited 2tates will ultimately determine whether this is a legal ractice, each indi"idual student can reach hisTher own conclusion as to whether the ractice is ethical. 53. a. :"erhead other than soilage $600,000 Bstimated soilage cost $50,000 Aess sal"age "alue &0,000 30,000 Ad#usted estimated o"erhead cost $630,000 ,:4 > $630,000 E +0,000 > $15.95 er =AF b. =isosal "alue of chemical +<6 5anufacturing :"erhead 1,&3+ 6or* in ,rocess[@ob 8988 1,930 5+. a. ,redetermined rate > $<&5,000 E 100,000 > $<.&5 er 5F b. Total cost of direct material $689,100 Total cost of direct labor 159,950 Alied :F (3,080 $ $<.&5) &8,+<0 Total cost of @ob ?316 $893,3+0 c. The rewor* cost is debited to the manufacturing o"erhead account since the comany uses a redetermined rate that includes rewor* costs to aly o"erhead. 5anufacturing :"erhead 95,500 Iarious accounts 95,500 d. ,redetermined rate > $850,000 E 100,000 > $8.50 er 5F Total cost of direct material $689,100 Total cost of direct labor 159,950 Alied :F (3,080 $ $8.50) &6,180 Total cost of @ob ?316 $891,030 e. Total cost of direct material $689,100 Total cost of direct labor 159,950 Alied :F (3,080 $ $8.50) &6,180 4ewor* cost ($95,500 $ .&0) 15,100 2ale of rewor*ed ie (&00 $ $3.50) (900) Total cost of @ob ?316 $885,+30 34