Cost Accounting

Midterm Revision Exercises

Dr. Mehreen Furqan

BBA-IV/ BSC III Winter Term 2019

Name: ID:

Exercise 2-2 Manufacturing costs. The Kiaassen Company reports the following data
for September:
Product A Product B

Production(Per unit cost 10000 units 8000 units

applicable to beginning
inventory and September
production:
Direct Material $4 $3
Direct Labor $10 $20
Applied factory overhead $7 $14
$23 $37
Sales price per unit $30 $50
Beginning inventories 10000 units 900units
Ending inventories 2000 units 100units

Actual factory overhead was $$180,000; factory overhead is applied at a rate of $0.70 per
direct labor dollar. Over- or underapplied factory overhead is closed to the cost of goods
sold account:
Required:
1). Over-or underapplied factory overhead.
2). Cost of goods manufactured.
3). Cost of goods sold.
4). Operating income.
P2-10. Comprehensive analysis of materials accounting and procedures
Mar. 31 The factory manager informs the storeroom keeper that for the month of April,
2000 sheets of aluminum are the forecasted usage. The check of the stock shows 500
aluminum sheets, costing $23 each, on hand. A minimum stock of 300 sheets must be
maintained, and purchasing agent is notified of the need of the 1800 sheets. This quantity
will cover the April production requirements and, at the same time, maintain the minimum
inventory level.
Apr. 1 After checking with a number of vendors, the purchasing agent orders the vendor
sheets at $25 each.
Apr. 6 The shipment of sheets is received, inspected, and found to be in good condition.
However, the order is short 100 sheets, which are backordered and expected to arrive in 5
days. The invoice from the vendor covering the aluminum sheets is also received, and it is
approved or the later payment.
Apr. 11 The aluminum sheets that are backordered are received and approved.
Apr. 11 the vendor’s invoice or the backordered shipment is received and approved or
payment.
Apr. 16 The April 6 invoice is paid, less a cash discount of 2%.
Apr. 30 During the month, 1900 sheets are issued to the factory. The company uses FIFO
and job order costing system.
Apr. 30 The factory returns 20 unused sheets to the storeroom. The returned sheets have a
cost of 25 each.
Apr. 30 At the end of the day, 398 sheets are at hand.
Required:
1. In tabular form, answer the following questions pertaining to each of the preceding
decisions and transactions:
2. What forms, if any, were used?
3. What journal entries, if any, were made?
4. What books of original entry, if any, were used to record the data?
5. What subsidiary records were affected?
Calculate: Show your computations of the following:
1. The material inventory balances as of April 30.
2. The cost of material used in production during April.
P3-5 Payroll calculations and distribution; overtime and idle time
A rush order was accepted by Bartely’s Conversions for five van conversions. The labor
time records for the week ended January 27 show the following (Hours not worked on vans
are idle time and are not charged to the job):
Labor Time Records – Hours Distribution
Employees Hours Van 1 Van 2 Van 3 Van 4 Van 5
Kiembara 42
Supervisor
Cao 45 10 10 10 10 5
Okoth 48 24 24
Perry 48 24 24
Tate 45 15 15 15
Oloo 42 24 8
Kahn 40 20 10

All employees are paid $20 per hour, expect Kiembara, who receives $25 per hour. All
overtime premium pay, except Kiembara’s, is chargeable to the job, and all the employees,
including Kiembara, receive time-and-a-half for overtime hours.
Required:
1. Calculate the total payroll and total net earnings or the week. Assume that an 18%
deduction for federal income tax is required in addition to FICA deductions and
unemployment taxes.
2. Prepare the journal entries to record and pay the payroll.
3. Prepare the journal entry to distribute the payroll to the appropriate accounts.
4. Determine the dollar amount of labor that is chargeable to each van, assuming that
the overtime costs are proportionate to the regular hours used on the vans. (First
compute an average labor rate for each worker, including overtime premium, and
then use that rate to charge all workers’ hours to vans.)
P4-9 Determining total job costs, using predetermined overhead rate
Channel Products Inc. uses the job order cost system of accounting. The following is a list of
the jobs completed during March, showing the charges for materials issued to production
and for direct labor.
Job ($)Material Issued Direct Labor
18AX 300000 600
19BT 1080000 940
20CD 720000 1400
21FB 4200000 5120

Assume that factory overhead is applied on the basis of direct labor costs and that the
predetermined rate is 200%.
Required:
1. Compute the amount of overhead to be added to the cost of each job completed
during the month.
2. Compute the total cost of each job completed during the month.
3. Compute the total cost of producing all jobs finished during the month.
P 3-57 Scholastic Brass Corporation manufactures brass manufactures brass musical
instruments for use by high school students. The company uses a normal costing
systems, in which manufacturing overhead is applied on the basis of direct labor
hours. The company’s budget for the current year included the following predictions.
Budgeted total manufacturing overhead…………………………………………………………$426,300
Budgeted total direct-labor hours…………………………………………………………………… 20,300
During March, the firm worked on the following two production jobs:
Job number T81, consisting of 76 trombones
Job number C40, consisting of 110 cornets
The events of March are described as follows:
a. One thousand square feet of rolled brass sheets metal were purchased on account
for $5000.
b. Four hundred pounds of brass tubing were purchased on account for $4000.
c. The following requisitions were submitted on March 5:
Requisition number 112: 250 sq. feet of brass sheet metal at $5 per square foot (for job
number T81)
Requisition number 113: 1000 pounds of brass tubing, at $10 per pound (for job number
C40)
Requisition number 114: 10 gallons of valve lubricant at $10 per gallon
All brass used in production is treated as direct material. Valve lubricant is an indirect
material.
d. An analysis of labor time card reveals the following labor usage of March.
Direct Labor: Job number T81, 800 hours at $20 per hour
Direct Labor: Job number C40, 900 hours at $20 per hour
Indirect labor: general factory cleanup; $4000
Indirect labor: factory supervisory salaries, $ 9000
e. Depreciation of the factory building and equipment during March amounted to
$12000.
f. Rent paid in cash or warehouse space used during March was $1200.
g. Utility costs incurred during March amounted to $2100. The invoices of these costs
were received, but the bills were not paid in March.
h. March property taxes on the factory were paid in cash, $2400.
 i. The insurance cost covering factory operations for the month of March was $3100.
The insurance policy has been prepaid.
j. The costs of salaries and fringe benefits for sales and administrative personnel paid
in cash during March amounted to $8000.
k. Depreciation on administrative office equipment and space amounted to $4000.
l. Other selling and administrative expenses paid in cash during March amounted to
$1000.
m. Job number T81 was completed on March 20.
n. Half of the trombones in job number T81 were sold on account during March or
$700 each.
The March 1 balance in selected accounts are as follows:
Cash $10000
A/R 21000
Prepaid Insurance 5000
Raw material inventory 149000
Manufacturing supplies inventory 500
WIP inventory 91500
FG Inventory 220000
Accumulated Depreciation 102000
A/P 13000
Wages Payable 8000

Required:
1. Calculate the company predetermined overhead rate for the year.
2. Prepare the journal entries to record the events in March.
3. Set-up T-Accounts and post the journal entries there.
4. Calculate the overapplied and underapplied overhead for March. Prepare journal
entry to close this balance into Cost of Goods Sold.
5. Prepare a schedule of cost of goods sold manufactured for March.
6. Prepare a schedule cost of goods sold for March.
7. Prepare income statement for March.