ACC60181H619 Managerial Accounting

Part A: Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income

Statement

Schedule of Cost of Goods Manufactured

Direct materials:
Beginning materials inventory $26,000
Add:
Purchases of raw materials 50,000
Raw materials available for use 76,000
Deduct:
Ending raw materials inventory 35,000
Raw materials used in production $ 41,000
Direct labor 23,000
Manufacturing overhead 59,000
Total manufacturing costs 123,000
Add:
Beginning work in process inventory 18,000
141,000
Deduct:
Ending work in process inventory 22,000
Cost of goods manufactured $119,000

b.

Income Statement
Sales $220,000
Cost of goods sold:
Beginning finished goods inventory $ 42,000
Add:
Cost of goods manufactured 119,000
Goods available for sale 161,000
Deduct:
Ending finished goods inventory 29,000 132,000
Gross margin 88,000
Selling and administrative expenses:
Selling expenses 18,000
Administrative expenses 43,000 61,000
Net operating income $27,000
 Part B: Application of Job Order Costing

The company’s predetermined overhead rate for the year is:

=$1,710,000/95,000 MHs

= $18 per MH

The amount of underapplied/overapplied overhead is:

Actual overhead $1,687,500

Applied overhead ($18 × 75,000) 1,350,000

Underapplied overhead $337,500

Allocation of underapplied overhead:

Overhead applied in work in process $ 337,5002 5.00% $ 84,375

Overhead applied in finished goods 253,125 18.75% 63,281

Overhead applied in cost of goods sold. 759,375 56.25% 189,844

Total overhead applied $1,350,000 100.00% $337,500

The entire amount of underapplied overhead $337,500 is added to Cost of Goods Sold where

no allocation occurs.

Allocation results in only $189,844 being added to Cost of Goods Sold. Net operating income

would be higher under allocation by $337,500 − $189,844 = $147,656

 Part C: Process Costing using Weighted Average
a.

Materials Conversion

Transferred to next department 22,200 22,200

Ending work in process:

Materials: 1,000 units × 80% 800

Conversion: 1,000 units × 60% 600

Equivalent units of production 23,000 22,800

b.

Materials Conversion

Work in process, beginning $ 8,400 $ 7,200

Cost added during the month 97,400 129,600

Total cost (a) $105,800 $136,800

Equivalent units (above) (b) 23,000 22,800

Cost per equivalent unit (a) ÷ (b) $4.60 $6.00

c.

Materials Conversion Total

Units transferred out 22,200 22,200

Cost per equivalent unit $4.60 $6.00

Cost transferred out $102,120 $133,200 $235,320

 d.

Materials Conversion Total

Equivalent units of production:

ending work in process 800 600

Cost per equivalent unit $4.60 $6.00

Cost of ending work in process $3,680 $3,600 $7,280

 Part D: Process Costing using First-in-First Out (FIFO)

Particulars Material Conversion Total

Equivalent unites in ending work in process 330 264

inventory
Cost per equivalent unit $9.50 $20.40 $29.90
Cost of ending work in process inventory $3,135 $5,385.60 $8,520.60

Cost of units transferred out

Particulars Amount ($)

Cost of beginning WIP brought forward from last period (A) 1,920
Cost to complete these units:
Direct Materials (360 x 9.50) 3,420
Conversion costs (140 x 20.4) 2,856
Total cost from beginning inventory 8,196
Cost of units started and completed in current period (3130 x 29.9) 93,587
Cost of units transferred out 1,01,783
 Part E: Activity-Based Costing

a.

Traditional Manufacturing Overhead Costs

Predetermined overhead rate = $1,464,480 ÷ 24,000 DLHs

= $61.02 per DLH

H16Z P25P

Direct labor-hours____________________________ 0.40 1.20

Predetermined overhead rate per DLH_ _ _ _ _ _ _ _ _ _ $61.02. $61.02

Manufacturing overhead cost per unit_ _ _ _ _ _ _ _ _ _ _ $24.41. $73.22

b.

ABC Manufacturing Overhead Costs

Estimated Total Expected Activity Rate ($)

Overhead Cost ($) Activity

Supporting Direct Labour 552,000 24,000 DLHs 23 per DLH
Setting up Machines 132,480 1,104 setups 120 per set up
Part Adm. 780,000 1,560 part types 500 per part type

Overhead cost for H16Z

Activity Rate ($) Activity ABC Cost

Supporting direct labour 23 per DLH 12,000 DLHs $276,000
Setting up machines 120 per setup 864 setups 103,680
Parts administration 500 per part type 600 part types 300,000
Total $679,680
Annual Production 30,000
Manufacturing Overhead cost per unit $22.66

Overhead cost for P25P

Activity Rate ($) Activity ABC Cost

Supporting direct labour 23 per DLH 12,000 DLHs $276,000
Setting up machines 120 per setup 240 setups 28,800
Parts administration 500 per part type 960 part types 480,000
Total $784,800
Annual Production 10,000
Manufacturing Overhead cost per unit $78.48