1.

Abbott workers requisitioned out the following materials:

110 yards of nylon/300 yards of cotton/400 lbs of grease

ASC workers made 40 nylon jogging suits and 80 cotton jogging suits in February.

Give the appropriate journal entry and any associated variances

WIP/FGnyl.suits (40ny.suits*2.5yds/suit*$20/yd) $2,000
DMEVnylon suits (unfavorable like an expense) $200
RMInylon (110yds*$20/yd) $2,200

WIP/FGcotton suits (80cotton suits*4dlh/suit*$15/dlh) $4,800

DLRVcotton [(favorable, like a revenue)20yds*15] $300
DLEVcotton [(favorable, like a revenue)300*15] $4,500

2. Abbott workers worked the following hours (and were paid in cash).

Nylon workers (190 dlh*$12/dlh);

Cotton workers (350 dlh*$16/dlh);
Janitor salary (200 hours for a total of $2,000)
Accountant (200 hours for a total of $2,000).

Give the appropriate journal entry and any associated variances

WIP/FGnylon suits (40nylon suits*5dlh/suit*$10/dlh) $2,000
DLRVnylon [(unfavorable, like an expense)$2dlh*190/dlh] $380
DLEVnylon [(favorable, like a revenue)10/dlh*$10] $100
Cash-Wages(nylon workers) $3,900

WIP/FGcotton suits (80cotton suits*4dlh/suit*$15/dlh) $4,800

DLRVcotton (unfavorable, like an expense) $350
DLEVcotton (unfavorable, like an expense) $450
Cash-Wages(cotton workers) $5,600
 MOH/VOH $2,000
Cash-janitor $2,000

Period expense $2,000

Cash-accountant $2,000

3. Abbott paid the following bills in cash

Fisher Properties for rent $500
We Energies for utilities $14,000

Give the appropriate journal entry

MOH/FOH $500
Cash-rent $500

MOH/VOH $14,000
Cash-utilities $14,000

4. Abbott has a sewing machine that was purchased in 2010 for $40,000, with a useful life
of 10 years and a salvage value of 0. Give the MONTHLY depreciation journal entry for
this machine.

MOH/FOH $333
Accumulated Depreciation $333

5. Give the journal entry to APPLY overhead in January for BOTH VOH and FOH. Nylon
jogging workers used 180 machine hours and cotton jogging suit workers used 620
machine hours

WIP/FGnylon suits (40 nylon suits*5mh/suit*$10/mh) $2,000

MOH/VOH $2,000
WIP/FGcotton suits (80cotton suits*8mh/suit*$10/mh) $6,400
MOH/VOH $6,400

WIP/FGnylon suits (50 nylon suits*5dlh/suit*$1/dlh) $250

MOH/FOH $250
 WIP/FGcotton suits (80 cotton suits*4dlh/suit*$1/dlh) $320
MOH/FOH $320

6. Create the different MOH/VOH and MOH/FOH clearing accounts. Indicate if the
individual moh t-accounts are OVER- or UNDER-applied. SHOW YOUR WORK. AND
CONTINUE FROM YOUR PRIOR MOH-T ACCOUNTS SINCE YOU DID NOT CLOSE THE MOH
CLEARING ACCOUNTS IN JANUARY.

MOH/VOH
$1,000 $2,500
$8,100 $6,400
$4,000 $2,000
$2,000 $6,400
$14,000
We are underapplied by : ($29,000 vs. $17,300)= $11,700

MOH/FOH
$500 $250
$333 $320
$500 $250
$ 333 $320
We are underapplied by : ($1666 vs. $1,140)= $526

7. CALCULATE THE VOH VARIANCES FOR FEBRUARY. REMEMBER, THESE ARE CALCULATED
MONTHLY. calculate them and ISOLATE them for the MONTH OF FEBRUARY. LATER ON,
WE WILL COMPUTE AND JOURNALIZE these on an annual basis!

Total actual VOH$/total actual mh = ($2,000+ $14,000)/(180mh+620mh)

($16,000)/(800mh) = $20/mh
We thought it would be $10/mh and it was $20/mh and that means MORE expensive to run
the sewing machine than what we thought, by ($10/mh - $20/mh) = $10/mh UNF. To
calculate:
 ($10/mh UNF)*800 mh => $8,000 UNFAVORABLE

VOEVnylon. So, we made 40 nylon suits*5mh/suit, should have used 200mh, but
actually used 180 so that’s favorable (200mh-180mh)=(20mhFAV) but cannot make a
journal entry in Mh, so (20mhFAV)*$10/mh=$200FAV.

VOEVcotton. So, we made 80cotton suits*8mh/suit, should have used 640mh,but

actually used 620 so that’s favorable (640mh-620mh)=(20mhFAV) but cannot make a
journal entry in Mh, so (20mhFAV)*$10/mh=$200FAV.

8. During January, ASC sells the following: 45 nylon jogging suits for $230/nylon jogging
suits ON ACCOUNT and 70 cotton jogging suits for $220/cotton jogging suit. Give the
journal entry.

Accounts receivable(45nylon suits*$230/suit) $10,350

Sales Revenue $10,350

COGS (45nylon suits*$155/suit) $6,975

FGInylon suits $6,975

Accounts receivable (70cotton suits*$220/suit) $15,400

Sales Revenue $15,400

COGS (70cotton suits*$204/suit) $14,280

FGInylon suits $14,280

9. Did the GROSS MARGIN % (or gross margin $/sales $) change from January to February
for nylon and cotton suits? If so, by how much AND what ‘caused’ the change in gross
margin %?

For nylon suits, the sales increased from 40 suits to 45 suits but the revenue has not
been increased much maybe due decrease in price per suit from $250/ny suits to
$230/ny.suits.
 For cotton suits, there is less quantity sold than from January 75 suits sold to 70 units
sold in February and it had reduced sale of cotton maybe due to decrease in price per
suit from $240/ct.suits to $220/ct.suits.

RESULTS FOR REMAINDER OF YEAR

1. From March-December (i.e. remainder of the year), Abbott purchased the following in
cash:

Nylon 5,000 yards for $85,000;

Cotton 5,000 yards for $85,000;

Give the appropriate journal entry

RMInylon (5000yds*$20/yd) $100,000

DMPPVnylon [(fav like a revenue)$5,000yds*$3)] $15,000
Cash $85,000

RMIcotton (5,000yds*$15/yd) $75,000

DMPPVcotton [(unfav. Like an expense)$5,000*2] $10,000
Cash $85,000

2. Abbott workers requisitioned about the following materials from March-December.

Nylon 3,000 yards;

Cotton 4,200 yards.

FOR THE REMAINDER OF THE YEAR, ABBOTT WORKERS MADE 1,000 Nylon and 1,000 cotton
jogging suits.
Give the appropriate journal entries.

WIP/FGnyl.suits (1,000ny.suits*2.5yds/suit*$20/yd) $50,000

DMEVnylon suits (unfavorable like an expense) $10,000
RMInylon (3,000yds*$20/yd) $60,000

WIP/FGnyl.suits (1,000ny.suits*4yds/suit*$15/yd) $60,000

 DMEVcotton suits (unfavorable like an expense) $3,000
RMIcotton (4,200yds*$20/yd) $63,000

3. Abbott paid the following in cash

Nylon workers (3900 dlh*$10/dlh);

Cotton workers (5200 dlh*$21/dlh);
Janitor salary (2000 hours for a total of $20,000)
Accountant (2000 hours for a total of $22,000).
Give the appropriate journal entries

WIP/FGnylon suits (1000nylon suits*5dlh/suit*$10/dlh) $50,000

DLRVnylon $0
DLEVnylon [(fav like a revenue)1,100/dlh*$10] $11,000
Cash-Wages(nylon workers) $39,000

WIP/FGcotton suits (100cotton suits*4dlh/suit*$15/dlh) $60,000

DLRVcotton (unfavorable, like an expense) $31,200
DLEVcotton (unfavorable, like an expense) $18,000
Cash-Wages(cotton workers) $109,200

MOH/VOH $20,000
Cash-janitor $20,000

Period cost $22,000

Cash-accountant $22,000

4. During the remainder of the year, Abbott paid the following in cash
Fisher Properties for rent $5,500
We Energies for utilities $80,000
Give the appropriate journal entry.

MOH/FOH $5,500
Cash-rent $5,500
 MOH/VOH $80,000
Cash-utilities $80,000

5. Abbott has a sewing machine that was purchased in 2010 for $40,000, with a useful life
of 10 years and a salvage value of 0. Give the MONTHLY depreciation journal entry for
this machine (i.e. add up the next 10 month’s worthy of monthly depreciation charges.

MOH/FOH $3,330
Accumulated Depreciation $3,330

6. Give the journal entry to APPLY overhead (both VOH and FOH). Nylon incurred 5,500
machine hours and cotton incurred 9,500 machine hours.

WIP/FGnylon suits (1,000 nylon suits*5mh/suit*$10/mh) $50,000

MOH/VOH $50,000
WIP/FGcotton suits (1,000cotton suits*8mh/suit*$10/mh) $80,000
MOH/VOH $80,000

WIP/FGnylon suits (1,000 nylon suits*5dlh/suit*$1/dlh) $5,000

MOH/FOH $5,000
WIP/FGcotton suits (1,000 cotton suits*4dlh/suit*$1/dlh) $4,000
MOH/FOH $4,000

7. Create the different MOH/VOH and MOH/FOH clearing accounts. Indicate if the
individual moh t-accounts are OVER- or UNDER-applied. SHOW YOUR WORK. AND
CONTINUE FROM YOUR PRIOR MOH-T ACCOUNTS SINCE YOU DID NOT CLOSE THE MOH
CLEARING ACCOUNTS IN FEBRUARY. SO WHAT SHOULD THESE T-ACCOUNTS LOOK LIKE?

MOH/VOH
$1,000 $2,500
$8,100 $6,400
$4,000 $2,000
$2,000 $6,400
 $14,000 $6,400
$20,000 $50,000
$80,000 $80,000
We are overapplied by : ($125,000 vs. $147,300)= $22,300

MOH/FOH
$500 $250
$333 $320
$500 $250
$ 333 $320
$5,500 $5,000
$3,330 $4,000
We are underapplied by : ($10,496 vs. $10,140)= $356

8. Abbott sells the following IN CASH:

800 nylon suits @$250/nylon suit;

800 cotton suits @$250/cotton suit.
Give the journal entry.

Accounts receivable(800nylon suits*$250/suit) $200,000

Sales Revenue $200,000

COGS (800nylon suits*$155/suit) $124,000

FGInylon suits $124,000

Accounts receivable (800cotton suits*$250/suit) $200,000

Sales Revenue $200,000

COGS (70cotton suits*$204/suit) $163,000

FGInylon suits $163,000
9. Close the VARIANCE accounts to COGS. You will have a total of 14 variance accounts –
which are clearing accounts. These must have a ‘zero’ beginning balance for next year.
VOSV (favorable like a revenue) $39,032
VOEVnylon (unfavor. Like expense) $5,000
VOEVcotton (unfavor. Like expense) $11,700
MOH/VOH $22,300

FOBV (unfavorable like an expense) $446

FOPVVnylon (favorable like a revenue) $1,450
FOPVVcotton (unfavorable like an expense) $1,360
MOH/FOH $356

DMPPVnylon $17,000 $0
DMEVnylon $0 $10,700
DMPPVcotton $1,000 $10,000
DMEVcotton $600 $3,000
DLRVnylon $0 $1,680
DLEVnylon $100 $100
DLRVcotton $0 $33,050
DLEVcotton $300 $18,450
VOSV $39,032 $0
VOEVnylon $0 $5,000
VOEVcotton $0 $11,000
FOBH $0 $446
FOPPVnylon $1,450 $0
FOPVVcotton $1,360
COGS $36,004

SalesRevnylon $220,350
SalesRevcotton $233,400
COGS $329,955
Period Cost $26,000
RETAINED EARNINGS
$97,795

10.CREATE YOUR FINAL 5-line income statement:

SALES $453,750

COGS ($329,955)
Gross Margin $123,795

Period Costs/SG&A ($26,000)

Net Income $97,795