Assignment for Cost and Management Accounting I

ADMAS UNIVERSITY, MEGENAGNA ADEBABAY CAMPUS, DEPARTMENT OF ACCT & FIN

Cost & Management Accounting-I Group Assignment
1. Brody Company makes industrial cleaning solvents. Various chemicals, detergent, and water
are mixed together and then bottled in 10-gallon drums. Brody provided the following
information for last year:
Raw materials purchases $250,000
Direct labor 140,000
Depreciation on factory equipment 45,000
Depreciation on factory building 30,000
Depreciation on headquarters building 50,000
Factory insurance 15,000
Property taxes:
Factory 20,000
Headquarters 18,000
Utilities for factory 34,000
Utilities for sales office 1,800
Administrative salaries 150,000
Indirect labor salaries 156,000
Sales office salaries 90,000
Beginning balance, Raw Materials 124,000
Beginning balance, WIP 124,000
Beginning balance, Finished Goods 84,000
Ending balance, Raw Materials 102,000
Ending balance, WIP 130,000
Ending balance, Finished Goods 82,000
Last year, Brody completed 100,000 units. Sales revenue equaled $1,200,000, and Brody paid a
sales commission of 5 percent of sales.
Required:
1. Calculate the direct materials used in production for last year.
2. Calculate total prime cost.
3. Calculate total conversion cost.
4. Prepare a cost of goods manufactured statement for last year. Calculate the unit product cost.
5. Prepare a cost of goods sold statement for last year.
6. Prepare an income statement for last year. Show the percentage of sales that each line item
represents
Job order costing
2. Assume that the following transactions were received from the record of Almda Textile Factory for
the month of June, 2014.
a. Purchase of materials (Direct and indirect) Br. 89,000 on account
b. Materials sent to mfg plant floor – Direct materials Br. 81,000, indirect materials Br. 4000
c. Manufacturing wages incurred : Direct Br. 39,000, Indirect Br. 15,000
d. Payment of Total manufacturing payroll for the month Br. 54,000
e. Additional manufacturing overhead costs incurred during the month consists of utilities and repairs
Br. 25,000 and accumulated depreciation on factory plant Br. 50,000
f. Allocation of manufacturing OH to production Br. 80,000
g. Goods costing Br. 188,000 were completed during the period
h. Goods costing Br. 180,000 were sold on account for Br. 220,000
i. The factory incurred the following nonmanufacturing expenses last month: Br. 2, 000 commissions
to sales agent, Br. 1,000 advertising expenses, Br. 3,000 depreciation on office equipment and Br.
1,500 other selling and administrative expenses.
Instruction: Prepare the necessary Journal entries from the above information.

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 Assignment for Cost and Management Accounting I
3. H2M manufacturing company uses job order costing system. The company uses machine hours to
apply overhead cost to jobs. At the beginning of 2012, the company estimated that 150,000 machine
hours would be worked and $900,000 overhead cost would be incurred during 2012.
The balances of raw materials, work in process (WIP), and finished goods at the beginning of 2012
were as follows:
 Raw materials: $40,000
 Work in process: $30,000
 Finished goods: $60,000
H2M manufacturing company recorded the following transactions during 2012:
a) Raw materials purchased on account, $820,000.
b) Raw materials were requisitioned for use in production, $760,000 ($720,000 direct materials and
$40,000 indirect materials).
c) Direct labor, $150,000; indirect labor, $220,000; sales commission, $180,000; and administrative
salaries, $400,000.
d) Sales travel costs were $34,000.
e) Utility costs incurred in the factory, $86,000.
f) Advertising expenses were $360,000.
g) Depreciation for the year was $700,000 ($560,000 relates to factory and $140,000 relates to selling
and administrative activities).
h) Insurance expired during the year, $20,000 ($14,000 relates to factory operations and $6,000 relates
to selling and administrative activities).
i) Fine manufacturing company worked 160,000 machine hours. Manufacturing overhead was applied
to production.
j) Goods costing $1,800,000 were completed during the year.
k) The goods costing $1,740,000 were sold to customers for $3,000,000.
Required:
1. Prepare journal entries, T-accounts and income statement from the above information.
2. Prepare a journal entry to close the balance in manufacturing overhead account (over or under
applied manufacturing overhead) to cost of goods sold.
4. 2C Company uses job-order costing. It applies overhead cost to jobs on the basis of direct labor-
hours. The following transactions took place during the year:
a) $300,000 of raw materials were purchased on account
b) Raw materials were issued into production: $90,000 direct materials and $40,000 indirect materials
c) Labor costs incurred: $40,000 direct, $130,000 indirect, sales commissions $50,000, administrative
salaries $100,000
d) Utility costs for the factory were $60,000
e) Depreciation recorded was $300,000 (70% related to factory; 30% related to administrative offices)
f) Manufacturing overhead of $715,000 was applied to production. Actual direct labor-hours incurred
were 22,000.
g) Jobs costing $300,000 were completed and transferred into the finished goods inventory.
h) Jobs with a cost of $150,000 were sold on account for $200,000.
i) Closed the under/over applied overhead for the year.
Required: Prepare the necessary journal entries and summarize their balance using T-Account
5. QRS Company has two support departments (Administration and Janitorial) and three producing
departments (Fabricating, Assembly, and Finishing). Costs and activities are as follows:
Administration Janitorial Fabricating Assembly Finishing
Direct costs ..................... $50,000 $30,000 $40,000 $50,000 $25,000
Number of employees ..... 10 30 40 20
Square feet ..................... 2,000 10,000 28,000 15,000
Direct labor hours ............ 5,000 6,000 2,000
Administrative services are allocated based on the number of employees; janitorial services are
allocated based on square footage. Overhead rates for the three producing departments are based on
direct labor hours.

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 Assignment for Cost and Management Accounting I
Required:
Determine the overhead application rates for the producing departments using each of the three
allocation methods:
A. Direct allocation method
B. Sequential allocation method
C. Reciprocal allocation method
Process costing
6. Suppose that Peace Corporation, chemical manufacturing Company, has two production departments
using sequential production flow: the Mixing Department and the Bottling Department. In the
Mixing Department direct material consisting ingredient chemicals is added at the beginning of the
production process. Direct labor and manufacturing overhead costs are incurred evenly throughout the
production process. Predetermined overhead rate is used in the mixing department using direct labor
cost as a cost allocation base and at 125% overheads per $1 direct labor cost. The following table
presents the summary activity performed in Mixing Department during March. The direct material
and conversion costs listed under beginning work in process section represent the work done during February.
Work in process, March 1: 20,000 Units
Direct material, 100% Complete, cost of* $50,000
Conversion costs, 10% Complete, cost of* 7,200
Balance in work in process, March 1* $57,200
Units started in March 30,000 Units
Units completed during March and transferred out of the Mixing department 40,000 Units
Work in process, March 31: 10,000 Units
Direct material, 100% Complete
Conversion costs, 50% Complete
Costs incurred During March:
Direct material $90,000

Conversion costs:
Direct labor $86,000
Applied Manufacturing Overhead** 107,500
Total Conversion Costs $193,500

*These costs were incurred during the month of February

**Overhead is allocated at 125% of Direct Labor cost
Required: prepare the cost production report based on FIFO and Weighted Average method and record
the necessary Entries.
Accounting for spoilage under process costing
7. Anzio Co. manufactures a wooden recycling container in its Forming Department. Direct materials
for this product are introduced at the beginning of the production cycle. At the start of production, all
direct materials required to make one output unit are bundled in a single kit. Conversion costs are
added evenly during the cycle. Some units of this product are spoiled as a result defects only
detectable at inspection of finished units. Normally spoiled units are 10% of the goods output.
Summary of data for July 2004 are:
Physical Units for July 2004
Work in Process, beginning inventory (July 1) 1,500 units
Direct Materials (100% complete)
Conversion costs (60% complete)
Started during July 8,500 units
Completed and transferred out during July 7,000 good units
Work in Process, ending inventory (July 31) 2,000 units
Direct Materials (100% complete)
Conversion costs (50% complete)
Total Costs for July 2004

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 Assignment for Cost and Management Accounting I
Work in process, beginning inventory
Direct materials (1,500 equivalent units * Br. 8) Br. 12,000
Conversion costs (900 equivalent units * Br.10) 9,000 Br. 21,000
Direct materials costs added during July 76,500
Conversion costs added during July 89,100
Total costs to account for Br.186, 600
Required: prepared the cost of production report using FIFO and weighted average Method and
record the necessary entry
8. Assume that the Dream Corporation has two processing departments using sequential production
flow: the Cleaning Department and the Milling Department. In the Cleaning Department direct
material is introduced in the production process at the beginning of the production process.
Conversion costs are incurred evenly throughout the production process. According to past
experience of the company normal spoilage accounts 10% of good units completed and transferred
out. The following table presents the summary activity performed in Cleaning Department during
May.
Work in process, May 1: 1,000 Units
Direct material, 100% Complete, cost of* $4,000
Conversion costs, 80% Complete, cost of* 400
Balance in work in process, May 1* $4,400

Units started in May 9,000 Units

Units completed during May and transferred out of the Cleaning department 7,400 Units
Work in process, May 31: 1,600 Units
Direct material, 100% Complete
Conversion costs, 25% Complete
Costs incurred During May:
Direct material $27,000

Conversion costs $48,000

*These costs were incurred during the month of April
Required:
i. Determine the amount of normal and abnormal spoilage, and
ii. Show the treatment of both using weighted average and First-in, First-out methods of process
costing and pass the necessary journal entries
Instruction:
 Select 2 Questions from(Q1-Q4)
 Select 6 or 7
 Question no.5 and 8 mandatory.
 Total Question=5

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