Shanghai National Accounting Institute Date 13 may 2023

Master of Professional Accounting

Names: KANYABWIRA JEAN CLAUDE

Student Id: M80221012

Management Accounting: Theory and Practice/ Homework II

Instructor: Prof. Tong Chengsheng,

QUESTION 1, PAGE 70 2-3

1. The estimated total fixed manufacturing overhead cost will be calculated as follows:
Total overhead cost (first quarter) $300,000
Variable cost element ($2.00 per unit *$80,000units) $180,000
Fixed cost element $140,000
2. I can use the fixed and variable cost estimates in requirement one to estimate the
manufacturing overheads(Y) for quarter four as follows:
Y= $140,000+($2.00 per unit *$60,000 unit)
Y=$140,000+$120,000= $280,000
The estimated unit product cost for the fourth quarter is computed as follows
Direct material $180,000
Direct labor 96,000
Manufacturing overhead 260,000
Total manufacturing cost (a) $536,000
Number of units to be produced(b) $60,000
Unit product cost (a/b) $8.93

3. The fixed portion of the manufacturing overhead cost is causing the unit production cost to
fluctuate. he unit production cost increase at the level of production decrease because the fixed
overhead is spread over fewer units.
4. The cost per unit can be stabilized by using a predetermined overhead rate that is based on
expected activity for the entire year. The cost formula created in requirement 1 can be adapted
to compute the annual predetermined overhead rate. The annual fixed manufacturing overhead
is $560,000($140,000*4quarters) and the variable manufacturing overhead per unit is$2.00.
the estimated total manufacturing overheads cost (Y) will be:
Y=$560,000+($2.00 per unit x 200,000units) = $960,000
Then annual predetermined overhead rate will also be:
Estimated total manufacturing overhead (a) = $960,000 =$4.80 per unit
Estimated total unit produced (b) 200,000
Using predetermined overhead rate of 4.80 per unit, the unit product cost would stabilize as:

Quarter
First Second third fourth
Direct material $240,000 $120,000 $60,000 $180,000
Direct labor 128,000 64,000 32,000 96,000
Manufacture over head 384,000 192,000 96,000 288,000
at (4.80 per unit
Total manufacturing cost(a) $752,000 $376,000 $188,000 $564,000
Number of units to be produced (b) 80,000 40,000 20,000 60,000
Units produced cost (a/b) $9.40 $9.40 $9.40 $9.40

QUESTION 2, PAGE 71 2-5

1. a. First step here is to calculate estimated total overhead cost in molding and fabrication
by using the using equation y=a+bx the estimated total manufacturing cost in molding will be
Y= $700,000+($3.00 per MH x 20,000 MHS)
Estimated total manufacturing overhead cost is $760,000

by using equation Y= a+bx the estimated total manufacturing cost in Fabrication will be
Y= $210,000+($1.00 per x 30,000 MHs)
Estimated total manufacturing overhead cost is $240,000
Second step is to combine modeling and fabrication ($760,000+$240,000) =$1,000,000 to
calculate the predetermined overhead rate as follows:
Estimated total manufacturing overhead (a) $1,000,000
Estimated total machine hours(b) 50,000 MHS
Predetermined overhead rate (a/b) $20,000 per MH
 1.b. total manufacturing cost assigned to Job D-70 and Job C-200 will be calculated as follows:
D-70 C-200
Direct material $700,000 $550,000
Direct labor 360,000 400,000
Manufacturing overhead applied ($20.00 x20,000; $20.00 x 30,000) 400,000 600,000
Total manufacturing cost $1,460,000 $1,550,000
1.c. bid price for Job D-70 and Job C-200 will be:
D-70 C-200
Total manufacturing cost (a) $1,460,000 $1,550,000
Mark up percentage (b) 150% 150%
Bid price (a) x (b) $2,190,000 $2,325,000
1.d. considering the reason that company has no beginning or ending inventories and only jobs D-
70 and C-200 were started, completed, and sold during the year ,the cost of goods sold is equal to
the sum of the manufacturing costs assigned to both jobs ($1.460,000+$1,550,000)= $3,010,000
2.a. the plantwide predetermined overhead rate in modeling department using equation y=a+bx
Will be Y= $700,000+($3.00 per MH x 20,000 MHS) = $700,000+60,000
Estimated total manufacturing overhead cost is $760,00
To calculate the predetermined overhead rate
Estimated total manufacturing overhead (a) $760,000
Estimated total machine hours(b) 20,000 MHS
Predetermined overhead rate (a/b) $38.00 per MH
For Fabrication department: using equation Y= a+bx
Y= $210,000+($1.00 per x 30,000 MHs)= $210,000+30,000
Estimated total manufacturing overhead cost is $240,000
To calculate the predetermined overhead rate
Estimated total manufacturing overhead (a) $240,000
Estimated total machine hours(b) 30,000 MHS
Predetermined overhead rate (a/b) $8.00 per MH
 2.b. total manufacturing cost assigned to Job D-70 and Job C-200 will be:
D-70 C-200
Direct material $700,000 $550,000
Direct labor 360,000 400,000
Modeling department ($14,000 x38; $6.00 x $38.00) 532,000 228,000
Fabrication department ($6,000 x8; $24,000 x $8.00) 48,000 192,000
Total manufacturing cost $1,640,000 $1,370,000

2.c. bid prices for Job D-70 and Job C-200 will computed as follows
D-70 C-200
Total manufacturing cost (a) $1,640,000 $1,370,000
Mark up percentage (b) 150% 150%
Bid price (a) x (b) $2,460,000 $2,055,000
2d. in this case the company has no beginning or ending inventories and only jobs D-70 and C-
200 were started, completed, and sold during the year, the cost of goods sold is equal to the sum
of the manufacturing costs assigned to both jobs of ($1.640,000+$1,370,000) = $3,010,000
3. Management insights
The plantwide and departmental approaches for applying manufacturing overhead costs to
products produce identical cost of goods solid figures. Therefore, these two approaches lead to
different bid price for Job D-70 and C-200. The bid price for Job D-70 using the departmental
approach is ($2,460,000-$2,190,000) = $270,000 higher than the bid price using the plantwide
approach. This is because the departmental cost pools reflect the fact that Job D-70 is an intensive
user of modeling machines hours. The overhead rate in modeling ($38) is much higher than the
overhead rate in fabrication ($8). While Job C-200 is an intensive user of the less expensive
fabrication machines hours, so it depart-mental bid price is $270,000 lower than the plantwide bid
price.
Whether a job order costing system relies on plantwide overhead cost allocation or departmental
overhead cost allocation does not usually have an important impact on the accuracy of the cost of
goods sold reported for the company as a whole. Consequently, int have a huge impact in internal
decision with respect to individual jobs such as establishing bid prices for those jobs. a job order
costing system relies on plantwide overhead cost allocation are commonly used to evaluate ending
inventories and cost of good sold for external reporting purposes, unless they can create costing
accuracies for individual jobs that adversely influence internal decision making.

QUESTION 3, PAGE 72 2-1

1. predetermined overhead rates used in the Molding Department and the Painting
Department will be:
• Modeling department using equation Y= a+bx
The Estimated total manufacturing overhead cost will be
Y= $497,000+($1.50 per MH x 70,000 MHS) = $602,000
To calculate the predetermined overhead rate
Estimated total manufacturing overhead (a) $602,000
Estimated total machine hours(b) 70,000 MHS
Predetermined overhead rate (a/b) $8.60 per MH

• Painting department: using equation Y= a+bx

The Estimated total manufacturing overhead cost will be
Y= $615,000+($2.00 per x 60,000 DLHs)= $735,000
To calculate the predetermined overhead rate
Estimated total manufacturing overhead (a) $735,000
Estimated total machine hours(b) 60,000 MHS
Predetermined overhead rate (a/b) $12.25 per DLH

2. Modeling department overhead applied to Job 205 will be

110 machine hours x 8.60 per machine hour $946

Painting department overhead applied to Job 205 is

84 direct labor hours x $12.5 per DLH $1,029
 Total overhead cost $1,975

3. total manufacturing cost recorded for Job 205, unit product cost and Total cost of Job
205, If the job contained 50 units will be:

Department
Modeling painting total
Direct material $770 $1,332 $2,102
Direct labors 525 1,470 1,995
Manufacturing overhead applied 946 1,029 1,975
Total manufacturing cost $2,241 $3,831 $6,072

Unit product cost for Job 205:

Total manufacturing cost (a) $6,072
Number of units the Job (b) 50 units
Unit product cost (a/b) $121.44 per unit

QUESTION 4, PAGE 108 3-1

1. Journal entries

No Particulars Debit Credit

Raw Materials Inventory 210000
A Accounts Payable 210000
Work in Process 178000
Manufacturing Overhead 12000
B Raw Materials Inventory 190000
Work in Process 90000
Manufacturing Overhead 110000
C Salaries and Wages Payable 200000
Manufacturing Overhead 40000
D Accumulated Depreciation 40000
Manufacturing Overhead 70000
E Accounts Payable 70000
Work in Process 240000
F Manufacturing Overhead 240000
Finished Goods 520000
G Work in Process 520000
H Cost of Goods Sold 480000
 Finished Goods 480000
Accounts Receivable 600000
I Sales (480000*125%) 600000
Total 2550000 2550000

2. T-Accounts

DEBIT CREDIT DEBIT CREDIT

Raw Material Inventory Work in Process
Opening 19000 Opening
Balance 0 B 0 Balance 42000
A 210000 B 178000 G 520000
Balance C/D 20000 C 90000
21000
210000 0 F 240000
balance B/D 20000 Balance 30000

Manufacturing Overhead Finished Goods

24000 Opening
Balance 12000 F 0 Balance 0 H 480000
C 110000 G 520000
E 70000 Balance 40000
D 40000
24000
232000 0 Cost of Goods Sold
balance 8000 H 480000
Balance 480000
Accounts Receivable
I 600000 Salaries Payable
C 200000
Balanc
Balance 600000 e 200000

Accounts Payable Accumulated Depreciation

E 70000 D 40000
Balanc Balanc
e 70000 e 40000

The total Manufacturing Overheads incurred is $232,000

Applied Manufacturing Overheads = 30000*$8 = $240,000

Therefore, Manufacturing Overhead account is over-applied by $8000

QUESTION 5, PAGE 109 3-1

Let’s first calculate the predetermined overhead rate is:

Estimated overhead cost $360,000

Estimated overhead driver 900 Direct labor hours

Predetermined overhead rate $400 per direct labor hour

Journal entries as well as T accounts of transactions

Raw Matertial Inventory
Description Debit Description Credit
Beginning balance $30,000 Used in Production $185,000
Materials purchased 200,000
$230,000 $185,000
Ending balance $45,000

Work-in-process
Debit Credit
Beginning balance $21,000 Goods completed $770,000
and Transferred
Direct materials used in 185,000
production
Direct labor used in 230,000
production
Factory overhead applied to 390,000
production ($400 x 975)

$826,000 $770,000
Ending balance $56,000
 Finished Goods
Debit Credit
Beginning balance $60,000 Cost of goods sold $800,000
Goods completed and transferred 770,000
$830,000 $800,000
Ending balance $30,000

Factory Overhead
Debit Credit
Beginning balance $0 Overhead applied 390,000
Factory utility bill 63,000
Indirect labor 90,000
Maintenance cost 54,000
Depreciation 76,000
Rental 102,000
$385,000 $390,000
Ending balance $5,000

Froya Fabrikker A/S Bergen

Schedule of Cost of Goods Manufactured
Cost
Direct Materials
Beginning raw materials $30,000
Add: Purchases 200,000
Less: Ending raw materials 45,000
Direct Materials Used $185,000
Direct Labor 230,000
Manufacturing Overhead Applied 390,000
Total Current Manufacturing Costs $805,000
Plus: Beginning Work in Process Inventory 21,000
Less: Ending Work in Process Inventory (56,000)
Cost of Goods Manufactured $770,000

The journal entry will be:

Debit Credit
DR Factory overhead $5,000
CR Cost of Goods Sols $5,000
To close the factory control account at the end of the period
 Froya Fabrikker A/S Bergen
Schedule of Cost of Goods Sold
Cost of Goods Manufactured $770,000
Plus: Beginning Finished Goods Inventory 60,000
Less: Ending Finished Goods Inventory (30,000)
Unadjusted Cost of Goods Sold $800,000
Overhead Adjustment (5,000)
Adjusted Cost of Goods Sold $795,000

Froya Fabrikker A/S Bergen

Income statement
Sales $1,200,000
Less Cost of Goods sold $795,000
Gross profit margin $405,000
Less: Selling and administrative expenses:
Advertising expenses $136,000
Utilities expenses $7000
Salaries expenses $110,000
Depreciation expenses $19,000
Rent expenses $18,000
$290,000

Net operating income $115,000

END