Reference no: EM131554879

Module Review Questions

I. Cost analysis and identification.

Georgia Pacific, a manufacturer, incurs the following costs:

a. Classify each cost as either a product or a period cost. If a product cost, identify it as a prime or a conversion cost.
b. Classify each product cost as either a direct cost or an indirect cost using the product as the cost object.

	Product Cost		Period Cost	Direct Cost	Indirect Cost
	Prime	Conversion
1. Office supplies used
2. Bad debts expense
3. Small tools used
4. Factory utilities
5. Advertising
6. Amortization of patents on factory machine
7. Payroll taxes for production supervisor
8. Accident insurance on factory workers
9. Depreciation-Factory building
10. State and federal income taxes
11. Wages to assembly workers
12. Direct materials used

II. Manufacturing statement preparation

Given the following selected account balances of Randa Company, prepare its manufacturing statement for the year ended on December 31, 2013. Include a listing of the individual overhead account balances in this statement.

Sales	$1,252,000
Raw Materials inventory, Dec. 31, 2012	39,000
Goods in process inventory, Dec. 31, 2012	55,900
Finished goods inventory, Dec. 31, 2012	64,750
Raw materials purchases	177,600
Direct labor	227,000
Factory computer supplies used	19,840
Indirect labor	49,000
Repairs - factory equipment	7,250
Rent cost of factory building	59,000
Advertising expense	96,000
General and administrative expense	131,300
Raw materials inventory, Dec. 31, 2013	44,700
Goods in process inventory, Dec. 31, 2013	43,500
Finished goods inventory, Dec. 31, 2013	69,300

III. Income Statement Preparation

Use the information from problem II above to prepare an income statement for Randa Company (a manufacturer). Assume that its cost of goods manufactured is $546,390.

IV. Inventory computation and reporting

Shown here are annual financial data at December 31, 2013, taken from two different companies.

	Pinnacle Retail	Slope Board Manufacturing
Beginning inventory
Merchandise	$150,000
Finished goods		$300,000
Cost of purchases	250,000
Cost of goods manufactured		586,000
Ending inventory
Merchandise	100,000
Finished goods		200,000

1. Compute the cost of goods sold section of the income statement at December 31, 2013, for each company. Include the proper date, title and format in the solution.

2. Write a half-page memorandum to your instructor (a) identifying the inventory accounts and (b) describing where each is reported on the income statement and balance sheet for both companies.

V. Analysis of cost flows

As of the end of June, the job cost sheets at Racing Wheels, Inc. show the following total costs accumulated on three custom jobs:

	Job 102	Job 103	Job 104
Direct materials	$30.000	$66,000	$54,000
Direct labor	I 6.000	28,400	42.000
Overhead	8.000	14,200	21.000

• Job 102 was started in production in May and the following costs were assigned to it in May: direct materials, $12,000; direct labor, $3,600; and overhead, $1,800.

• Jobs 103 and 104 are started in June. Overhead cost is applied with a predetermined rate based on direct labor cost.

• Jobs 102 and 103 are finished in June, and Job 104 is expected to be finished in July. No raw materials are used indirectly in June.

Using this information, answer the following questions. (Assume this company's predetermined overhead rate did not change across these months).

1. What is the cost of the raw materials requisitioned in June for each of the three jobs? What is the total cost of raw materials requisitioned for June?

2. How much direct labor cost is incurred during June for each of the three jobs? What is total direct labor cost incurred in June?

3. What predetermined overhead rate is used during June? How much total cost is transferred to finished goods during June?

VI. Cost flows in a job order cost system

The following information is available for Lock-Down Company, which produces special-order security products and uses a job order cost accounting system.

	April 30	May 31
Inventories
Raw materials	$40000	$ 50.000
Goods in process	9.600	19,500
Finished goods	60.000	33.200
Activities and information for May
Raw materials purchases (paid with cash)		189.000
Factory payroll (paid with cash)		400.000
Factory overhead
Indirect materials		12.000
Indirect labor		75,000
Other overhead costs		100.500
Sales (received in cash)		1.200.000
Predetermined overhead rate based on direct labor cost		65%

Complete the following amounts for the month of May.

1. Cost of direct materials used.
2. Cost of direct labor used.
3. Cost of goods manufactured.
4. Cost of goods sold.*
5. Gross profit.
6. Overapplied or underapplied overhead.

*Do not consider any underapplied or overapplied overhead.

VII. Journal Entries for Materials, Labor, and Overhead

Use information from Problem VI to prepare journal entries for the following events for the month of May. Remember that a journal entry must debit at least one account and credit at least one account. Please use proper account titles.

1. Raw materials purchased for cash.
2. Direct materials usage.
3. Indirect materials usage.
4. Factory payroll costs Paid in cash.
5. Direct labor usage.
6. Indirect labor usage.
7. Factory overhead excluding indirect materials and indirect labor (record credit to Other Accounts).
8. Application of overhead to goods in process.
9. Allocation of overapplied or underapplied overhead to Cost of Goods Sold.

VIII. Factory Overhead Calculation, Allocation, and Analysis

Red Wing Company applies factory overhead based on direct labor costs. The company incurred the following costs during 2013: direct materials costs, $637,500; direct labor costs, $2,500,000; and factory overhead costs applied, $1,000,000.

1. Calculate the predetermined overhead rate for year 2013.

2. Assuming that the company's $57,000 ending Goods in Process Inventory account for year 2013 had $18,000 of direct labor costs; determine the inventory's direct materials costs.

3. Assuming that the company's $337,485 ending Finished Goods Inventory account for year 2013 had $137,485 of direct materials costs, determine the inventory's

(a). direct labor costs and (b). its overhead costs.