Reference no: EM133346333

Exercises

Question 1. BE2-2 During January, its first month of operations, Knox Company accumulated the following manufacturing costs: raw materials $4,000 on account, factory labor $6,000 of which $5,200 relates to factory wages payable and $800 relates to payroll taxes payable, and utilities payable $2,000. Prepare separate journal entries for each type of manufacturing cost.

Question 2. In January, Knox Company requisitions raw materials for production as follows: Job 1 $900, Job 2 $1,400, Job 3 $700, and general factory use $600. Prepare a summary journal entry to record raw materials used.

Question 3. , Job 2 $1,600, Job 3 $1,400, and general factory use $800. Prepare a summary journal entry to record factory labor used.Factory labor data for Knox Company is given in BE2-2. During January, time tickets show that the factory labor of $6,000 was used as follows: Job 1 $2,200

Question 4. BE2-6 Marquis Company estimates that annual manufacturing overhead costs will be $900,000. Estimated annual operating activity bases are direct labor cost $500,000, direct labor hours 50,000, and machine hours 100,000. Compute the predetermined overhead rate for each activity base.

Question 5. BE2-7 During the first quarter, Roland Company incurs the following direct labor costs: January $40,00 February $30,000, and March $50,000. For each month, prepare the entry to assign overhead to production using a predetermined rate of 80% of direct labor cost.

Question 6. BE2-8 In March, Stinson Company completes Jobs 10 and 11. Job 10 cost $20,000 and Job 11 $30,000. On March 31, Job 10 is sold to the customer for $35,000 in cash. Journalize the entries for the completion of the two jobs and the sale of Job 10.

Question 7. BE2-9 Preprah Engineering Contractors incurred service salaries and wages of $32,000 ($24,000 direct and $8,000 indirect) on an engineering project. The company applies overhead at a rate of 25% of direct labor. Record the entries to assign service salaries and wages and to apply overhead.

Question 8. BE2-10 At December 31, balances in Manufacturing Overhead are Shimeca Company- debit $1,200, Garcia Company-credit $900. Prepare the adjusting entry for each company at December 31, assuming the adjustment is made to cost of goods sold.

Question 9. Torre Corporation incurred the following transactions.

a. Purchased raw materials on account $46,300.
b. Raw materials of $36,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $6,800 was classified as indirect materials.
c. Factory labor costs incurred were $55,900, of which $51,000 pertained to factory wages payable and $4,900 pertained to employer payroll taxes payable.
d. . Time tickets indicated that $50,000 was direct labor and $5,900 was indirect labor.
e. Manufacturing overhead costs incurred on account were $80,500.
f. Depreciation on the company's office building was $8,100.
g. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
h. Goods costing $88,000 were completed and transferred to fi nished goods.
i. Finished goods costing $75,000 to manufacture were sold on account for $103,000.

Instructions
Journalize the transactions. (Omit explanations.)

Question 10. Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $325,000 for the year, and machine usage is estimated at 125,000 hours. For the year, $342,000 of overhead costs are incurred and 130,000 hours are used.

Question 11. The gross earnings of the factory workers for Vargas Company during the month of January are $66,000. The employer's payroll taxes for the factory payroll are $8,000. The fringe benefits to be paid by the employer on this payroll are $6,000. Of the total accumulated cost of factory labor, 85% is related to direct labor and 15% is attributable to indirect labor.

Question 12. Clauss Company transfers out 14,000 units and has 2,000 units of ending work in process that are 25% complete. Materials are entered at the beginning of the process and there is no beginning work in process. Assuming unit materials costs of $3 and unit conversion costs of $5, what are the costs to be assigned to units
(a) transferred out and (b) in ending work in process?

Question 13. (a) Ann Quinn believes the production cost report is an external report for stockholders. Is Ann correct? Explain.
(b) Identify the sections in a production cost report.

Question 14. What purposes are served by a production cost report?

Question 15. At Trent Company, there are 800 units of ending work in process that are 100% complete as to materials and 40% complete as to conversion costs. If the unit cost of materials is $3 and the total costs assigned to the 800 units is $6,000, what is the per unit conversion cost?

Question 16. Kopa Company manufactures CH-21 through two processes: Mixing and Packaging. In July, the following costs were incurred.

                                                                                         Mixing                Packaging

Raw materials used                                                    $10,000               $28,000

Factory labor costs                                                         8,000                   36,000

Manufacturing overhead costs                                   12,000                  54,000

Units completed at a cost of $21,000 in the Mixing Department are transferred to the Packaging Department. Units completed at a cost of $106,000 in the Packaging Department are transferred to Finished Goods.

Journalize the assignment of these costs to the two processes and the transfer of units as appropriate

Question 17. Overton Company has gathered the following information.

Units in beginning work in process                        20,000

Units started into production                                 164,000

Units in ending work in process                                24,000

Percent complete in ending work in process:

Conversion costs                                                                   60%

Materials                                                                                100%

Costs incurred:

Direct materials                                                             $101,200

Direct labor                                                                     $164,800

Overhead                                                                           $184,000

Instructions
(a) Compute equivalent units of production for materials and for conversion costs.
(b) Determine the unit costs of production.
(c) Show the assignment of costs to units transferred out and in process.

Question 18. Weisman, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats. Compute the activity-based overhead rates using the following budgeted data for each of the activity cost pools.

Estimated            Expected Use of

                    Activity Cost Pools         Overhead Cost      Drivers per Activity

Designing                                          $ 450,000            10,000 designer hours

Sizing and cutting                             4,000,000        160,000 machine hours

Stitching and trimming                    1,440,000             80,000 labor hours

Wrapping and packing                         336,000            32,000 finished units

Question 19. Palmer Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data.

                                               Pairs of                        Pairs of                     Range-

                                                 Shoes                          Gloves                      Finder

Unit sales price                   $100                              $30                              $260

Unit variable costs                 60                                 10                                200

Unit contribution margin   $ 40                             $20                               $ 60

Sales mix                                    30%                           60%                              10%

Fixed costs are                          $630,000.

Instructions
(a) Compute the break-even point in units for the company.
(b) Determine the number of units to be sold at the break-even point for each product line.
(c) Verify that the mix of sales units determined in (b) will generate a zero net income.

Question 20. Rubble Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows.

Direct materials                     $30,000                  Variable overhead             $45,000

Direct labor                            $42,000                    Fixed overhead                 $60,000

Instead of making the switches at an average cost of $2.95 ($177,000 4 60,000), the company has an opportunity to buy the switches at $2.70 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

(a) Prepare an incremental analysis showing whether the company should make or buy the switches.

(b) Would your answer be different if the released productive capacity will generate additional income of $34,000?