Reference no: EM133560357

Product costing and Cost Accumulation in a Batch Production Environment

Exercise 1 Job-Order Costing Basics

Rexford Company manufactures finger splints for kids who get tendonitis from playing video games. The firm had the following inventories at the beginning and end of the month of January.

                               January 1      January 31
Finished goods            $184,900      $160,400
Work In process           321,700        342,1500
Raw material                185,500       173,1300

The following additional manufacturing data pertains to January operations.

Raw material purchased                      $273,400
Direct labor                                        410,000
Actual manufacturing overhead               242,500
Actual selling and administrative expenses 250,030

Rexford Company applies manufacturing overhead at the rate of 60 percent of direct-labor cost. Any overapplied or underapplied manufacturing overhead is accumulated until the end of the year.

Required: Compute the following amounts.

1. The company's prime cost for January.

2. The total manufacturing cost for January.

3. The cost of goods manufactured for January,

4. The cost of goods sold for January.

5. The balance in the Manufacturing Overhead account on January 31. Debit or credit?

Exercise 2: Job-Cost Record

Shawn Toy Company incurred the following costs to produce job number TB78. which consisted of 1000 teddy bears that can walk, talk, and play cards,

Direct material:

8/11/x0 Requisition number 201: 500 yards of fabric at $.90 per yard
8/12/x0 Requisition number 208: 600 cubic feet of stuffing at $.40 per cubic foot
Direct labor:
8/15/x0 Time card number 82: 550 hours at $14 per hour

Manufacturing overhead:
Applied on the basis of direct-labor hours at $3.00 per hour.

Job number TB78 was finished on August 20. On August 30, 800 of the bears were shipped to a local toy store.

Required: Prepare a job-cost record using the information given above. (Use Exhibit 3-3 as a guide.)

Exercise 3 Cost Relationships; Normal Costing System

Cherry Hill Glass Company employs a normal costing system. The following information pertains to the year just ended.

• TOTAL manufacturing costs were $1,250,000.
• Cost of goods manufactured was $1,212.500.
• Applied manufacturing overhead was 30 percent of total manufacturing costs.
• Manufacturing overhead was applied to production at a rate of 80 percent of direct-labor cost.
• Work-in-process inventory on January 1 was 75 percent of work-in-process inventory on December 31.

Required:
1. Compute Cherry Hill's total direct-labor cost for the year.
2. Calculate the total cost of direct material used during the year.
3. Compute the value of the company's work-in-process inventory on December 31

Exercise 4 Basic Journal Entries In Job-Order Costing

Dewitt Educational Products started and finished job number RM67 during June. The job required $5,100 of direct material and 40 hours of direct labor at $18 per hour. The predetermined overhead rate is $6 per direct-labor hour.

Required: Prepare journal entries to record the incurrence of production costs and the completion of job number RM67.

Exercise 5 Fixed and Variable Costs; Overhead Rate; Agribusiness

The controller for Tender Bird Poultry, Inc. estimates that the company's fixed overhead is $100,000 per year. She also has determined that the variable overhead is approximately $0.15 per chicken raised and sold. Since the firm has a single product, overhead is applied on the basis of output units, chickens raised and sold.

Required:
1. Calculate the predetermined overhead rate under each of the following output predictions;

chickens, 200.000 chickens, and 300,000 chickens.

2. Does the predetermined overhead rate change in proportion to the change in predicted production, Why?

Exerelee 6 Job-Order Costing; Feature Film Production; Use of Internet

Visit the website of a film producer, such as Disney, MGM, or Warner Brothers,

Required: Read about one of the company's recent (or upcoming) film releases. Then discuss why or why not job-order costing would be an appropriate costing method for feature film production. Would your answer be any different depending on the type of film being produced (e.g., animation in a studio versus filming on location in the Swiss Alps)?

Exercise 7

Manufacturing Cost Fbws

Jay Sports Equipment Company, Inc. incurred the following costs during 20x2.

Direct material used   $174,000
Direct labor321,000

Manufacturing overhead applied 160,000

During 20x2, products costing $172,000 were finished, and products costing $193,000 were sold on account for $267,500. There were no purchases of raw material during the year. The beginning balances in the firm's inventory accounts are as follows:

Raw material          $227,000
Work in process        16,000
Finished goods          32,000

Required:

1. Prepare T-accounts to show the flow of costs through the company's manufacturing accounts during 20x2.

2. Prepare a partial balance sheet and a partial income statement to reflect the information given above. (Hint: See Exhibit 3-2.)

Exercise 8 Basle Manufacturing Cost Rows

	Inventories

Raw material .............................................................. work in process ...................................................... . Finished  goods ..................................................... ........ Other data: Direct Material used........................................................................... Total manufacturing costs charged to production during the year includes direct material, direct labor, and manufactured  overhead applied at a rate of 60% of direct-tabor cost.................................. Cost of goods available for sale ...................................................... Selling and administrative expenses...........................................................	Beginning $142,000 160,000 180,000	Ending $ 162,000 60,000 220,000 $ 652,000
		1,372,000 1,652,000 63,000

Selected data concerning the past year's Operations of the Lone Star Leather Company are as follows:

Required:
1. What was the cost of raw materials purchased during the year?
2. What was the direct-labor cost charged to production during the year?
3. What was the cost of goods manufactured during the year?
4. What was the cost of goods sold during the year?

Exercise 9 Schedule of Cost of Goods Manufactured

Crunchem Cereal Company incurred the following actual costs during 20x4

Direct material used    $412,500
Meet labor                   180,000
Manufacttring overhead 378,000

The firm's predetermined overhead rate Is 210 percent of direct-labor cost. The. January 1 inventory balances were as follows:

Raw material        $45,000
Waif in emcees       58,500
flashed goods         63,000

Each of these inventory balances was 10 percent higher at the end of the year.

Required:
1. Prepare a schedule of cost of goods manufactured for 20x4.
2. What was the cost of goods sold for the year?
3. Build a spredsheet: Construct an Excel spreadsheet to solve all of the preceding requirements. Show how the solution will change if the following data change: direct material used amounted to $409,000 and raw-material inventory on January 1 was $43,000.