Solutions Guide:   Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as is

Chapter 2 Exercise 3-28 The controller for Tender Bird Poultry, Inc. estimates that the company’s fixed overhead is $150,000 per year. She also has determined that the variable overhead is approximately $.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: 100,000 chickens, 200,000 chickens, and 300,000 chickens. 2. Does the predetermined overhead rate change in proportion to the change in predicted production? Why? Exercise 3-31 Selected data concerning the past year’s operations of the Lone Star Leather Company are as follows: Inventories Beginning Ending Raw material..................................................................................................... $142,000 $ 162,000 Work in process ................................................................................................. 160,000 60,000 Finished goods ................................................................................................... 180,000 220,000 Other data: Direct material used ....................................................................................... $ 652,000 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and manufacturing overhead applied at a rate of 60% of direct-labor cost) ............................................... 1,372,000 Cost of goods available for sale....................................................................... 1,652,000 Selling and administrative expenses ................................................................ 63,000 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 3-35 The following information pertains to Paramus Metal Works for the year just ended. Budgeted direct-labor cost: 77,000 hours at $17 per hour Actual direct-labor cost: 79,000 hours at $18 per hour Budgeted manufacturing overhead: $993,300 Budgeted selling and administrative expenses: $417,000 Actual manufacturing overhead: Depreciation......................................................................................................................................... $225,000 Property taxes ....................................................................................................................................... 19,000 Indirect labor......................................................................................................................................... 79,000 Supervisory salaries ............................................................................................................................... 210,000 Utilities ................................................................................................................................................. 58,000 Insurance ............................................................................................................................................. 32,000 Rental of space ..................................................................................................................................... 295,000 Indirect material (see data below) ............................................................................................................ 79,000

Indirect material: Beginning inventory, January 1 ................................................................................................................ 46,000 Purchases during the year....................................................................................................................... 95,000 Ending inventory, December 31 ............................................................................................................... 62,000 Required: 1. Compute the firm’s predetermined overhead rate, which is based on direct-labor hours. 2. Calculate the over applied or under applied overhead for the year. 3. Prepare a journal entry to close out the Manufacturing Overhead account into Cost of Goods Sold. 4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1) and (2) above. Show how the solution will change if the following data change: budgeted manufacturing overhead was $990,000, property taxes were $25,000 and purchases of indirect material amounted to $97,000.

Exercise 4-18 Andromeda Glass Company manufactures decorative glass products. The firm employs a process costing system for its manufacturing operations. All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. The company’s production schedule for August follows. Units Work in process on August 1 (60% complete as to conversion) ...................................................................... 2,000 Units started during August ......................................................................................................................... 3,500 Total units to account for ..................................................................................................................... 5,500 Units from beginning work in process, which were completed and transferred out during August ..................... 2,000 Units started and completed during August ................................................................................................... 1,800 Work in process on August 31 (20% complete as to conversion).................................................................... 1,700 Total units accounted for ..................................................................................................................... 5,500 Required: Calculate each of the following amounts using weighted-average process costing. 1. Equivalent units of direct material during August. 2. Equivalent units of conversion activity during August.

Exercise 4-24 The November production of MVP’s Minnesota Division consisted of batch P25 (2,000 professional basketballs) and batch S33 (4,000 scholastic basketballs). Each batch was started and finished during November, and there was no beginning or ending work in process. Costs incurred were as follows: Direct material: Batch P25, $42,000, including $2,500 for packaging material; batch S33, $45,000. Conversion costs: Preparation Department, predetermined rate of $7.50 per unit; Finishing Department, predetermined rate of $6.00 per unit; Packaging Department, predetermined rate of $.50 per unit. (Only the professional balls are packaged.) Required: 1. Draw a diagram depicting the division’s batch manufacturing process. Refer to Exhibit 4–10 for guidance. 2. Compute the November product cost for each type of basketball. 3. Prepare journal entries to record the cost flows during November.

Problem 4-37 Plastic sheets ....................... 10,000 $ 90,000 Standard model .................... 12,000 108,000 $36,000 Deluxe model ....................... 6,000 54,000 18,000 $13,500

Executive model .................... 4,000 36,000 12,000 9,000 $18,000 Total ..................................... 32,000 $288,000 $66,000 $22,500 $18,000 Operation Costing; Unit Costs Direct labor ................................................ $228,000 $ 90,000 $45,000 $27,000 Manufacturing overhead .............................. 360,000 108,000 58,500 36,000 Required: 1. For each product produced by Plattsburg Plastics Corporation during the month of March, determine the ( a ) unit cost and ( b ) total cost. Be sure to account for all costs incurred during the month.(Carry out unit costs to three decimal places, i.e., a tenth of a cent.) 2. Prepare journal entries to record the flow of production costs during March. . Chapter 3 .

Asisngment 1 a) Chapter 3, p. 115 - Complete exercise 3-28

1.

(a) At 100,000 chicken volume:

(b) At 200,000 chicken volume:

(c) At 300,000 chicken volume:

2. The predetermined overhead rate does not change in proportion to the change in production volume. As production volume increases, the $150,000 of fixed overhead is allocated across a larger activity base. When volume rises by 100%, from 100,000 to 200,000 chickens, the decline in the overhead rate is 45.45% [($1.65 – $.90)/$1.65]. When volume rises by 50%, from 200,000 to 300,000 chickens, the decline in the overhead rate is 27.78% [($.90 – $.65)/$.90].

b) Chapter 3, p. 117 - Complete exercise 3-31

1. Raw material:

Beginning inventory.................................................................................... $142,000Add: Purchases............................................................................................       ?Deduct: Raw material used......................................................................... 652,000Ending inventory.......................................................................................... $162,000

Therefore, purchases for the year were.................................................... $672,000

2. Direct labor:

Total manufacturing cost............................................................................ $1,372,000Deduct: Direct material................................................................................   652,000 Direct labor and manufacturing overhead................................................ $   720,000

Direct labor + manufacturing overhead = $720,000Direct labor + (60%) (direct labor) = $720,000

(160%) (direct labor) = $720,000

Direct labor = $720,0001.6   

Direct labor = $450,000

3. Cost of goods manufactured:

Work in process, beginning inventory.................................................. $ 160,000Add: Total manufacturing costs............................................................. 1,372,000Deduct: Cost of goods manufactured...................................................     ? Work in process, ending inventory........................................................ $ 60,000

Therefore, cost of goods manufactured was........................................ $1,472,000

4. Cost of goods sold:

Finished goods, beginning inventory........................................................ $ 180,000Add: Cost of goods manufactured............................................................. 1,472,000Deduct: Cost of goods sold........................................................................     ? Finished goods, ending inventory............................................................. $ 220,000

Therefore, cost of goods sold was............................................................ $1,432,000

c) Chapter 3, p. 118 - Complete exercise 3-35

1. Predetermined overhead rate = $993,300 / 77,000 hours = $12.90 per hour

2. To compute actual manufacturing overhead:

Depreciation................................................................................................. $225,000Property taxes.............................................................................................. 19,000Indirect labor................................................................................................ 79,000Supervisory salaries.................................................................................... 210,000Utilities.......................................................................................................... 58,000Insurance...................................................................................................... 32,000Rental of space............................................................................................ 295,000Indirect material:

Beginning inventory, January 1..........................................................$ 46,000Add: Purchases....................................................................................   95,000 Indirect material available for use.......................................................$141,000Deduct: Ending inventory, December 31...........................................   62,000 Indirect material used.......................................................................... 79,000

Actual manufacturing overhead................................................................. $997,000

actual appliedOverapplied = manufacturing – manufacturing

overhead overhead overhead

= $997,000 – ($12.9079,000*) = $22,100

*Actual direct-labor hours.

3. Manufacturing Overhead............................................................. 22,100Cost of Goods Sold........................................................... 22,100

d) Chapter 4, p. 155 - Complete exercise 4-181. 5,500 equivalent units (refer to (a) in the following table)

2. 4,140 equivalent units (refer to (b) in the following table)

CALCULATION OF EQUIVALENT UNITS: ANDROMEDA GLASS COMPANYWeighted-Average Method

Physical Units

Percentage of

Completion with Respect to Conversion

Equivalent Units

Direct Material Conversion

Work in process, August 1...... 2,000 60%Units started during August.... 3,500Total units to account for........ 5,500

Units completed and transferred out during August............ 3,800 100% 3,800 3,800

Work in process, August 31.... 1,700 20% 1,700 340Total units accounted for........ 5,500 _____ ____Total equivalent units.............. (1) 5,500 (2) 4,140

e) Chapter 4, p. 157 - Complete exercise 4-24

1. Diagram of production process:Work-in-Process Inventory:

Preparation Department

Batch P25 Batch S33

Accumulatedby

department

Conversion costs: Direct-labor

Manufacturing overhead

Work-in-Process Inventory:Finishing Department

Batch P25 Batch S33

Accumulatedby

batch

Direct-material

costs

Work-in-Process Inventory:Packaging Department

Batch P25

Finished-Goods Inventory

2. The product cost for each basketball is computed as follows:

Professional Scholastic

Direct material:.....................................................................Batch P25 ($42,000 ÷ 2,000)........................................... $21.00 -0-     Batch S33 ($45,000 ÷ 4,000)........................................... -0- $11.25     

 Conversion: Preparation Department............................... 7.50 7.50      Conversion: Finishing Department................................... 6.00 6.00     *Conversion: Packaging Department.................................     .50     -0-        Total product cost............................................................... $35.00 $24.75      

*The two production departments each worked on a total of 6,000 balls, but the Packaging Department handled only the 2,000 professional balls.

3. Journal entries:

Work-in-Process Inventory: Preparation Department........... 39,500*Raw-Material Inventory................................................... 39,500

*$39,500 = $42,000 of direct material for batch P25 – $2,500 of packaging material

Work-in-Process Inventory: Preparation Department........... 45,000*Raw-Material Inventory................................................... 45,000

*Direct-material cost for batch S33.

Work-in-Process Inventory: Preparation Department........... 45,000*Applied Conversion Costs............................................. 45,000

*$45,000 = 6,000 units$7.50 per unit

Work-in-Process Inventory: Finishing Department............... 129,500*Work-in-Process Inventory: Preparation Department 129,500

*$129,500 = $39,500 + $45,000 + $45,000

Work-in-Process Inventory: Finishing Department............... 36,000*Applied Conversion Costs............................................. 36,000

*$36,000 = 6,000 units$6.00 per unit

Work-in-Process Inventory: Packaging Department............. 66,500*Finished-Goods Inventory....................................................... 99,000†

Work-in-Process Inventory: Finishing Department..... 165,500

*$66,500 = $39,500 + (2,000$7.50) + (2,000$6.00).

These are the costs accumulated for batch P25 only.

†$99,000 = $45,000 + (4,000$7.50) + (4,000$6.00).

These are the costs accumulated for batch S33 only.

Work-in-Process Inventory: Packaging Department............. 3,500Raw-Material Inventory................................................... 2,500*Applied Conversion Costs............................................. 1,000†

*Cost of packaging material for batch P25.†$1,000 = 2,000 units$.50 per unit

Finished-Goods Inventory....................................................... 70,000*Work-in-Process Inventory: Packaging Department... 70,000

*$70,000 = $66,500 + $3,500

f) Chapter 4, p. 164 - Complete problem 4-37

 1. The unit costs and total costs for each of the products manufactured by Plattsburg

Plastics Corporation during the month of March are calculated as follows:

Extrusion Form Trim FinishUnits produced..................... 32,000 22,000 10,000 4,000Material costs........................ $288,000 $ 66,000 $22,500 $18,000

Unit material cost.......... 9.00 3.00 2.25 4.50Conversion costs*................ 588,000 198,000 103,500 63,000

Unit conversion cost..... 18.375 9.00 10.35 15.75

*Direct labor and manufacturing overhead.

Unit CostsPlastic Sheets

Standard Model

Deluxe Model

Executive Model

Material costs:Extrusion........................ $9.00 $9.00 $9.00 $9.00   

Form................................ 3.00 3.00 3.00Trim................................. 2.25 2.25Finish.............................. 4.50

Conversion costs:Extrusion........................ 18.375 18.375 18.375 18.375Form................................ 9.00 9.00 9.00Trim................................. 10.35 10.35

Finish.............................. _ _ _    15.75     Total unit cost....................... $27.375 $39.375 $51.975 $72.225Units produced.....................  

10,000 12,000   6,000   4,000    

Total product cost*............... $273,750 $472,500 $311,850 $288,900

*Total costs accounted for:

Product Total

Product CostsPlastic sheets $ 273,750Standard model 472,500Deluxe model 311,850Executive model 288,900 Total $1,347,000

2. Journal entries:

Work-in-Process Inventory: Extrusion.............................. 876,000Raw-Material Inventory............................................. 288,000Applied Conversion Costs....................................... 588,000

Finished-Goods Inventory.................................................. 273,750Work-in-Process Inventory: Extrusion.................... 273,750

Work-in-Process Inventory: Forming................................ 866,250Work-in-Process Inventory: Extrusion.................... 602,250Raw-Material Inventory............................................. 66,000Applied Conversion Costs....................................... 198,000

Finished-Goods Inventory.................................................. 472,500Work-in-Process Inventory: Forming...................... 472,500

Work-in-Process Inventory: Trimming.............................. 519,750Work-in-Process Inventory: Forming...................... 393,750Raw-Material Inventory............................................. 22,500Applied Conversion Costs....................................... 103,500

Finished-Goods Inventory.................................................. 311,850Work-in-Process Inventory: Trimming.................... 311,850

Work-in-Process Inventory: Finishing............................... 288,900Work-in-Process Inventory: Trimming.................... 207,900Raw-Material Inventory............................................. 18,000Applied Conversion Costs....................................... 63,000

Finished-Goods Inventory.................................................. 288,900Work-in-Process Inventory: Finishing.................... 288,900