Cost Accounting Tauseef Ahmed Qureshi COST CLASSIFICATION

Assignment no 1Problem No 1Consider the following account balances (in thousands) for the BPL Company.

Beginning of current year End of current year

Direct materials inventory $22,000 $26,000

Work-in-process inventory 21,000 20,000

Finished goods inventory 18,000 23,000

Purchase of direct materials 75,000

Direct manufacturing labor 25,000

Indirect manufacturing labor 15,000

Plant Insurance 9,000

Depreciation-plant building 11,000

Repairs and maintenance - plant 4,000

Marketing and Distribution costs 93,000

General & Administrative costs 29,000

1. Prepare a schedule of cost of goods manufactured for current year.2. Revenues in current year were 300 million. Prepare the income statement, current year.

Problem No 2

A distraught employee, Guy Arson, put a torch to a manufacturing plant on a blustery Feb 26. The resulting blaze completely destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building. They revealed the following for the period from Jan 1, 2000 to Feb 26, 2000.Direct Material purchased $160,000WIP, Jan 1, 2000 34,000Direct Materials, Jan 1, 2000 16,000Finished goods, Jan 1, 2000 30,000Indirect Manufacturing costs 40 % of conversion costRevenue 500,000Direct manufacturing labor 180,000Prime costs (all direct mfg cost) 294,000Gross Margin % based on sales 20 %Cost of goods available for sale 450,000The loss was fully covered by insurance .The insurance company wants to know the historical cost of inventories as one factor considered when negotiating a settlement.

Required:1. Finished goods inventory, Feb 26, 2000. 2. WIP inventory, Feb 26, 2000. 3. Direct materials inventory, Feb 26, 2000

Problem No 3

1

Shaw Tool Company produces and sells high-quality automotive tool sets. Each set of tools is contained in a wooden case that is purchases from an outside supplier. The wooden carrying cases are held as raw materials inventory until they are placed into production and combined with the related tool sets. The firm’s accountant has provided the following information for the month of July:

1. Beginning raw materials inventory included 2,100 wooden cases at a cost of $94,500.

2. The company purchased 4,000 additional cases at $45 each.

3. A total of 4,400 cases were transferred into production.

4. 400 cases were given for promotional purposes to managers of prospective retail outlets.

Of the cases placed into production, 65% were combined with tool sets that were completed and transferred to finished goods inventory. Of the cases transferred to finished goods inventory during July, 70% had been sold by month-end. There was no beginning inventory of wooden case in finished goods inventory or in work in process inventory.

Required:Determine the cost of the wooden cases that would be included in the following accounts as of July 31:

A. Raw material inventory B. Work in process inventory C. FG inventory D. Selling expenses E. Cost of goods sold

Problem 4:

Williams, Inc submits the following for July.

Direct labor cost ……………….. $ 30,000Cost of goods sold …………….. 111,000 Factory overhead is applied at the rate of 150% of direct labor cost Marketing expenses ……………. 14,100 General & administrative expenses 22,900Sales for the month ………………….. 182,000Purchases of material 42,300

Inventories July 1 July 31Finished Goods ………………………………….. $15,000 $17,500WIP …………………………………………………… 9,600 13,000Materials ………………………………………….. 7,000 7,400

Required:

Prepare an income statement with schedule showing cost of goods manufactured.

Problem No 5

Beta Corporation experienced a fire on December 31, 1990. The fire destroyed a significant portion of the

2

firm's accounting records, and the controller is currently trying to prepare a reliable income statement for the year. She has gathered the following information from various sources:1. Sales $300,0002. Beginning inventories for 1990: Work in process $20,000 Finished goods 45,0003. Raw materials inventories are not maintained by the firm as materials are purchases as needed for production.4. Manufacturing overhead cost is three times as much as direct labor cost.5. Direct materials used in production are one half as much as direct labor cost.6. The firm's gross profit percentage is 40% of sales.7. Selling and administrative expenses are $80,000 each year.8. The work in process inventory increased $5000 during 1990.9. The finished goods inventory decreased by an unknown amount during 1990.10. Direct labor cost amounting to $40,000 was recorded in 1990.

Required:

Prepare the income statement and cost of goods manufactured statement for the firm's 1990 performance based on the data above.

Problem No 6

Hickey Company, a manufacturing firm, produces a single produce. The following information has been taken from the company’s production, sales, and cost records for last year.

Production in units ………………………………………….. 30,000Sales in units ……………………,…………………………….. ?Ending finished goods inventory in units ………… ?Sales in dollars ……………………………………………….. $650,000Costs: Advertising …………………………………………………. $50,000 Direct labor ………………………………………………… 80,000 Indirect labor …………………………………………….. 60,000 Raw materials purchased …………………………… 160,000 Building rent ……………………………………………… 50,000 (production uses 80 % of the space, administrative and sales office uses the rest) Utilities, factory ………………………………………….. 35,000 Royalty paid for use of production patent ….. ? $1 unit produced Maintenance, factory …………………………………. 25,000 Rent for special production equipment,……… ? $ 6,000 per year plus $ 0.10 per unit produces Selling and administrative salaries ……………… 140,000 Other factory overhead costs …………………….. 11,000 Other selling & administrative expenses …….. 20,000

January 1 December 31 (Beginning of the year) (End of the year) Inventories: Raw materials: $ 20,000 $ 10,000

3

Work in process: 30,000 40,000 Finished goods: 0 ?

The finished goods inventory is being carried at the average unit production cost for the year. The selling price of the product is $ 25 per unit.

1. Prepare a schedule of cost of goods manufactured for the year.2. Compute the following.

a. The number of units in the finished goods inventory on December 31.b. The cost of the units in the finished goods inventory at December 31.

3. Prepare an income statemen

Problem 7 The Klaassen Company reports the following data for Sept: Product A Product B Production …………………………………………………… 10,000 units 8,000 units Per unit production costs Direct Material $ 4 $ 3Direct Labor 10 20Applied overhead 7 14 $ 21 $ 37Sales Price per unit $ 30 $ 50Beginning inventories 1,000 units 900 unitsEnding Inventories 2,000 100

Actual factory overhead was $ 180,000; factory overhead is applied at a rate of $ 0.70 per direct labor dollar. Over or under applied factory overhead is closed to the costs of goods sold account. Marketing and Administrative expenses were $ 100,900.

Required:

1. over or under applied factory overhead 2. Cost of goods manufactured 3. Cost of goods sold . 4. Operating income.

Problem No 8 For each company, fill in the missing data. Each company is independent of the others.

4

Company Company CompanyA B C

Sales $108,000 e $120,000

Finished goods, beginning inventory 14,000 f 30000

Cost of goods manufactured 38000 80000 iFinished goods, ending inventory a 36000 42000

Cost of goods sold 40000 74000 j

Gross profit b 85000 k

Operating expenses 30000 g 46000

Net income c 50000 l

Work in progress, beginning inventory d 21000 24000

Direct labor cost 14000 30000 42000

Raw materials used 13000 18000 34000

Manufacturing overhead 16000 24000 30000

Work in process, ending inventory 18000 h 60000

Problem No 9

Regina Office equipment manufactures and sells metal shelving. It began operations on January 1, 2000. Costs incurred for 2000 are as follows. (V stands for variable and F stands for fixed)

Direct material used costs $140,000 VDirect manufacturing labor costs 30,000 VPlant energy costs 5,000 VIndirect manufacturing labor costs 10,000 VIndirect manufacturing labor costs 16,000 FOther Indirect manufacturing costs 8,000 VOther Indirect manufacturing costs 24,000 FMarketing ,distribution, and customer service costs 122,850 VMarketing ,distribution, and customer service costs 40,000 FAdministrative costs 50,000 F

Variable manufacturing costs are variable with respect to units produced. Variable marketing, distribution, and customer services costs are variable with respect to units sold.

Inventory data are as follows

Beginning, Jan 1,2000 Ending, Dec 31,2000Direct materials 0 Kilograms 2,000 KilogramsWork in process 0 Units 0 UnitsFinished goods 0 units ? Units

Production in 2000 was 100,000 units. Two kilograms of direct materials are used to make one unit of finished product.Revenues in 2000 were $436,800. The selling price per unit and the purchase price per kilogram of direct materials were stable throughout the year. The company’s ending inventory of finished goods is carried at

5

the average unit manufacturing costs for 2000. Finished goods inventory, at December 31,2000 was $20,970.

Required:

1. Direct materials inventory, total costs, December 31, 2000.2. Finished goods inventory, total units, December 31, 2000.3. Selling price per unit, 2000.4. Operating income,2000.Show your computations.

Problem No 10

An auditor for Revenue Canada is trying to reconstruct some partially destroyed records of two taxpayers. For each of the cases in the accompanying list, find the unknowns designated by capital letters figures are assumed to be in thousands)

CASE 1 CASE 2Accounts receivable, December 31,2000 $6,000 $2,100Cost of goods sold A 20,000Accounts payable, January 1,2000 3,000 1,700Accounts payable, December 31,2000 1,800 1,500Finished goods inventory, December 31,2000 B 5,300Gross Margin 11,300 CWork in process, January 1,2000 0 800Work in process, December 31,2000 0 3,000Finished goods inventory, January 1,2000 4,000 4,000Direct material used 8,000 12,000Direct manufacturing labor 3,000 5,000Indirect manufacturing costs 7,000 DPurchase of direct material 9,000 7,000Revenues 32,000 31,800Accounts receivable, January 1,2000 2,000 1,400

---------------------------------------------- THE END ---------------------------------------------------------

6