Cost Accounting Ch2 HW (part 2)
All costs related to the manufacturing function in a company are Select one: a. prime costs. b. product costs. c. conversion costs. d. direct costs.
b. product costs.
Period costs Select one: a. remain unchanged over a given period of time. b. are associated with the periodic inventory method. c. are always variable costs. d. are expensed in the same period in which they are incurred
d. are expensed in the same period in which they are incurred
Cost of goods manufactured The Work in Process Inventory account of Phelan Corporation increased $32,200 during November. Costs incurred during November included $33,600 for direct materials, $176,400 for direct labor, and $58,800 for overhead. What was the cost of goods manufactured during November?
Solution: Direct material used $33,600 Direct labor 176,400 Overhead 58,800 Current manufacturing costs $268,800 Less increase in work in process inventory (32,200) Cost of goods manufactured $236,600 Since Work in Process Inventory increased by $32,200 , current manufacturing costs must have been $32,200 more than cost of goods manufactured.
Cost of services rendered The following information is related to North Zulch Veterinary Clinic for April, the firm's first month of operation: Veterinarian salaries for April $12,960 Assistants' salaries for April 5,024 Medical supplies purchased in April 3,840 Utilities for month (90% related to animal treatment) 3,200 Office salaries for April (20% related to animal treatment) 3,040 Medical supplies on hand at April 30 1,920 Depreciation on medical equipment for April 5,920 Building rental (80% related to animal treatment) 4,960 Compute the cost of services rendered.
Solution: Direct labor $17,984 1 Overhead: Medical supplies $1,920 2 Utilities 2,880 3 Office salaries 608 4 Depreciation 5,920 5 Building rental 3,9681 5,296 6 Cost of services rendered $33,280 1 12,960 + 5,024 = $17,984 2 3,840 - 1,920 = $1,920 3 3,200 x 90% = $2,880 4 3,040 x 20% = $608 5 Given 6 4,960 x 80% = $3,968
CGM; CGS Irresistible Art produces collectible pieces of art. The company's Raw Material Inventory account includes the costs of both direct and indirect materials.Account balances for the company at the beginning and end of July follow: July 1 July 31 Raw Material Inventory $55,920 $41,760 Work in Process Inventory 87,840 72,000 Finished Goods Inventory 43,200 62,880 During the month, the company purchased $393,600 of raw material; direct material used during the period amounted to $302,400. Factory payroll costs for July were $472,800, of which 75 percent was related to direct labor. Overhead charges for depreciation, insurance, utilities, and maintenance totaled $360,000 for July. a. Prepare a schedule of cost of goods manufactured. b. Prepare a schedule of cost of goods sold.Note: Do not use negative signs with your answers.
Solution: a. Irresistible Art Schedule of Cost of Goods Manufactured For the Month Ended July 31 Beginning WIP inventory $87,840 Beginning RM inventory $55,920 Raw material purchased 393,600 Raw material available $449,520 Less ending RM inventory 41,760 Raw material used $407,760 Less indirect material used 105,360 Direct material used 302,400 Direct labor 354,600 Overhead: Various $360,000 Indirect material 105,360 Indirect labor 118,200 583,560 Total cost to account for $1,328,400 Less ending WIP inventory 72,000 Cost of goods manufactured $1,256,400 b. Irresistible Art Schedule of Cost of Goods Sold For the Month Ended July 31 Beginning FG inventory $43,200 Cost of goods manufactured 1,256,400 Goods available for sale 1,299,600 Less ending FG inventory 62,880 Cost of goods sold $1,236,720
Labor cost classification Woodlands Restaurant Supply operates in two shifts, paying a late-shift premium of 10 percent and an overtime premium of 75 percent. The May payroll follows: Total wages in dollars $32,400 Total wage hours 3,600 Normal hourly employee wage $9.00 Total regular hours worked, split evenly between the shifts 3,000 All overtime was worked by the early shift during May. Shift and overtime premiums are considered part of overhead rather than direct labor. a. How many overtime hours were worked in May? b. 1. How much of the total labor cost should be charged to direct labor? 2. How much of the total labor cost should be charged to overhead? c. 1. What amount of overhead was for second-shift premiums? 2. What amount of overhead was for overtime premiums?
Solution: a. 3,600 total hours - 3,000 regular hours = 600 overtime hours b. 1. Direct labor: 3,000 x $9.00 = $27,000 2. Overhead: $32,400 - $27,000 = $5,400 c. Shift premiums: 1. Second-shift premium: 10% x $9.00 x 3,000 / 2 = $1,350 2. Overtime premium: 75% x $9.00 x 600 = $4,050
Labor cost classification Tidy House produces a variety of household products. The firm operates 24 hours per day with three daily work shifts. The first-shift workers receive ''regular pay.'' The second shift receives an 8 percent pay premium, and the third shift receives a 12 percent pay premium. In addition, when production is scheduled on weekends, the firm pays an overtime premium of 50 percent (based on the pay rate for first-shift employees). Labor premiums are included in overhead. The October factory payroll is as follows. Total wages for October $871,200 Total wage hours for October 64,000 Normal hourly wage for first-shift employees $12.00 Total regular hours worked, split evenly among the three shifts54,000 a. How many overtime hours were worked in October? Answer b. 1. How much of the total labor cost should be charged to direct labor? 2. How much of the total labor cost should be charged to overhead? c. 1. What amount of overhead was for second-shift premiums? 2. What amount of overhead was for third-shift premiums? 3. What amount of overhead was for overtime premiums?
Solution: a. 64,000 total hours - 54,000 regular hours = 10,000 overtime hours b. 1. Direct labor: 12 x $64,000 = $768,000 2. Overhead: $871,200 - $768,000 = $103,200 c. 1. Second-shift premium: 8% x $12.00 x 54,000 / 3 = $17,280 2. Third-shift premium: 12% x $12.00 x 54,000 / 3 = $25,920 3. Overtime premium: 50% x $12.00 x 10,000 = $60,000
E2-10. Association with cost object Chase University's College of Business has five departments: Accounting, Economics, Finance, Management, and Marketing. Each department chairperson is responsible for the department's budget preparation. Indicate whether each of the following costs incurred in the Accounting Department is direct or indirect to the department: a.Accounting faculty salaries b. Accounting chairperson's salary c. Cost of computer time of university server used by members of the department d.Cost of office assistant salaries (office assistants are shared by the entire college) e. Cost of travel by department faculty paid from externally generated funds contributed directly to the department f. Cost of equipment purchased by the department from allocated state funds g.Depreciation allocation of the college building cost for the number of offices used by department faculty h.Cost of periodicals/books purchased by the department i. Cost of software on faculty computers
Solution: a. Direct b. Direct c. Direct d. Indirect e. Direct f. Direct g. Indirect h. Direct i. Direct
Financial statement classification Babineaux Company incurred the following costs in May: • Paid a six-month (May through October) premium for insurance of company headquarters, $40,920 . • Paid $2,200 fee for a salesperson to attend a seminar in July. • Paid three months (May through July) of property taxes on its factory building, $33,000 . • Paid a $22,000 bonus to the company president for his performance during May. • Accrued $44,000 of utility costs, of which 40 percent was for the headquarters and the remainder was for the factory. a. What expired period costs are associated with the May information? b. What unexpired period costs are associated with the May information? c. What product costs are associated with the May information?
Solution: a.One month of insurance $6,820 1 Bonus to corporate president 22,000 Utility cost on headquarters 17,600 2 Total $46,420 b.Five months of insurance $34,100 3 Seminar fee 2,200 Total $36,300 c.Property taxes $11,000 4 Utility cost on factory 26,400 5 Total $37,400 1 $40,920 / 6 = $6,820 2 $44,000 x 40% = $17,600 3 $40,920 x 5 / 6 = $34,100 4 $33,000 / 3 = $11,000 5 $44,000 x 60% = $26,400
Service industry; journal entries and CSR Kalogrides & McMillan CPAs incurred the following costs in performing audits during September. The firm uses a Work in Process Inventory account for audit engagement costs and records overhead in fixed and variable overhead accounts. a. Prepare journal entries for each of the following transactions: Note: Where applicable, list multiple debits in alphabetical order and multiple credits in alphabetical order. 1. Used $6,000 of previously purchased supplies on audit engagements. 2. Paid $9,600 of partner travel expenses to an accounting conference. 3. Recorded $7,800 of depreciation on laptops used in audits. 4. Recorded $2,160,000 of annual depreciation on the Kalogrides & McMillan Building, located in downtown New York; 65 percent of the space is used to house audit personnel. 5. Accrued audit partner salaries, $240,000. 6. Accrued remaining audit staff salaries, $309,480. 7. Paid credit card charges for travel costs for client engagements, $23,280. 8. One month's prepaid insurance and property taxes expired on the downtown building, $20,760. 9. Accrued audit partner salaries, $4,080 of office assistant wages; the office assistant works only for the audit partners and staff. 10. Paid all accrued salaries and wages for the month. b. Determine the cost of audit services rendered for September.
Solutions a. Account Debit Credit 1.Work in Process Inventory 6,000 Supplies Inventory 6,000 To record supplies usage for audit engagements 2.Travel Expense 9,600 Cash 9,600 To record travel expenses for partner 3.Fixed Overhead Control 7,800 Accumulated Depreciation—Laptops 7,800 To record laptop depreciation 4.Depreciation Expense 63,000 Fixed Overhead Control 1 117,000 Accumulated Depreciation—Buildings 180,000 To record depreciation on NYC building 5.Work in Process Inventory 240,000 Salaries Payable 240,000 To accrue partner salaries 6.Work in Process Inventory 309,480 Salaries Payable 309,480 To accrue audit salaries 7.Work in Process Inventory 23,280 Cash 23,280 To record audit-related travel costs 8.Fixed Overhead Control 213,494 Insurance Expense 7,266 Prepaid Insurance and Taxes 20,760 To record expiration of prepaid insurance and property taxes on downtown building 9.Variable Overhead Control 4,080 Wages Payable 4,080 To accrue office assistant wages 10.Salaries Payable 549,480 Wages Payable 4,080 Cash 553,560 To pay accrued salaries and wages 1 $180,000 x 65% = $117,000 2 $20,760 x 65% = $13,494 b. Cost of Services Rendered: Supplies used $6,000 Labor: Partner salaries $240,000 Audit salaries 309,480 549,480 Overhead: Laptop depreciation $7,800 Depreciation on building 117,000 Travel 23,280 Insurance and taxes 13,494 Indirect labor 4,080 165,654 Total cost of services rendered $721,134