ACCT Final
margin of safety =
(current unit sales - breakeven unit sales) x price per unit or just current sales - breakeven sales
to reach a target profit =
(target profit + fixed exp) / CM per unit
profit =
(unit CM x Q) - fixed expenses (Q = number of units) or (CM ratio x sales) - fixed exp
managerial vs financial accounting
managerial -> plans for the future; provides info to managers within organization financial -> focuses on the past; provides info to external parties (stkholders, creditors, regulators)
in a job-order costing system, indirect labor cost is usually recored as a debit to
manufacturing overhead
in a job-order costing system, indirect material cost is usally recorded as a debit to
manufacturing overhead
product testing and research and development would be considered a
product level activity
factory overhead
product or factory costs not included in DM or DL; includes indirect material and indirect labor
period costs
selling and admin costs; flow directly to income statement
The Polaris Company uses a job-order costing system. The following transactions occurred in October: a. Raw materials purchased on account, $210,000. b. Raw materials used in production, $190,000 ($178,000 direct materials and $12,000 indirect materials). c. Accrued direct labor cost of $90,000 and indirect labor cost of $110,000. d. Depreciation recorded on factory equipment, $40,000. e. Other manufacturing overhead costs accrued during October, $70,000. f. The company applies manufacturing overhead cost to production using a predetermined rate of $8 per machine-hour. A total of 30,000 machine-hours were used in October. g. Jobs costing $520,000 according to their job cost sheets were completed during October and transferred to Finished Goods. h. Jobs that had cost $480,000 to complete according to their job cost sheets were shipped to customers during the month. These jobs were sold on account at 25% above cost. Required: 1. Prepare journal entries to record the transactions given above. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant transactions from above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $42,000.
1) a) raw materials 210,000 accts payable 210,000 b) WIP 178,000 MOH 12,000 RM 190,000 c) WIP 90,000 MOH 110,000 sal and wages pay 200,000 d) MOH 40,000 accum dep 40,000 e) MOH 70,000 accts pay 70,000 f) WIP 240,000 MOH 240,000 (30,000 MH x 8/MH) g) FG 520,000 WIP 520,000 h) accts rec 600,000 sales 600,000 (480,000 x 1.25) 2. MOH: credits: (b) 12,000 (c) 110,000 (d) 40,000 (e) 70,000 debits: (f) 240,000 end bal 8,000 (overapplied OVH) WIP: credits: beg bal 42,000 (b) 178,000 (c) 90,000 (f) 240,000 debits: (g) 520,000 end bal 30,000
Bunnell Corporation is a manufacturer that uses job-order costing. On January 1, the company's inventory balances were as follows: Raw materials $ 40,000 Work in process $ 18,000 Finished goods $ 35,000 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company's predetermined overhead rate of $16.25 per direct labor-hour was based on a cost formula that estimated $650,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year: a. Raw materials were purchased on account, $510,000. b. Raw materials used in production, $480,000. All of the raw materials were used as direct materials. c. The following costs were accrued for employee services: direct labor, $600,000; indirect labor, $150,000; selling and administrative salaries, $240,000. d. Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $367,000. e. Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $500,000. f. Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year. g. Jobs costing $1,680,000 to manufacture according to their job cost sheets were completed during the year. h. Jobs were sold on account to customers during the year for a total of $2,800,000. The jobs cost $1,690,000 to manufacture according to their job cost sheets. 1) what is the journal entry to record labor costs incurred during the year? 2) what is the ending balance in WIP? 3) what is the total amount of act MOH cost incurred during the year? 4) is manufacturing overapplied or underapplied for the year? by how much?
1) journal entry: WIP 600,000 MOH 150,000 selling and admin salaries 240,000 wages payable 990,000 2) ending balance in WIP: credits: beg bal 18,000 (b) 480,000 (c) 600,000 (f) 666,250 debits: (g) 1,680,000 end bal. 84,250 3) total actual MOH cost: indirect labor 150,000 dep., ins., utilities 500,000 total act MOH cost 650,000 4) overapplied overhead actual MOH 650,000 MOH applied 666,250 overapplied MOH (16,250)
sigma corp applies overhead to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of 5,000 for DM, 8,000 for DL, and 6,000 for OVH. Job W, which is still in process at year-end, shows charges of 2,500 for DM and 4,000 for DL. 1) should any overhead cost be applied to Job W at year-end? If so, how much? 2) how much will the costs included in Job W's job cost sheet be reported within sigma corp's financial statements at the end of the year?
1) yes, overhead should be applied to Job W at year-end. because 6,000 of overhead was applied to Job V on the basis of 8,000 of DLC, the company's predet overhead rate must be 75% of DLC. job W direct labor cost = 4,000 predet ovh rate = .75 manuf ovh applied to job W = 3,000 2) direct materials (2,500), direct labor (4,000), and applied ovh (3,000) for Job W will be included in work in process on sigma corp's balance sheet
job-order costing
1. many different products are produced each period 2. products are manufactured to order (many service industries use this) 3. the unique nature of each order requires tracing and allocating costs to each job and maintaining cost records for each job
beg WIP inventory 1,300 materials costs 13,400 conversion costs 5,500 % complete materials 75% % complete conversion 20% units started 10,000 units transfered 8,900 materials costs added 172,500 conversion costs added 242,500 ending WIP inventory 2,400 % complete materials 90% % complete conversion 30% what is the cost per equivalent units for materials?
16.81 units transfered = 8,900 end WIP materials = 2,400 x 90% = 2,160 equivalent units = 8,900 + 2,160 = 11,060 cost of beg WIP = 13,400 costs added = 172,500 total costs = 13,400 + 172,500 = 185,900 cost per unit = 185,900 / 11,060 = 16.81
dehner corp total DLHs 70,000 fMOH 273,000 vMOH 6/DLH units 50 total DLHs 100 DM 680 DLC 7,000 unit product cost = ?
173.4 predet rate = [273,000 + (6 x 70,000)] / 70,000 = 9.9 total cost of job: 9.9 x 100 = 990 990 + 680 + 7000 = 8,670 unit cost = 8,670 / 50 = 173.4
bims corp uses weighted-average method beg inventory 2,600 units -> 70% complete 62,500 units added end inventory 21,000 -> 60% complete what were the equivalent units for conversion costs
56,700 TO = BB + TI - EB TO = 2,600 + 62,500 - 21,000 = 44,100 44,100 + (21,000 x .6) = 56,700
A Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year: Beginning inventories: Finished goods $30,000 Estimated total manufacturing overhead at the beginning of the year $600,000 Estimated direct labor-hours at the beginning of the year 50,000 Results of operations: Actual direct labor-hours 48,000 Manufacturing overhead:Indirect labor cost $200,000 Other manufacturing overhead costs incurred $300,000 Selling and administrative: Selling and administrative salaries $200,000 Other selling and administrative expenses $300,000 Cost of goods manufactured $1,000,000 Sales revenue $2,500,000 Cost of goods sold (unadjusted) $1,500,000 The net operating income is:
576,000 predet OVH = 600,000/50,000 = 12.00/DLH OVH applied = 12.00*48,000 = 576,000 act MOH incurred (200,000+300,000) = 500,000 MOH app to WIP = 576,000overapplied MOH = 76,000unadj COGS = 1,500,000overapplied MOH = 76,000adj COGS = 1,424,000 sales = 2,500,000 COGS = 1,424,000 gross margin = 1,076,000 selling/admin salaries = 200,000 selling/admin exp = 300,000 net op income = gross margin - selling/adminnet op income = 576,000
awtis corp has a margin of safety of 25% of sales. the breakeven point is 320,400 and the vExp are 45% of sales. what is the act profit?
58,740 CM ratio = 1 - v exp ratio CM ratio = .55 breakeven = f exp / CM ratio 320,000 = f exp / .55 f exp = 320,000 x .55 = 176,220 margin of safety in $ = sales - breakeven margin of safety % = margin of safety in $ / sales margin of safety % = 1 - breakeven sales / sales sales = breakeven / (1 - margin of safety %) sales = 320,000 / (1 - .25) = 427,200 profit = (CM ratio x sales) - f exp = (.55 x 427,200) - 176,220 = 58,740
moyas corp sells a product for $20/unit. last year sales were $255,000 and net income was $69,000. if fixed expenses totaled 84,000, the breakeven point in unit sales was
7,000 unit sales = 255,000 / 20 = 12,750 units breakeven = fExp / CM per unit CM per units = units sales - unit vExp vExp =255,000 -(69,000 + 84,000) = 102,000 CM ratio = (255,000 - 102,000) / 255,000 = .6 CM/unit = 20*.6 = 12/unit breakeven = 84,000 / 12 = 7,000
ferkil corp has a product selling price of $30. f exp are 63,000. company must sell 7,000 units to breakeven. with a target profit of 13,500, what should the sales in units be
8,500 units to breakeven = f exp / unit CM 7,000 units = 63,000 / unit CM unit CM = 63,000 / 7,000 = 9/unit unit sales to attain target profit = (target profit + f exp) / unit CM = (13,500 + 63,000) / 9 = 76,500 / 9 = 8,500
darden corp uses weighted-avg method in its process costing system welding dept: beg inventory 18,200 -> 10% complete conv cost $16,700 additional 85,000 units end inventory 18,000 -> 70% complete total of 837,880 in conv costs the cost per equiv unit is
8.738 TO = BB + TI - EB TO = 18,200 + 85,000 - 18,000 = 85,200 units transferred to the next dept 85,200 end WIP (18,000 x 70%) 12,600 equivalent units 97,800 cost of beg WIP 16,700 costs added 837,880 total cost 854,580 cost/equiv unit (854,580 / 97,800) = 8.738
sabv corp's breakeven in sales is $980,000 and its vExp are 70% of sales. if the company lost $48,000 last year, sales must have been
820,000 vExp = 980,000 - 686,000 = 294,000 OR CM ratio = 1 - vExp ratio (.7) = .3 dollar sales to breakeven = fExp / CM ratio 980,000 = fExp / .3 fExp = 980,000 x .3 = 294,000 profit = (CM ratio x sales) - fExp -48,000 = (.3 x sales) - 294,000 sales = (fExp - profit) / CM ratio sales = (294,000 - 48,000) / .3 = 820,000
last year Easton corp reported sales of 760,000, CM ratio of 20%, and net loss of 28,000. based on this info, breakeven point was
900,000 breakeven = f exp / CM per unit or CM ratio CM = .2 x 760,000 = 152,000 CM = sales - v exp 152,000 = 760,000 - v exp vExp = 608,000 f exp = 152,000 + 28,000 = 180,000 breakeven = f exp / CM per unit or ratio breakeven = 180,000 / .2 = 900,000
in the schedule of COGm and COGS, the COGm is computed according to what equation
COGm = total manuf costs + beg WIP - end WIP (TO = BB + TI - EB)
direct manuf costs
DM + DL
product cost formula
DM + DL + MOH
COGS =
beg FG + COGm - end FG
COGm =
beg WIP + total manuf costs - end WIP
the adjustment for overapplied overhead _________ and _________
decreases COGS and increases net operating income
coversion costs
direct labor + manufacturing overhead
prime cost
direct materials + direct labor
the three main manuf product cost flow accounts
direct/raw materials, WIP, FG
activity rate
est OVH cost / total expected activity
predet OVH =
est hours x variable overhead rate + fixed overhead
factory grounds management and utilities maintenence would be considered a
facility level activity
breakeven =
fixed exp / CM per unit
overhead applied under activity-based costing
for each cost pool: est OVH / total exp activity = activity rate
the adjustment for underapplied overhead __________ and ___________
increases COGS and decreases net operating income
if manufacturing overhead is underapplied, then the amount of manufacturing overhead cost applied to WIP is _________ than the actual manufacturing overhead cost incurred
less
equivalent units of production =
units transferred to the next department or to finished goods + equivalent units in ending WIP inventory
indirect manufacturing costs
variable MOH + fixed MOH
variable costs vs fixed costs
varies in total but is constant per unit constant in total but varies per unit
t charts
work in process manuf overhead raw materials
in a job-order costing system, actual overhead cost is usually recorded as a debit to
work in process inventory
in a job-order costing system, direct labor cost is usually recorded as a debit to
work in process inventory
in a job-order costing system, direct material cost is usually recorded as a debit to
work in process inventory
in a job-order costing system, manufacturing overhead applied is recorded as a debit to
work in process inventory