Managerial Accounting Persuasive

The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2014.

Raw Materials

Factory Insurance

$ 4600
Inventory 7/1/13

$ 48000

Factory Machinery

Raw Materials

Depreciation

16,000
Inventory 6/30/14

39,600

Factory Utilities

27,600
Finished Goods

Office Utilities Expenses

8,650
Inventory 7/1/13

96,000

Sales Revenue

534,000
Finished Goods

Sales Discounts

4,200
Inventory 6/30/14

75,900

Plant Manager’s Salary

58,000
Works in Process

Factory Property Taxes

9,600
Inventory 7/1/13

19,800

Factory Repairs

1,400
Work in Process

Raw materials Purchases

96,400
Inventory 6/30/14

18,600

Cash

32,000
Direct Labor

139,250

Indirect Labor

24,460

Account Receivable

27,000

Instructions
Prepare a cost of goods manufactured schedule (Assume all raw materials used were direct material)

1) Prepare an income statement through gross profit.

2) Prepare the current assets section of the balance sheet at June 30, 2014.

CHAPTER 2 (Job Order Costing)

P2-4A
Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K.In establishing the predetermined overhead rates for 2014, the following estimates were made for the year.

Department

Manufacturing overhead

$1,200,000

$1,500,000

$900,000
Direct labor costs

$1,500,000

$1,250,000

$450,000
Direct labor hours

100,000

125,000

40,000
Machine hours

400,000

500,000

120,000

During January, the job cost sheets showed the following costs and production data.

Department

Direct materials used

$140,000

$126,000

$78,000
Direct labor costs

$120,000

$110,000

$37,500
Manufacturing overhead incurred

$99,000

$124,000

$79,000
Direct labor hours
8,000

11,000

3,500
Machine hours
34,000

45,000

10,400

Instructions
a) Compute the predetermined overhead rate for each department. b) Compute the total manufacturing costs assigned to jobs in January in each department. c) Compute the under-or over applied overhead for each department at January 31.

CHAPTER 3 (Process Costing)

P3-2A
Rosenthal Company manufactures bowling balls through two processes: Molding and Packaging .In the Molding Department, the urethane, rubber, plastic and other materials are molded into bowling balls. In the Packaging Department the balls are placed in cartons and sent to the finished goods warehouse. All materials are entered at the beginning of each process. Labor and manufacturing overhead are incurred uniformly throughout each process. Production and cost data for the Molding Department during June 2014 are presented below.

Production Data

June
Beginning work in process units

-0-
Units started into production

22,000
Ending work in process units

2,000
Percent complete –ending inventory

40%

Cost Data

Materials

$ 198000
Labor

53,600
Overhead

112,800
Total

$ 364, 4000

Instructions
a) Prepared a schedule showing physical units of production
b) Determine the equivalent units of production for materials and conversion costs. c) Compute the unit costs of production.
d) Determine the costs to be assigned to the unit transferred out and in process for June. e) Prepare a production cost report for the Molding Department for the month of June.

CHAPTER 4 (Activity-Based Costing)

P4-1A
Fire Out, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers ;(1) a home fire extinguisher and (2) a commercial fire extinguisher .The home model is a high volume (54,000 units), half –gallon cylinder that holds 2 1/ 2 pounds of multi-purpose dry chemical at 480 PSI.The commercial model is a low –volume 910, 2000 units), two-gallon cylinder that holds 10 pounds of multipurpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total annual direct labor hours are 96,300 or {1.5hrs.X (54,000+10, 2000)}.Expected annual manufacturing overhead is $1,557,480.Thus, the predetermined overhead rate is $16.17 OR ($1,557,480 /96,300) per direct labor hour. The direct materials cost per unit is $18.50 for the home model and $26.50 for the commercial model. The direct labor cost is $ 19 per unit for both the home and the commercial models. The company’s managers identified six activity cost pools and related cost drivers and accumulated overhead by costs pool as follows.

Expected Use of Drivers by Product
Activity Cost Pools

Cost Drivers

Estimated  Overhead

Expected use  of cost drivers

Home

Commercial Receiving

Pounds

$ 70350

335,000

215,000

120,000
Forming

Machine hours

150,500

35,000

27,000

8,000
Assembling

Number of parts

412,300

217,000

165,000

52,000
Testing

Number of tests

51,000

25,500

15,500

10,000
Painting

Gallon

52,580

5,258

3,680

1,578
Packing and shipping

Pounds

820,750

335,000

215,000

120,000

Instructions
a) Under traditional product costing, compute the total unit cost of each product. Prepare a simple comparative schedule of the individual costs by product (Similar to Illustration 4-10).
b) Under ABC, prepare a schedule showing the computations of the activity –Based overhead rates)per cost driver) c) Prepare a schedule assigning each activity’s overhead cost pool to each product based on the use of cost drivers (Include a computation of overhead cost per unit, rounding to the nearest cent. d) Compute the total cost per unit for each product under ABC. e) Classify each of the activities as a value added activity or non value added activity. f) Comment on (1) the comparative overhead cost per unit for the two products under ABC, and (2) the comparative total costs per unit under traditional costing and ABC. CHAPTER 5 (Cost-Volume –Profit Analysis)

E5-3
The controller of Furgee Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.

Month

Total
Maintenance Costs

Total
Machine Hours
January

$2,500

300
February

3,000

350
March

3,600

500
April

4,500

690
May

3,200

400
June

4,900

700

Instructions
a) Determine the fixed –and variable –cost components using the high-low method. b) Prepare a graph showing the behavior of maintenance costs, and indentify the fixed-and variable –cost elements. Use 100 hour increments and $ 1,000 cost increments.

E5-9
The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $ 60 a night. Operating costs are as follows.

Salaries

$6,200
per month
Utilities

$1,100
per month
Depreciation

$1,000
per month
Maintenance

$100
per month
Maid services

$11
per room
Other costs

$28
per room

Instructions
Determine the inn’s break –even point in (a) number of rented rooms per month and (b) dollars.