Accounting Revision Package Questions

Revision Package Questions. E2-7 Crawford Corporation incurred the following transactions. 1. Purchased raw materials on account $46,300. 2. Raw materials of $36,000 were requisitioned to the factory. An analysis of the materials requisition slips indicate that $6,800 as classified as indirect materials. 3. Factory labor costs incurred were $59,900, of which $51,000 pertained to factory wages payable and $8,900 pertained to employer payroll taxes payable. 4. Time tickets indicated that $54,000 was direct labor and $5,900 was indirect labor. 5. Manufacturing overhead costs incurred on account were $80,500. 6. Depreciation on the company’s office building was $8,100. 7. Manufacturing overhead was applied at the rate of 150% of direct labor cost. 8. Goods costing $88,000 were completed and transferred to finished goods. 9. Finished goods costing $75,000 to manufacture were sold on account for $103,000. Instructions Journalize the transactions. (Omit explanations.) P2-1A Lott Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2017, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job 49 had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the Raw Materials Inventory account. During the month of January, Lott Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000 and $158,000, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $90,000 on account. 2. Incurred factory labor costs of $70,000. Of this amount $16,000 related to employer payroll taxes. 3. Incurred manufacturing overhead costs as follows: indirect materials $17,000, indirect labor $20,000, depreciation expense on equipment $12,000, and various other manufacturing overhead costs on account $16,000. 4. Assigned direct materials and direct labor to jobs as follows. Job No. Direct Materials Direct Labour 50 $10,000 $ 5,000 51 39,000 25,000 52 30,000 20,000 Instructions (a) Calculate the predetermined overhead rate for 2017, assuming Lott Company estimates total manufacturing overhead costs of $840,000, direct labor costs of $700,000, and direct labor hours of 20,000 for the year. (b) Open job cost sheets for Jobs 50, 51, and 52. Enter the January 1 balances on the job cost sheet for Job 50. (c) Prepare the journal entries to record the purchase of raw materials, the factory labor costs incurred, and the manufacturing overhead costs incurred during the month of January. (d) Prepare the journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning manufacturing over-head costs, use the overhead rate calculated in (a). Post all costs to the job cost sheets as necessary. (e) Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month. (f)Prepare the journal entry (or entries) to record the sale of any job(s) during the month. (g) What is the balance in the Finished Goods Inventory account at the end of the month? What does this balance consist of? (h) What is the amount of over- or underapplied overhead? P3-3A Thakin Industries Inc. manufactures dorm furniture in separate processes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows. Cutting Department $9.00 $8.00 (a) Prepare 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 units transferred out and in process for June. (e) Prepare a production cost report for the Molding Department for the month of June. P3-3A Thakin Industries Inc. manufactures dorm furniture in separate processes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows. Production Data—July CUTTING DEPARTMENT Plant 1 T12-Tables Plant 2 C10-Chairs Work in process units, July 1 Units started into production 0 20,000 –0– 18,000 Work in process units, July 31 3,000 500 Work in complete process percent 60 80 Cost Data—July Work in process, July 1 –0– –0– Materials 380,000 $ 288,000 Labor 234,400 110,000 Overhead 104,000 104,800 Total $718,400 $502,800 Instructions (a) For each plant: (1) Compute the physical units of production. (2) Compute equivalent units of production for materials and for conversion costs. (3) Determine the unit costs of production. (4) Show the assignment of costs to units transferred out and in process. (b) Prepare the production cost report for Plant 1 for July 2017. P3-1A Fire Out Company manufactures its product, Vitadrink, through two manufactur- ing processes: Mixing and Packaging. All materials are entered at the beginning of each process. On October 1, 2017, inventories consisted of Raw Materials $26,000, Work in Process—Mixing $0, Work in Process—Packaging $250,000, and Finished Goods $289,000. The beginning inventory for Packaging consisted of 10,000 units that were 50% complete as to conversion costs and fully complete as to materials. During October, 50,000 units were started into production in the Mixing Department and the following transactions were completed. 1. Purchased $300,000 of raw materials on account. 2. Issued raw materials for production: Mixing $210,000 and Packaging $45,000. 3. Incurred labor costs of $278,900. 4. Used factory labor: Mixing $182,500 and Packaging $96,400. 5. Incurred $810,000 of manufacturing overhead on account. 6. Applied manufacturing overhead on the basis of $23 per machine hour. Machine hours were 28,000 in Mixing and 6,000 in Packaging. 7. Transferred 45,000 units from Mixing to Packaging at a cost of $979,000. 8. Transferred 53,000 units from Packaging to Finished Goods at a cost of $1,315,000. 9. Sold goods costing $1,604,000 for $2,500,000 on account. Instructions Journalize the October transactions. P4-1A Combat Fire, 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 (10,200 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 [1.5 hours 3 (54,000 1 10,200)]. Expected annual manu- facturing overhead is $1,584,280. Thus, the predetermined overhead rate is $16.45 or ($1,584,280 4 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 cost pool as follows. Expected Use of Drivers by Product Activity Cost Cost Drivers Pools Estimated Overhead Expected Use Home of Cost Drivers Commercial Receiving Pounds 80,400 335,000 215,000 120,000 Forming Machine hours 150,500 35,000 27,000 8,000 Assembling Number parts of 412,300 217,000 165,000 52,000 Testing Number tests of 51,000 25,500 15,500 10,000 Painting Gallons 52,580 5,258 3,680 1,578 837,500 335,000 215,000 120,000 Packing and Pounds shipping $1,584,280 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 4-3 on page 137). (b) Under ABC, prepare a schedule showing the computations of the activity-based over- head 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 a 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. E5-12 In 2016, Manhoff Company had a break-even point of $350,000 based on a selling price of $5 per unit and fixed costs of $112,000. In 2017, the selling price and the variable costs per unit did not change, but the break-even point increased to $420,000. Instructions (a) Compute the variable costs per unit and the contribution margin ratio for 2016. (b) Compute the increase in fixed costs for 2017 P5-4A Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new light- ing system and increased display space that will add $24,000 in fixed costs to the $270,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $24 per pair of shoes. Management is impressed with Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. Instructions (a) Compute the current break-even point in units, and compare it to the break-even point in units if Mary’s ideas are used. (b) Compute the margin of safety ratio for current operations and after Mary’s changes are introduced. (Round to nearest full percent.) (c) Prepare a CVP income statement for current operations and after Mary’s changes are introduced. (Show column for total amounts only.) Would you make the changes suggested?