Chapter 15: Exercises

Exercise 15-1: Defining Production Activities 1. 2. 3. 4. Cost Accounting System: A system that records manufacturing costs. Target Cost: The expected selling price of a job minus its desired profit. Job: Production activities for a custom product. Process Operation: Mass production in a continuous flow of steps. Exercise 15-2: Preparing Job Cost Sheet Prepare a job cost sheet for Job 9: • • • • Direct Materials: Sum of materials requisitions (from codes starting with "M"). Direct Labor: Sum of time tickets (from codes starting with "T"). Overhead: $1,400 (as provided). Total Cost: Direct Materials + Direct Labor + Overhead. Exercise 15-3: Interpreting Job Cost Sheets 1. Total Cost of Direct Materials Requisitioned: Sum direct materials costs across Jobs 102, 103, and 104. 2. Total Direct Labor Cost: Sum direct labor costs across Jobs 102, 103, and 104. 3. Total Cost Transferred to Finished Goods: Total cost of Jobs 102 and 103 (completed jobs). Exercise 15-4: Computing Cost per Unit 1. Total Cost per Unit for each job: o Total Cost of Job / Number of Units. 2. Direct Materials Cost per Unit for each job: o Direct Materials / Number of Units. Exercise 15-5: Record Materials Purchase and Use 1. Purchase of Raw Materials: o Debit Raw Materials Inventory; Credit Accounts Payable for purchase amount. 2. Direct Materials Used: Debit Work in Process Inventory; Credit Raw Materials Inventory. 3. Indirect Materials Used: o Debit Factory Overhead; Credit Raw Materials Inventory. o Exercise 15-6: Computing Job Costs and Gross Profit 1. Job Cost Sheets for Jobs 201 and 202: o Add up Direct Materials, Direct Labor, and Applied Overhead (80% of Direct Materials for each job). 2. Gross Profit on Job 201 Sale: o Sale Price - Total Cost of Job 201. Exercise 15-7: Recording Materials, Labor, Overhead, and Sales Prepare journal entries for transactions: • Purchases, Use of Materials (Direct and Indirect), Direct and Indirect Labor, Overhead Application, Transfer to Finished Goods, Sales, and Cost of Goods Sold based on Exercise 15-6 information. Exercise 15-8: T-Accounts for Manufacturing Activities Set up T-accounts for Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Factory Overhead, and Cost of Goods Sold and post entries from Exercise 15-7. Exercise 15-9: Recording Materials, Labor, and Overhead Prepare journal entries for: 1. Raw Materials Purchased: Debit Raw Materials Inventory; Credit Accounts Payable. 2. Direct Materials Used: Debit Work in Process Inventory; Credit Raw Materials Inventory. 3. Direct Labor Used: Debit Work in Process Inventory; Credit Factory Wages Payable. 4. Applied Overhead: Debit Work in Process Inventory; Credit Factory Overhead. Exercise 15-10: Recording Transactions for Job Costing and Inventory Balances 1. Journal Entries for Transactions in July: o Record Direct Materials, Direct Labor, Overhead Applied, Sale of Job 120, and Cost of Goods Sold. 2. July 31 Inventory Balances: o Work in Process Inventory: Balance of in-process Job 122. o Finished Goods Inventory: Includes Job 121 (completed but not sold). Exercise 15-11: Computing Inventory Balances and Over/Underapplied Overhead 1. Set up T-accounts for Raw Materials, Work in Process, Finished Goods to calculate ending balances. 2. Calculate Overapplied or Underapplied Overhead by comparing actual and applied overhead. Exercise 15-12: Computing Cost of Goods Manufactured 1. Use T-accounts to solve for Direct Materials Used, Direct Labor Used, Cost of Goods Manufactured, Cost of Goods Sold, and Overapplied or Underapplied Overhead based on provided data. Exercise 15-13 to 15-15: Recording Materials, Labor, and Overhead Prepare journal entries for: 1. Direct and Indirect Materials (Exercise 15-13). 2. Direct and Indirect Labor (Exercise 15-14). 3. Actual Overhead Costs and Applied Overhead (Exercise 15-15). Exercise 15-16: Manufacturing Cost Flows Compute the values of Direct and Indirect Materials, Direct and Indirect Labor, Cost of Goods Manufactured, and Cost of Goods Sold. Exercise 15-17: Overhead Rate and Job Cost Calculation 1. Predetermined Overhead Rate: $747,500 / $575,000. 2. Total Cost of Job 56: Add Direct Materials, Direct Labor, and Applied Overhead (based on rate from part 1). Exercise 15-18: Recording Job Order Costing Transactions Journalize transactions (a through h) to reflect Raw Materials, Direct and Indirect Materials, Labor, Overhead, Finished Goods Transfers, Sales, and Cost of Goods Sold. Exercise 15-19: Analyzing Work in Process Costs 1. Predetermined Overhead Rate based on direct materials cost. 2. Calculate Direct Labor and Applied Overhead for remaining job in process. Exercise 15-20 to 15-23: Computing Inventory Balances and Cost of Goods Sold Compute ending balances for Work in Process and Finished Goods Inventory, Cost of Goods Sold, and Gross Profit where applicable. Exercise 15-24: Cost of Goods Manufactured Schedule 1. Schedule of Cost of Goods Manufactured: List direct materials, direct labor, and overhead. 2. Gross Profit: Sales - Cost of Goods Sold. Exercise 15-25 to 15-27: Closing Over/Underapplied Overhead 1. Calculate the amount of overapplied or underapplied overhead. 2. Prepare closing entries to adjust Cost of Goods Sold for any over- or underapplied overhead. Exercise 15-28: Service Company Overhead Rate and Pricing 1. Overhead Rate: Estimated overhead / estimated grooming hours. 2. Total Cost for Job: Direct labor + applied overhead. 3. Quoted Price: Total cost + 25% markup. Exercise 15-29: Service Job Costing and Pricing 1. Calculate total cost for the architectural job. 2. Determine expected profit if bid is $285,000. 3. Calculate bid price needed to achieve an $80,000 target profit. Exercise 15-30: Service Job Gross Profit 1. Total Cost of Job: Direct labor + applied overhead (50% of direct labor). 2. Gross Profit: Revenue - Total Cost. Exercise 15-31: Gross Profit Ratio 1. Gross Profit Ratio = (Sales - COGS) / Sales for each year. 2. Compare to the industry average of 30%. 3. Analyze improvement or decline from prior year.