Solution to Chapter 3 E3‐23,24,26,28,30, E3‐38,31,33, P3‐45 EXERCISE 3-23 (10 MINUTES)
1. Process
2. Job-order
3. Job-order (contracts or projects)
4. Process
5. Process
6. Job-order
7. Process
8. Job-order (contracts or projects)
9. Process
10. Job-order
EXERCISE 3-24 (20 MINUTES)
1.
Raw-material inventory, January 1.........................................................................
Add: Raw-material purchases.................................................................................
Raw material available for use................................................................................
Deduct: Raw-material inventory, January 31 ........................................................
Raw material used in January.................................................................................
Direct labor ...............................................................................................................
Total prime costs incurred in January ...................................................................
2.
Total prime cost incurred in January ..................................................................... $651,300
Applied manufacturing overhead (70% × $390,000)............................................. 273,000
Total manufacturing cost for January.................................................................... $924,300
$174,200
248,300
$422,500
161,200
$261,300
390,000
$651,300
EXERCISE 3-24 (CONTINUED)
3.
Total manufacturing cost for January....................................................................$ 924,300
Add: Work-in-process inventory, January 1.......................................................... 305,500
Subtotal.....................................................................................................................$1,229,800
Deduct: Work-in-process inventory, January 31 .................................................. 326,300
Cost of goods manufactured ..................................................................................$ 903,500
4.
Finished-goods inventory, January 1 ....................................................................$ 162,500
Add: Cost of goods manufactured ......................................................................... 903,500
Cost of goods available for sale .............................................................................$1,066,000
Deduct: Finished-goods inventory, January 31 .................................................... 152,100
Cost of goods sold...................................................................................................$ 913,900
Since the company accumulates overapplied or underapplied overhead until the end of
the year, no adjustment is made to cost of goods sold until December 31.
5.
Applied manufacturing overhead for January ...................................................... $273,000
Actual manufacturing overhead incurred in January........................................... 227,500
Overapplied overhead as of January 31 ................................................................ $ 45,500
The balance in the Manufacturing Overhead account on January 31 is a $45,500 credit
balance.
NOTE: Actual selling and administrative expense, although given in the exercise, is
irrelevant to the solution.
EXERCISE 3-26 (15 MINUTES)
1.
Applied manufacturing overhead
= total manufacturing costs 30%
= $1,250,000 30%
= $375,000
Applied manufacturing overhead
= direct-labor cost 80%
Direct-labor cost = applied manufacturing overhead 80%
= $375,000 .8
2.
= $468,750
Direct-material used = total manufacturing cost
– direct labor cost
– applied manufacturing overhead
= $1,250,000 – $468,750 – $375,000
= $406,250
3.
Let X denote work-in-process inventory on December 31.
Total
manufacturing
cost
+
$1,250,000
+
work-in-process
inventory,
–
Jan. 1
.75X
–
work-in-process
inventory,
Dec. 31
X
=
cost of
goods
manufactured
= $1,212,500
.25X = $1,250,000 – $1,212,500
X = $150,000
Work-in-process inventory on December 31 amounted to $150,000.
EXERCISE 3-28 (15 MINUTES)
1.
(a)
At 100,000 chicken volume:
(b)
At 200,000 chicken volume:
(c)
At 300,000 chicken volume:
2. The predetermined overhead rate does not change in proportion to the change in
production volume. As production volume increases, the $150,000 of fixed
overhead is allocated across a larger activity base. When volume rises by 100%,
from 100,000 to 200,000 chickens, the decline in the overhead rate is 45.45%
[($1.65 – $.90)/$1.65]. When volume rises by 50%, from 200,000 to 300,000
chickens, the decline in the overhead rate is 27.78% [($.90 – $.65)/$.90].
EXERCISE 3-30 (20 MINUTES)
1.
Raw-Material Inventory
295,100
226,200
68,900
Wages Payable
421,200
Manufacturing Overhead
234,000
2.
Work-in-Process Inventory
23,400
226,200
421,200
234,000
156,000
748,800
Sales Revenue
253,500
Finished-Goods Inventory
39,000
156,000
171,600
23,400
Accounts Receivable
253,500
Cost of Goods Sold
171,600
JAY SPORTS EQUIPMENT COMPANY, INC.
PARTIAL BALANCE SHEET
AS OF DECEMBER 31, 20X2
Current assets
Cash ........................................................................................................................
XXX
Accounts receivable..............................................................................................
XXX
Inventory
Raw material......................................................................................................$ 68,900
Work in process................................................................................................ 748,800
Finished goods ................................................................................................. 23,400
JAY SPORTS EQUIPMENT COMPANY, INC.
PARTIAL INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X2
Sales revenue........................................................................................................... $253,500
Less: Cost of goods sold........................................................................................ 171,600
Gross margin ........................................................................................................... $ 81,900
EXERCISE 3-38 (15 MINUTES)
Work-in-Process Inventory: Tanning Department ..................................... 11,000a
Manufacturing Overhead ...................................................................
a11,000
= 25 sets x 110 sq. ft. x $4 per sq. ft.
Work-in-Process Inventory: Assembly Department .................................. 1,100b
Manufacturing Overhead ...................................................................
b$1,100
1,100
= 25 sets x 4 MH x $11 per MH
Work-in-Process Inventory: Saddle Department ....................................... 5,625c
Manufacturing Overhead ...................................................................
c$5,625
11,000
5,625
= 25 sets x 45 DLH x $5 per DLH
EXERCISE 3-31 (20 MINUTES)
1.
2.
Raw material:
Beginning inventory ...................................................................................
Add: Purchases ..........................................................................................
Deduct: Raw material used........................................................................
Ending inventory ........................................................................................
$142,000
?
652,000
$162,000
Therefore, purchases for the year were ...................................................
$672,000
Direct labor:
Total manufacturing cost...........................................................................
Deduct: Direct material ..............................................................................
Direct labor and manufacturing overhead ...............................................
$1,372,000
652,000
$ 720,000
Direct labor + manufacturing overhead
Direct labor + (60%) (direct labor)
(160%) (direct labor)
=
=
=
$720,000
$720,000
$720,000
Direct labor
=
$720,000
1.6
Direct labor
3.
=
$450,000
Cost of goods manufactured:
Work in process, beginning inventory .................................................
Add: Total manufacturing costs............................................................
Deduct: Cost of goods manufactured ..................................................
Work in process, ending inventory.......................................................
$ 160,000
1,372,000
?
$ 60,000
Therefore, cost of goods manufactured was .......................................
$1,472,000
EXERCISE 3-31 (CONTINUED)
4.
Cost of goods sold:
Finished goods, beginning inventory.......................................................
Add: Cost of goods manufactured............................................................
Deduct: Cost of goods sold.......................................................................
Finished goods, ending inventory ............................................................
$ 180,000
1,472,000
?
$ 220,000
Therefore, cost of goods sold was ...........................................................
$1,432,000
EXERCISE 3-33 (20 MINUTES)
NOTE: Budgeted sales revenue, although given in the exercise, is irrelevant to the
solution.
1.
Predetermined overhead rate
=
(a)
= $32.50 per machine hour
(b)
= $26.00 per direct-labor hour
(c)
=
$2.00 per direct-labor dollar or 200%
of direct-labor cost
*Budgeted direct-labor cost = 25,000 × $13
2.
Actual
manufacturing
overhead
–
applied
manufacturing
overhead
=
overapplied or
underapplied
overhead
(a)
$690,000 – (22,000)($32.50)
=
$25,000 overapplied overhead
(b)
$690,000 – (26,000)($26.00)
=
$14,000 underapplied overhead
(c)
$690,000 – ($364,000†)(200%)
=
$38,000 overapplied overhead
†Actual
direct-labor cost = 26,000 × $14
PROBLEM 3-45 (25 MINUTES)
The completed T-accounts are shown below. (Missing amounts in problem are italicized.)
Raw-Material Inventory
29,400
189,000 168,000
Bal. 12/31
50,400
Bal. 1/1
Work-in-Process Inventory
Bal. 1/1
23,800
Direct
168,000
material
Direct
210,000 1,005,200
labor
Mfg.
630,000
overhead
Bal. 12/31
26,600
Manufacturing Overhead
633,500 630,000
Wages Payable
2,800 Bal. 1/1
205,800
210,000
7,000 Bal. 12/31
Accounts Payable
3,500 Bal. 1/1
191,100
189,000
1,400 Bal. 12/31
Finished-Goods Inventory
Bal. 1/1
16,800
1,005,200 994,000
Bal. 12/31
28,000
Cost of Goods Sold
994,000
Sales Revenue
1,134,000
Accounts Receivable
Bal. 1/1
15,400
1,134,000 1,128,400
Bal. 12/31
21,000