Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Answers to Questions
1.
A job order cost system is best suited to manufacturing operations
that produce distinct products or products that are produced in
distinct batches. Examples include buildings, ships, and airplanes. It is also suited to many service operations such as auditing and legal services.
2.
A process cost system is best suited to manufacturing operations
that produce homogeneous products in a continuous production
process. Examples include paint, gasoline, and soft drinks.
3.
In a job order cost system there are overhead costs that cannot be
directly traced to particular jobs. Indirect material, utilities, and
depreciation costs are examples of costs that are added together
and averaged over the products through the use of some common
measure of production. Averaging is used further in a job order
system when numbers of units on a particular job are organized into a batch. The total cost of the batch is divided by the number of
units in the batch to determine the average unit cost. In a process
cost system the per unit product cost is determined for each processing department by dividing the total product cost incurred in
the department by the number of units of product made in the department during some designated span of time. Accordingly, an
average unit cost is determined.
4.
A unit cost is determined for each processing department by dividing the department’s total production costs for the period by the
department’s total number of equivalent units for the period. The
unit cost of each department becomes the transferred-in unit cost
for the subsequent department. Accordingly, the production costs
of the preceding departments become a part of the production
costs of the subsequent departments. Ultimately, the final unit
cost is the unit cost determined for the last processing department. It is computed by dividing the total production costs incurred for all departments by the total number of equivalent units
in the last department.
12-1
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
5.
Ludwig can use a job order cost system to accumulate the costs
related to the special order. Job order and process cost systems
are not incompatible. Companies can use job order systems for
some products and a process cost system for other products.
6.
Job order cost systems require more documentation because cost
information must be traced to each specific job. In a process cost
system there is less tracing of costs to products and more averaging.
7.
Source documents provide accountants with initial data from operating departments such as production and warehouse. Examples of
source documents include material requisition forms and work tickets. Accountants use material requisition forms to identify the cost
of materials used and work tickets to identify additional cost of direct labor. Without the source documents, accountants are not able
to obtain the data needed for product costs.
8.
The subsidiary records for work-in-process inventory are called job
cost sheets. The materials, labor, and overhead costs for a job are
summarized on the job cost sheet.
9.
Indirect labor is normally recorded in the manufacturing overhead
account and allocated to work-in-process inventory using a predetermined overhead rate. Indirect labor is assigned to each job by
using the predetermined overhead rate to allocate overhead from
work-in-process to the job cost sheets kept for each job in production.
10. Depreciation on manufacturing equipment is recorded initially in
manufacturing overhead and accumulated depreciation. From the
overhead account, the cost is allocated to work-in-process using a
predetermined overhead rate. In a job order cost system the allocation is to one work-in-process account used to accumulate product
costs for the company’s jobs. It is then allocated from work-inprocess to the job cost sheets for each production job. Finally, it is
averaged across the products being produced on each job. In a
process cost system the allocation of depreciation from the overhead account goes to many different work-in-process accounts that
are used to accumulate production costs for each processing de-
12-2
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
partment. Within each department the cost is then averaged across
all products under production in the department during that period.
11.
Products that are distinctly different must be designed and manufactured separately, which makes continuous production in mass
quantities impossible. Under the circumstances, a process cost
system is not applicable.
12.
Videl should express the partially complete units as an equivalent
number of complete units prior to including them in the per unit
computation. For example, if 1,000 units were 25% complete, then
they could be included as 250 (i.e., 1,000 x .25) complete units.
13.
The company does not have 1,000 complete units. Only 600 units
are completed. If unit costs are based on 1,000 units, the unit cost
will be understated. The company will be including all the units
(the company has the equivalent of only 800 units) in the computation but only part of the costs. To get a more accurate unit cost
Bindon should convert the incomplete units to equivalent units. By
using equivalent units it will be matching units with production
costs.
14.
The weighted average method is a method used in process costing
to determine equivalent units. The method ignores the state of
completion of items in beginning inventory. They are assumed to
be 100% complete. The equivalent units adjustment is applied only
to units in ending inventory. Using this method can distort the accuracy of unit cost resulting in inaccuracies in the allocation of
production costs between departments. The method is frequently
used because of its simplicity and in many cases the results do not
differ significantly from more precise, but more complex, methods.
12-3
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
15.
The three primary steps in a process cost system are as follows:
a.
Determining the number of equivalent units – Incomplete units are
converted into equivalent units in order to obtain an accurate unit
cost.
Finding the cost per equivalent unit – Total production costs for
each department are divided by the total number of equivalent
units in that department.
Allocating production cost between departments – Total production costs for each department are allocated between those costs
that become the department’s ending work-in-process inventory
and those costs that will be transferred out to a subsequent department or finished goods. This allocation is completed by multiplying the cost per equivalent unit determined in part b by the
number of equivalent units in ending inventory and by the number
of units being transferred. The allocation of costs is necessary for
determining the final unit cost of product produced. The unit cost
is necessary for product pricing, for performance evaluation, and
for control purposes. It is also necessary for financial statement
purposes for determining ending inventory and cost of goods sold.
b.
c.
16.
Transferred-in costs are the production costs associated with
products that have been transferred into a department for further
processing or completion. Transferred-in costs consist of the material, labor, and overhead that have been added to the products up
to the point of transfer. The amount of transferred-in costs is determined by multiplying the cost per equivalent unit for the preceding department by the number of units being transferred out of the
preceding department.
17.
The transferred-in costs include the costs incurred by the departments preceding finishing and may have been incurred in preceding months. These costs were transferred out of the printing department at the end of February. They become the transferred-in
costs to the finishing department in the month of March.
12-4
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-1A
Type of Product
a. Apartment building
b. Automobile
Type of Cost System
Job-order
Process or hybrid for custom features
c. Hollywood movie
Job-order
d. Concorde aircraft
Job-order
e. Personal computer with special features Hybrid
f. Coffee table
Process
g. Plastic storage containers
Process
h. TV set
Process
i. Ship
Job-order
j. Boom box
Process
k. House
Job-order
l. Custom-made suit
Job-order
m. Van with custom features
Hybrid
n. CPA review course
Job-order
o. Shirts
Process
p. Pots and pans
Process
Exercise 12-2A
Maurice Company should use three different costing systems. Since the
standard bins constitute a uniform, relatively low-cost product, they are
suitable to a process cost system. The bins supplied to special order
customers involve alterations to the standardized product. Accounting
for these products could be easily accomplished by making minor adjustments to the process cost data. Even though these adjustments
would be minor, they must be maintained separately for each special
order customer. Accordingly, the accounting system needed would be a
hybrid system that includes components of a process system and a joborder system. Finally, the bins built for commercial customers constitute unique, expensive products for which separate records should be
maintained. As a result, a job-order system would be most appropriate
for the large commercial bins.
Exercise 12-3A
12-5
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
a.
Mr. Tang should use a job-order system. Each suit will be unique
requiring different amounts of materials and labor. The cost differences between suits appear to be significant. Accordingly, a joborder system is justified.
b.
Mr. Tang should use a predetermined overhead rate to estimate the
overhead cost for each suit. Estimated costs would be used during
the year. Differences between estimated and actual costs would be
charged to cost of goods sold at the end of the year.
c.
It is not appropriate for Mr. Tang to consider labor cost to be zero.
Mr. Tang incurs an opportunity cost by making suits. In other words,
if Mr. Tang were not making suits, he could be earning money by performing other tasks. The opportunity cost of labor should be included in the determination of the total cost of making a suit. Otherwise,
Mr. Tang will be underpaid for the work he performs. Indeed, if the
business is successful and grows beyond Mr. Tang’s ability to make
all of the suits himself, it will be necessary for him to hire help. Assuming a cost-plus pricing strategy, Mr. Tang’s customers would be
unhappy when they were required to pay more for suits made by Mr.
Tang’s employee. To avoid this type of problem, and to obtain a fair
price for services provided, Mr. Tang should include a charge for labor regardless of whether he or one of his employees actually does
the work.
d. Advertising, packaging, and delivery are selling and administrative
costs. In addition, a portion of the rent and utilities could be classified as selling and administrative costs. Only those costs incurred
to make the suits should be classified as product costs. The selling
and administrative costs should be considered when making pricing
decisions. However, the selling and administrative costs should not
be classified as product costs (i.e., be included in inventory) for financial reporting purposes. Selling and administrative costs are
down-stream costs that should be taken directly to the income
statement.
12-6
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-4A
a.
Assets
=
Equity
Work in
Finished
Manuf.
Com.
Ret.
Cash + Process + Goods +
OH = Stock +
Ear.
+
+
+
+
40,000
N/A
N/A
N/A
40,000
N/A
(5,100) +
5,100 +
N/A +
N/A
N/A +
N/A
(4,350) +
4,350 +
N/A +
N/A
N/A +
N/A
+
+
+
+
(6,600)
N/A
N/A
6,600
N/A
N/A
+
+
+
+
N/A
6,630
N/A
(6,630)
N/A
N/A
+
+
+
+
N/A
(16,080)
16,080
N/A
N/A
N/A
+
+
23,950
0 + 16,080 +
(30) = 40,000
N/A
12-7
Rev.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
–
–
–
–
–
–
–
–
Exp.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
=
=
=
=
=
=
=
=
Net Inc.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Cash Flow
N/A
(5,100) OA
(4,350) OA
(6,600) OA
N/A
N/A
(16,050)
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Predetermined manufacturing overhead rate:
$175,500/135,000 = $1.30 per direct labor hour
Applied manufacturing overhead for Boat 25:
$1.30 x 5,100 = $6,630
Items
Direct materials
Direct labor
Manufacturing overhead
Total product cost
Boat 25
$ 4,350
5,100
6,630
$16,080
b.
Desired Price = Total product cost + 20% of product cost
= $16,080 + $16,080 x 20%
= $19,296
c.
If the boat is not sold by the year end, the balances of work in
process and finished goods for Boat 25 would be $0 and
$16,080, respectively.
d.
The $16,080 is the estimated cost of the boat. The applied
overhead is an estimated amount based on estimated total
overhead and estimated total labor costs. While actual
overhead was $6,600, the estimated overhead was $6,630.
e.
It is appropriate to use estimated cost on the balance sheet
when the difference between applied and actual overhead is
insignificant. Under these circumstances any difference between applied and actual overhead would be closed directly
to cost of goods sold and inventory would be reported at estimated cost.
12-8
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-5A
a. & b.
Cash
$35,000
(1,500)
(2,000)
(900)
(700)
(3,600)
(1,800)
N/A
N/A
N/A
(2,379)
N/A
N/A
6,600
N/A
3,200
N/A
(1,500)
N/A
30,421
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Assets
=
Work in
Finished
Manuf.
Process + Goods +
OH =
N/A +
N/A +
N/A =
1,500 +
N/A +
N/A =
+
+
2,000
N/A
N/A =
900 +
N/A +
N/A =
+
700 +
N/A
N/A =
3,600 +
N/A +
N/A =
1,800 +
N/A +
N/A =
600 +
N/A
+
(600) =
360 +
N/A
+
(360) =
1,440 +
N/A
+ (1,440) =
N/A +
N/A
+ 2,379 =
(4,100) +
4,100 +
N/A =
(1,960) +
1,960 +
N/A =
N/A +
N/A +
N/A =
N/A + (4,100) + N/A =
N/A +
N/A +
N/A =
N/A + (1,960) +
N/A =
N/A
+
N/A +
N/A =
N/A
+
N/A +
21 =
6,840 +
0 +
0 =
12-9
Equity
Com.
Ret.
Stock + Ear.
35,000 +
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
+ 6,600
N/A
+ (4,100)
N/A
+ 3,200
N/A
N/A
+ (1,960)
N/A
+ (1,500)
N/A
+
21
35,000 + 2,261
Rev.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
6,600
N/A
3,200
N/A
N/A
N/A
9,800
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Exp.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4,100
N/A
1,960
1,500
(21)
7,539
= Net Inc.
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
6,600
= (4,100)
=
3,200
= (1,960)
= (1,500)
=
21
=
2,261
Cash Flow
N/A
(1,500) OA
(2,000) OA
(900) OA
(700) OA
(3,600) OA
(1,800) OA
N/A
N/A
N/A
(2,379) OA
N/A
N/A
6,600 OA
N/A
3,200 OA
N/A
(1,500) OA
N/A
(4,579)
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-5A (continued)
Items
Direct materials
Direct labor
Manufacturing overhead
Total product cost
Job 1
$2,000
1,500
600
$4,100
Job 2
$ 700
900
360
$1,960
Job 3
$1,800
3,600
1,440
$6,840
Total applied manufacturing overhead:
$600 + $360 + $1,440 = $2,400
Total applied MOH – Total actual MOH = Overapplied MOH
$2,400 – $2,379 = $21
c. Sales revenue – Cost of goods sold = Gross margin
($6,600 + $3,200) – ($4,100 + $1,960 – 21 ) = $3,761
Exercise 12-6A
a.
The cost of operating Condo 2 is shown below:
Direct labor
Operating costs
Overhead*
Total
$ 9,300
21,000
6,300
$36,600
*Predetermined overhead rate:
$20,250 / $67,500 = $0.30 per direct operating cost dollar.
$0.30 x 21,000 = $6,300
The amount of income earned from Condo 2 is $11,400 (i.e.,
$48,000  $36,600).
b.
Birchtree is a service business that does not produce inventory. Accordingly, no finished goods inventory balance will be
shown on the balance sheet.
12-10
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-7A
The cost of Project 730 is shown below:
Contract price
Cost of project
Gross profit
$380,000
?
$ 68,000
The cost of the Project is $312,000 (i.e., $380,000  $68,000).
The cost of raw materials used in Project 730 is shown below:
Materials
$
?
Labor
89,800
Overhead
128,000
Total
$312,000
The cost of raw materials is $94,200 (i.e., $312,000  $89,800 
$128,000).
12-11
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-8A
a.
Quantities
Beginning inventory
Units added to production
Total to be accounted for
Transferred to finished goods
Ending inventory
Total accounted for
(1)
Actual
200
800
1,000
600(1)
400
1,000
Equivalent Units
x 100%
x 75%
600
300
900
1,000  400 = 600
b.
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Transferred to finished
goods
Ending inventory
Total accounted for
Actual
200
800
1,000
600(1)
400
1,000
1,000  400 = 600
(2)
700  600 = 100
(3)
400 * X = 100; X = 25%
(1)
12-12
Equivalent Units
x 100%
x
25%(3)
600
100(2)
700
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-9A
a. and b.
Cost per Unit
Cost Accumulation
Beginning inventory
Transferred-in cost
Raw materials cost
Labor cost
Overhead cost
Total to be accounted for
$ 21,500
41,000
19,500
60,000
65,400
$207,400
Cost per unit
$207,400 ÷ 3,050
Part a: Cost Allocation
To finished goods (2,450* units x $68)
To ending inventory (600 equivalent units x $68)
Total allocated cost
*3,050  600 = 2,450
Part b: Cost Allocation
To finished goods (2,800 units x $68)
To ending inventory (250* equivalent units x $68)
Total allocated cost
*3,050  2,800 = 250
12-13
= $68
$166,600
40,800
$207,400
$ 190,400
17,000
$207,400
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-10A
a., b., and c.
Equivalent Units
Transferred to finished goods
Ending inventory
Total accounted for
4,200
450
4,650
Cost per Unit
Cost per equivalent unit
$657,000
x 100%
x 40%
÷ 4,380 = $150
Cost Allocation
To finished goods (4,200 units x $150)
To ending inventory (180 equivalent units x $150)
Total allocated cost
Exercise 12-11A
WIP Assembly
Bal.
118,000 684,000 Transferred-out
Transferred-in
?
Materials
144,000
Labor
170,000
Overhead
160,000
Bal.
82,000
$118,000+X+$144,000+$170,000+$160,000  $684,000 =$82,000
X = $174,000
12-14
4,200
180
4,380
$ 630,000
27,000
$ 657,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-12A
a.
b.
c.
d.
MCW is a service company. The company does not produce a
product that can be used at a future period. The value provided by MCW is consumed immediately.
A process cost system would be most appropriate for MCW.
The service provided is homogenous and relatively low cost.
There would be no value in accumulating costs for each individual car washed.
There would be no balance in work-in-process or finished
goods inventory. The service is consumed immediately rather
than being stored in inventory to be consumed at a later point
in time.
The primary costs incurred would be labor and overhead. The
amount of raw materials (i.e., cleaning supplies) would be relatively small.
12-15
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-13A a., b., and c.
Cash
10,000
(7,000)
N/A
(2,000)
N/A
(4,000)
N/A
(2,000)
N/A
N/A
N/A
N/A
N/A
9,000
N/A
(400)
(3,500)
N/A
100
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Raw. M.
N/A
7,000
(1,000)
N/A
(2,000)
N/A
(3,000)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1,000
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Assets
MOH
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1,000)
(2,000)
(1,000)
N/A
N/A
N/A
N/A
N/A
3,500
500
0
Items
Direct materials
Direct labor
Manufacturing overhead
Total product cost
+ W-I-P + F. Goods
+
N/A +
N/A
+
N/A +
N/A
+ 1,000 +
N/A
+ 2,000 +
N/A
+ 2,000 +
N/A
+ 4,000 +
N/A
+ 3,000 +
N/A
+ 2,000 +
N/A
+ 1,000 +
N/A
+ 2,000 +
N/A
+ 1,000 +
N/A
+ (8,000) + 8,000
+ (6,000) + 6,000
+ N/A +
N/A
+ N/A + (6,000)
+ N/A +
N/A
+
N/A +
N/A
+
N/A +
N/A
+ 4,000 + 8,000
Job 1
$1,000
2,000
1,000
$4,000
12-16
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Equity
C. Stk. + Ret. Ear.
10,000 + N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ 9,000
N/A
+ (6,000)
N/A
+
(400)
N/A
+
N/A
N/A
+
500
10,000 + 3,100
Job 2
$2,000
4,000
2,000
$8,000
Job 3
$3,000
2,000
1,000
$6,000
Rev.
–
Exp.
= Net Inc.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
9,000
N/A
N/A
N/A
N/A
9,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
6,000
400
N/A
(500)
5,900
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
9,000
(6,000)
(400)
N/A
500
3,100
Cash Flow
10,000 FA
(7,000) OA
N/A
(2,000) OA
N/A
(4,000) OA
N/A
(2,000) OA
N/A
N/A
N/A
N/A
N/A
9,000 OA
N/A
(400) OA
(3,500) OA
N/A
100
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-13A (continued)
d.
Cost of Goods Manf. and Sold
Beg. Raw Mat. Inv.
Purchases
Raw Mat. Avail.
End. Raw Mat. Inv.
Raw Mat. Used
Labor
Overhead
Total Manf. Costs
Beg. W-I-P Inv.
Total W-I-P Inv.
End. W-I-P Inv.
Cost of Goods Man.
Beg. Fin. Goods
Goods Available
End. Fin. Goods
Cost of Goods Sold
$
0
7,000
7,000
(1,000)
6,000
8,000
3,500
17,500
0
17,500
(4,000)
13,500
0
13,500
(8,000)
$ 5,500
Runner Manufacturing Corporation
Financial Statements for 2007
Income Statement
Balance Sheet
Sales Revenue
Cost of Goods Sold
Gross Margin
Selling and Admin.
Net Income
$9,000
(5,500)
3,500
(400)
$3,100
Assets
Cash
Raw Mat. Inv.
W-I-P Inv.
Fin. Goods Inv.
Total Assets
Equity
Common Stk.
Ret. Earnings
Total Equity
12-17
$
100
1,000
4,000
8,000
$13,100
$10,000
3,100
$13,100
Statement of Cash Flows
Oper. Activities
Inflow from Rev.
$ 9,000
Outflow for Inventory
(18,500)
Outflow for S & A Exp.
(400)
Net Outflow from Oper.
(9,900)
Investing Activities
0
Financing Activities
Inflow from Stock Issue
10,000
Net Change in Cash
100
Beginning Cash Balance
0
Ending Cash Balance
$ 100
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-14A a., b., and c.
Cash
6,000
(2,600)
N/A
(432)
N/A
(80)
(210)
N/A
N/A
1,050
N/A
(100)
N/A
3,628
+ Raw. M.
+ N/A
+
2,600
+ (2,400)
+
N/A
+ N/A
+
N/A
+
N/A
+ N/A
+ N/A
+
N/A
+ N/A
+
N/A
+ N/A
+
200
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Assets
MOH
N/A
N/A
N/A
N/A
(270)
80
210
N/A
N/A
N/A
N/A
N/A
(20)
0
Items
Direct materials
Direct labor
Manufacturing overhead
Total product cost
+ W-I-P + F. Goods
+
N/A +
N/A
+
N/A +
N/A
+ 2,400 +
N/A
+
432 +
N/A
+
270 +
N/A
+
N/A +
N/A
+
N/A +
N/A
+
(795) +
795
+ (1,325) +
1,325
+
N/A +
N/A
+
N/A +
(795)
+
N/A +
N/A
+
N/A +
N/A
+
982 +
1,325
Job 1
$600
120
75
$795
12-18
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Equity
C. Stk. + Ret. Ear.
6,000 + N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+
N/A
N/A
+
N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ 1,050
N/A
+
(795)
N/A
+
(100)
N/A
+
(20)
6,000 +
135
Job 2
$1,000
200
125
$1,325
Job 3
$800
112
70
$982
Rev.
–
Exp.
= Net Inc.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1,050
N/A
N/A
N/A
1,050
–
–
–
–
–
–
–
–
–
–
–
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
795
100
20
915
=
=
=
=
=
=
=
=
=
=
=
=
=
=
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1,050
(795)
(100)
(20)
135
Cash Flow
6,000 FA
(2,600) OA
N/A
(432) OA
N/A
(80) OA
(210) OA
N/A
N/A
1,050 OA
N/A
(100) OA
N/A
3,628
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-14A (continued)
d.
Cost of Goods Manf. and Sold
Beg. Raw Mat. Inv.
Purchases
Raw Mat. Avail.
End. Raw Mat. Inv.
Raw Mat. Used
Labor
Overhead
Total Manf. Costs
Beg. W-I-P Inv.
Total W-I-P Inv.
End. W-I-P Inv.
Cost of Goods Man.
Beg. Fin. Goods
Goods Available
End. Fin. Goods
Cost of Goods Sold
$
0
2,600
2,600
(200)
2,400
432
290
3,122
0
3,122
(982)
2,140
0
2,140
(1,325)
$ 815
Stewart Construction Company
Financial Statements for 2007
Income Statement
Balance Sheet
Sales Revenue
Cost of Goods Sold
Gross Margin
S & A Exp.
Net Income
12-19
$1,050
(815)
235
(100)
$ 135
Statement of Cash Flows
Assets
Oper. Activities
Cash
$3,628 Inflow from Rev.
Raw Mat. Inv.
200 Outflow for Inventory
W-I-P Inv.
982 Outflow for S & A Exp.
Fin. Goods Inv.
1,325 Net Outflow from Oper.
Total Assets
$6,135 Investing Activities
Financing Activities
Equity
Inflow from Stock Issue
Common Stk.
6,000 Net Change in Cash
Ret. Earnings
135 Beginning Cash Balance
Total Equity
$6,135 Ending Cash Balance
$1,050
(3,322)
(100)
(2,372)
0
6,000
3,628
0
$ 3,628
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-15A
a., b., and c.
Cash
Work-in-Process Cutting
(1) 100,000 (2)
30,000 (3)
12,000 (7)
24,000
(9)
60,000 (2)
800 (4)
20,000
(4)
56,400 (5)
10,000
(6)
12,800 Bal 18,000
(10)
6,000
Bal 54,000
(2)
Bal
Raw Materials
30,000 (3)
12,000
18,000
Work-in-Process Assemb.
Finished Goods
(4)
26,000 (8)
40,000 (8) 40,000 (9) 36,000
(5)
13,000
Bal 4,000
(7)
24,000
Bal 23,000
Common Stock
(1) 100,000
Retained Earnings
Cl
17,200
Cl
Production Supplies
(2)
800 (11)
600
Bal
200
Revenue
60,000 (9)
60,000
Cost of Goods Sold
(9) 36,000 Cl
36,800
(12)
800
Manufacturing Overhead
(4)
10,400 (5)
23,000
(6)
12,800 (12)
800
(11)
600
Bal
0
Selling & Admin. Exp.
(10) 6,000 Cl
6,000
12-20
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-15A (continued)
d.
Cost of Goods Manf. and Sold
Seating Corporation
Financial Statements for 2006
Income Statement
Balance Sheet
Beg. Raw Mat. Inv.
$
0 Sales Revenue
$60,000
Purchases
30,000 Cost of Goods Sold (36,800)
Raw Mat. Avail.
30,000 Gross Margin
23,200
End. Raw Mat. Inv.
(18,000) Sell & Admin. Exp.
(6,000)
Raw Mat. Used
12,000 Net Income
$17,200
Labor
46,000
Overhead
23,800
Total Manf. Costs
81,800
Beg. W-I-P Inv.
0
Total W-I-P Inv.
81,800
End. W-I-P Inv.
(41,000)
Cost of Goods Man. 40,800
Beg. Fin. Goods
0
Goods Available
40,800
End. Fin. Goods
(4,000)
Cost of Goods Sold $36,800
12-21
Assets
Cash
Production Sup.
Raw Mat. Inv.
W-I-P Inv.
Fin. Goods Inv.
Total Assets
Equity
Common Stk.
Ret. Earnings
Total Equity
Statement of Cash Flows
Oper. Activities
Inflow from Rev.
Outflow for Inventory
Outflow for Sell. & Adm.
Net Outflow from Oper.
Investing Activities
Financing Activities
Inflow from Stock Issue
Net Change in Cash
$100,000 Beginning Cash Balance
17,200 Ending Cash Balance
$117,200
$ 54,000
200
18,000
41,000
4,000
$117,200
$60,000
(100,000)
(6,000)
(46,000)
0
100,000
54,000
0
$54,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-16A
a., b., and c.
Bal
Cash
54,000 (1)
64,000 (1)
(3)
(5)
(9)
6,700
Bal
(1)
Bal
Raw Materials
18,000 (2)
13,400
40,000
44,600
Bal
(8)
40,000
1,300
47,000
14,600
8,400
Work-in-Process Cutting
Bal 18,000 (6)
30,000
(2)
13,400
(3)
22,000
(4)
11,000
Bal 34,400
Work-in-Process Assemb.
Finished Goods
Bal 23,000 (7)
60,000 Bal 4,000 (8)34,000
(3)
20,000
(7) 60,000
(4)
10,000
Bal 30,000
(6)
30,000
Bal 23,000
Common Stock
Bal 100,000
Retained Earnings
Bal 17,200
Cl
21,800
Bal 39,000
Revenue
Cl 64,000 (8)
64,000
Production Supplies
Bal
200 (10)
1,200
(1)
1,300
Bal
300
Cost of Goods Sold
(8) 34,000 (11)
200
Cl
33,800
Manufacturing Overhead
(3)
5,000 (4)
21,000
(5)
14,600
(10)
1,200
(11)
200
Bal
0
Selling & Admin. Exp.
(9) 8,400 Cl
8,400
12-22
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-16A (continued)
d.
Cost of Goods Manf. and Sold
Beg. Raw Mat. Inv.
Purchases
Raw Mat. Avail.
End. Raw Mat. Inv.
Raw Mat. Used
Labor
Overhead
Total Manf. Costs
Beg. W-I-P Inv.
Total W-I-P Inv.
End. W-I-P Inv.
Cost of Goods Man.
Beg. Fin. Goods
Goods Available
End. Fin. Goods
Cost of Goods Sold
$18,000
40,000
58,000
(44,600)
13,400
42,000
20,800
76,200
41,000
117,200
(57,400)
59,800
4,000
63,800
(30,000)
$33,800
Seating Corporation
Financial Statements for 2007
Income Statement
Balance Sheet
Sales Revenue
$64,000
Cost of Goods Sold (33,800)
Gross Margin
30,200
Sell & Admin. Exp.
(8,400)
Net Income
$21,800
Assets
Cash
Production Sup.
Raw Mat. Inv.
W-I-P Inv.
Fin. Goods Inv.
Total Assets
Equity
Common Stk.
Ret. Earnings
Total Equity
12-23
Statement of Cash Flows
Oper. Activities
Inflow from Rev.
Outflow for Inventory
Outflow for Sell. & Adm.
Net Outflow from Oper.
Investing Activities
Financing Activities
Net Change in Cash
Beginning Cash Balance
$100,000 Ending Cash Balance
39,000
$139,000
$
6,700
300
44,600
57,400
30,000
$139,000
$ 64,000
(102,900)
(8,400)
(47,300)
0
0
(47,300)
54,000
$ 6,700
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-17A
Cost of Production Report for Hamby Company
Schedule of Equivalent Units (a.)
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Transferred to finished goods
Ending inventory
Total accounted for
Actual
250
2,000
2,250
Equivalent Units
1,500 x 100%
750 x 60%
2,250
Cost per Unit (b.)
Cost Accumulation
Beginning inventory
Cost added to production
Total to be accounted for
$ 3,420
27,000
$30,420
Cost per unit
$30,420
Cost Allocation (c.)
To finished goods (1,500 units x $15.60)
To ending inventory (450 equivalent units x $15.60)
Total allocated cost
12-24
1,500
450
1,950
÷ 1,950 = $15.60
$23,400
7,020
$30,420
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-18A
Cost of Production Report for Kenny Company
Equivalent Units (a.)
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual
200
1,400
1,600
Transferred to finished goods
Ending inventory
Total accounted for
1,200
400
1,600
Cost per Unit (b.)
Cost Accumulation
Beginning inventory
Cost added to production
Total to be accounted for
$15,800
29,040
$44,840
Cost per unit
$44,840 ÷
Cost Allocation (c.)
To finished goods (1,200 units x $29.50)
To ending inventory (320 equivalent units x $29.50)
Total allocated cost
12-25
Equivalent Units
x 100%
x 80%
1,520
1,200
320
1,520
= $29.50
$35,400
9,440
$44,840
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-19A
Cost of Production Report for Collier Plastic Products, Inc.
Parts Department – 2006
Equivalent Units (a.)
Quantities:
Actual
Equivalent Units
Beginning inventory
1,000
Units added to production
5,000
Total to be accounted for
6,000
Transferred to the assembly department
Ending inventory
Total accounted for
4,500
1,500
6,000
Cost per Unit (b.)
Cost Accumulation
Beginning inventory
Cost added to production*
Total to be accounted for
$ 5,700
113,100
$118,800
Cost per unit
$118,800
x 100%
x 60%
÷ 5,400
Cost Allocation (c.)
To the assembly department (4,500 units x $22)
To ending inventory (900 equivalent units x $22)
Total allocated cost
*$52,000 (DM) + $47,000 (DL) + $14,100 (Applied MOH) = $113,100
12-26
4,500
900
5,400
= $22.00
$ 99,000
19,800
$118,800
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-19A (continued)
d.
Cash
Bal 200,000 (3)
(5)
Bal 138,900
Work-in-Process Parts
51,600 Bal
5,700 (6)
99,000
9,500 (2)
52,000
(3)
47,000
(4)
14,100
Bal 19,800
Bal
Raw Materials
Work-in-Process Assemb.
64,000 (2)
52,000 (6)
99,000
Bal
12,000
Bal
99,000
Production Supplies
Bal
1,000 (7)
1,000
Manufacturing Overhead
(3)
4,600 (4)
14,100
(5)
9,500 (8)
1,000
(7)
1,000
Bal
0
12-27
Cost of Goods Sold
(8)
1,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-20A
Cost of Production Report for Sparkle Cola Corporation
Mixing Department – 2005
Equivalent Units (a.)
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual
400,000
800,000
1,200,000
Transferred to the bottling department
Ending inventory
Total accounted for
Equivalent Units
600,000
600,000
1,200,000
Cost per Unit (b.)
Cost Accumulation
Beginning inventory
Cost added to production*
Total to be accounted for
$40,000
68,000
$108,000
Cost per unit
$108,000
x 100%
x 50%
600,000
300,000
900,000
÷ 900,000
= $0.12
Cost Allocation (c.)
To the bottling department (600,000 units x $.12)
To ending inventory (300,000 EQ units x $.12)
Total allocated cost
*$40,000 (DM) + $24,000 (DL) + $4,000 (MOH) = $68,000
12-28
$ 72,000
36,000
$108,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-20A (continued)
d.
Work-in-Process Mixing Work-in-Process Bottling
30,400 Bal 40,000 (8)
72,000 (8)
72,000
25,920 (3)
40,000
1,440 (4)
24,000
(5)
4,000
Bal 36,000
Bal
(1)
Cash
45,000 (2)
54,000 (4)
(6)
Bal
41,240
Bal
(2)
Bal
Raw Materials
14,800 (3)
40,000
29,600
4,400
Production Supplies
Bal
400 (9)
640
(2)
800
Bal
560
Manufacturing Overhead
(4)
1,920 (5)
4,000
(6)
1,440
(9)
640
Bal
0
12-29
Common Stock
Bal 100,200
(1)
54,000
Bal 154,200
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-21A
a.
Bellanca Corporation
Cost of Production Report
Conversion Department
For the month ended July 31, 2006
Equivalent Units
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual Units
50,000
200,000
250,000
Transferred to the finishing department
Ending inventory
Total accounted for
225,000
25,000
250,000
Cost per Unit
Cost Accumulation
Beginning inventory
Cost added to production
Total to be accounted for
$30,000
154,000
$184,000
Cost per unit
$184,000
Cost Allocation
To the finishing department (225,000 units x $0.80)
To ending WIP inventory (5,000 EQ units x $0.80)
Total allocated cost
12-30
Equivalent Units
X 100%
X 20%
225,000
5,000
230,000
÷ 230,000
= $0.80/EU
$180,000
4,000
$184,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-21A (continued)
b.
Bellanca Corporation
Cost of Production Report
Finishing Department
For the month ended July 31, 2006
Equivalent Units
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual Units
20,000
225,000
245,000
Transferred to the finished goods invent.
Ending inventory
Total accounted for
Equivalent Units
219,000
x 100%
219,000
26,000
245,000
x
6,500
225,500
Cost per Unit
Cost Accumulation
Beginning inventory
Cost transferred In
Cost added to production
Total to be accounted for
$ 24,000
180,000
44,050
$248,050
Cost per unit
$248,050
÷ 225,500 = 1.1/EU
Cost Allocation
To the finished goods inv. (219,000 units x $1.10)
To ending WIP inventory (6,500 EQ units x $1.10)
Total allocated cost
$240,900
7,150
$248,050
c.
Revenue
Cost of goods sold (218,000 x $1.1/EU)
Gross margin
12-31
25%
$327,000
239,800
$ 87,200
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-1B
Type of Product
a. Audit engagement
b. Shoes
c. Treadmill
d. Textbook
e. House
f. Oil
g. Luxury yacht
h. Special-order personal computer
i. Over-the-counter personal computer
j. Mouse pad for a computer
k. Aircraft carrier
l. Makeup sponge
m. Hand-held video game player
n. Generic coffee mug
o. Personalized coffee mug
p. Surgery
Type of Cost System
Job-Order
Process
Process
Job-Order
Job-Order
Process
Hybrid
Hybrid
Process
Process
Job-Order
Process
Process
Process
Hybrid
Job-Order
Exercise 12-2B
Morgan Corporation’s Knox Plant produces a weed-control chemical solution, Weed Terminator, in a continuous and uniform process. All bottles of Weed Terminator have the same content and
cost. For this type of production, a process cost system is the
most appropriate.
12-32
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-3B
a.
Even though the subject of each portrait Ms. Gill would draw is
different, the process and technique she uses is basically the
same. Ms. Gill could consider framing a separate product
which also follows a standard production procedure. Consequently, a process cost system is appropriate.
b.
Ms. Gill’s costs could include the following:
Direct materials:
Direct labor:
Manufacturing Overhead:
c.
paper, frame
Ms. Gill’s time for each portrait
lease cost for stand, paint, brush,
and pencils
Ms. Gill would have to do some marketing research to learn
what actually attracts customers so she could estimate the
number of portraits she would likely draw for customers in a
month. Price, quality, location, and an individual artist’s style
and personality could influence demand. She would have to
consider all such factors to make the best estimate for her own
business. After she operates her business for a couple of
months, Ms. Gill would be able to refine her estimate using actual market history. The refined estimate would provide a reasonable base for estimating overhead per portrait.
Total manufacturing overhead costs are the sum of the monthly
lease and the monthly costs of replacing various art supplies.
The manufacturing overhead rate is total monthly manufacturing overhead costs divided by the estimated number of portraits per month.
d.
Ms. Gill would be self-employed. Her time spent drawing
portraits is comparable to that of any other hired artist doing
the same work. Therefore, she would have labor cost.
12-33
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-4B
a.
Cash
40,000
(7,360)
(10,240)
(5,200)
(6,800)
(14,400)
N/A
N/A
N/A
28,000
N/A
24,000
+
+
+
+
+
+
+
+
+
+
+
+
+
Assets
Work in
Finished
Process + Goods
N/A
+
N/A
7,360 +
N/A
10,240 +
N/A
5,200 +
N/A
6,800 +
N/A
N/A
+
N/A
6,144 +
N/A
4,080 +
N/A
(23,744) + 23,744
N/A
+
N/A
N/A
+ (23,744)
16,080 +
0
=
+
+
+
+
+
+
+
+
+
+
+
+
+
Manuf.
OH
N/A
N/A
N/A
N/A
N/A
14,400
(6,144)
(4,080)
N/A
N/A
N/A
4,176
12-34
=
=
=
=
=
=
=
=
=
=
=
=
=
Equity
Com.
Stock
40,000
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
40,000
+
+
+
+
+
+
+
+
+
+
+
+
+
Ret.
Ear.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
28,000
(23,744)
4,256
Rev.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
28,000
N/A
28,000
–
–
–
–
–
–
–
–
–
–
–
–
–
Exp.
=
N/A =
N/A =
N/A =
N/A =
N/A =
N/A =
N/A =
N/A =
N/A =
N/A
=
23,744 =
23,744 =
Net Inc.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
28,000
(23,744)
4,256
Cash Flow
40,000 FA
(7,360) OA
(10,240) OA
(5,200) OA
(6,800) OA
(14,400) OA
N/A
N/A
N/A
28,000 OA
N/A
24,000 NC
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-4B (continued)
Predetermined manufacturing overhead rate:
$240,000/20,000 = $12 per direct labor hour
Applied manufacturing overhead for Job 801:
$12 x 512 = $6,144
Applied manufacturing overhead for Job 802:
$12 x 340 = $4,080
Items
Direct materials
Direct labor
Manufacturing overhead
Total product cost
Job 801
$ 7,360
10,240
6,144
$23,744
Job 802
$ 5,200
6,800
4,080
$16,080
b.
The amount of ending inventory on August 31st was $16,080,
which is the current balance of Job 802. This is an estimate
because the applied manufacturing overhead cost included
in the job cost is an estimate.
c.
It is appropriate to use estimated cost on the balance sheet
when the difference between applied and actual overhead is
insignificant. Under these circumstances any difference between applied and actual overhead would be closed directly
to cost of goods sold and inventory would be reported at estimated cost.
12-35
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise12-5B
a. & b.
Cash
+
48,000 +
(3,600) +
(14,400) +
(6,480) +
(21,600) +
(5,840) +
(19,040) +
(24,080) +
N/A
+
N/A
+
N/A
+
N/A
+
N/A
+
30,400 +
N/A
+
43,200 +
N/A
+
(8,000) +
N/A
+
18,560 +
Assets
Work in
Finished
Process + Goods +
N/A
+
N/A
+
3,600 +
N/A
+
14,400 +
N/A
+
6,480 +
N/A
+
21,600 +
N/A
+
5,840 +
N/A
+
19,040 +
N/A
+
N/A
+
N/A
+
7,200 +
N/A
+
5,760 +
N/A
+
10,880 +
N/A
+
(25,200) +
25,200 +
(33,840) +
33,840 +
N/A
+
N/A
+
N/A
+
(25,200) +
N/A
+
N/A
+
N/A
+
(33,840) +
N/A
+
N/A
+
N/A
+
N/A
+
35,760 +
0 +
=
Manuf.
OH
N/A
N/A
N/A
N/A
N/A
N/A
N/A
24,080
(7,200)
(5,760)
(10,880)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(240)
0
12-36
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Equity
Com.
Stock
48,000
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
48,000
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Ret.
Ear.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
30,400
(25,200)
43,200
(33,840)
(8,000)
(240)
6,320
Rev.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
30,400
N/A
43,200
N/A
N/A
N/A
73,600
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Exp.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
25,200
N/A
33,840
8,000
240
67,280
= Net Inc.
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
30,400
= (25,200)
=
43,200
= (33,840)
=
(8,000)
=
(240)
=
6,320
Cash Flow
48,000 FA
(3,600) OA
(14,400) OA
(6,480) OA
(21,600) OA
(5,840) OA
(19,040) OA
(24,080) OA
N/A
N/A
N/A
N/A
N/A
30,400 OA
N/A
43,200 OA
N/A
(8,000) OA
18,560 NC
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise12-5B (continued)
Items
Direct materials
Direct labor
Manufacturing overhead
Total product cost
Job 301
$ 3,600
14,400
7,200
$25,200
Job 302
$ 6,480
21,600
5,760
$33,840
Job 303
$ 5,840
19,040
10,880
$35,760
Total applied manufacturing overhead:
$7,200 + $5,760 + $10,880 = $23,840
Total actual MOH – Total applied MOH = Underapplied MOH
$24,080 – $23,840 = $240
c. Sales revenue – Cost of goods sold = Gross margin
($30,400 + $43,200) – ($25,200 + $33,840 + $240) = $14,320
Exercise 12-6B
a.
The costs of Contract 3 follow:
Direct labor
Overhead*
Total
$28,800
12,960
$41,760
*Predetermined overhead rate:
$21,600 ÷ $48,000 = $0.45 per direct labor cost dollar.
$0.45 x $28,800 = $12,960
The amount of income earned from Contract 3 is $23,840
($65,600  $41,760).
b.
Lanzi is a service business that does not produce inventory. It
will therefore not report finished goods inventory on the balance sheet.
12-37
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-7B
The cost of job order 712 is shown below:
Materials
Labor
Overhead
Total
$31,000
19,000
22,000
$72,000
Contract price
Cost of job
Gross profit
?
$72,000
$25,000
Contract price = Gross profit + Cost of job
= $25,000 + $72,000 = $97,000
12-38
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-8B
a.
Quantities
Beginning inventory
Units added to production
Total to be accounted for
Transferred to finished goods
Ending inventory
Total accounted for
(1)
Actual
1,500
18,000
19,500
13,500
6,000
19,500
Equivalent Units
(1)
x 100%
x 40%
13,500
2,400
15,900
19,500  6,000 = 13,500
b.
Quantities
Beginning inventory
Units added to production
Total to be accounted for
Transferred to finished goods
Ending inventory
Total accounted for
Actual
1,500
18,000
19,500
13,500
6,000
19,500
19,500  6,000 = 13,500
15,000  13,500 = 1,500
(3)
6,000X = 1,500; X = 25%
(1)
(2)
12-39
Equivalent Units
(1)
x 100%
x 25%(3)
13,500
1,500(2)
15,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-9B
a. and b.
Cost per Unit
Cost Accumulation
Beginning inventory
Raw materials cost
Labor cost
Overhead cost
Total to be accounted for
$ 75,000
420,000
240,000
165,000
$900,000
Cost per unit
$900,000 ÷ 18,000
= $50
Part a: Cost Allocation
To finished goods (15,000* units x $50)
To ending inventory (3,000 equivalent units x $50)
Total allocated cost
*18,000  3,000 = 15,000
$750,000
150,000
$900,000
Part b: Cost Allocation
To finished goods (14,000 units x $50)
To ending inventory (4,000* equivalent units x $50)
Total allocated cost
*18,000  14,000 = 4,000
$ 700,000
200,000
$900,000
12-40
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-10B
a., b., and c.
Equivalent Units
Transferred to finished goods
Ending inventory
Total accounted for
21,000
3,000
24,000
Cost per Unit
Cost per equivalent unit
$666,000
x 100%
x 40%
÷ 22,200
Cost Allocation
To finished goods (21,000 units x $30)
To ending inventory (1,200 equivalent units x $30)
Total allocated cost
Exercise 12-11B
WIP Binding
Bal.
30,000 360,000 Transferred out
Transferred in
?
Materials
11,000
Labor
38,000
Overhead
71,000
Bal.
53,000
$30,000+X+$11,000+$38,000+$71,000  360,000 =$53,000
X = $263,000
12-41
21,000
1,200
22,200
= $30
$630,000
36,000
$666,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Exercise 12-12B
a.
b.
c.
d.
Foxwell is a manufacturing company because it produces such
tangible products as altered equipment that adds value to vehicles.
A job-order cost system would be most appropriate for Foxwell.
Each customer’s needs are unique and, hence, individual products are different. A job-order cost system would allow Foxwell
to track the costs incurred on behalf of each customer.
Foxwell does have work in process inventory and finished goods
inventory. Foxwell should account for every incomplete job as
work in process. Every job completed but not yet delivered to
customers is finished goods inventory.
Foxwell should classify engineering design costs as manufacturing overhead because it develops designs before customers
agree to a contract. Therefore, some design costs will result in
revenues and others will not be recovered.
12-42
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-13B a., b., and c. (reference numbers are provided to facilitate the tracing of transactions)
Cash
40,000
(7,900)
N/A
(3,200)
N/A
(4,800)
N/A
(4,480)
N/A
N/A
N/A
N/A
N/A
9,800
N/A
(1,400)
(6,000)
N/A
22,020
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Raw. M.
N/A
7,900
(2,100)
N/A
(1,700)
N/A
(3,200)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
900
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Assets
MOH
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1,500)
(2,250)
(2,100)
N/A
N/A
N/A
N/A
N/A
6,000
(150)
0
+ W-I-P + F. Goods
+
N/A +
N/A
+
N/A +
N/A
+ 2,100 +
N/A
+ 3,200 +
N/A
+ 1,700 +
N/A
+ 4,800 +
N/A
+ 3,200 +
N/A
+ 4,480 +
N/A
+ 1,500 +
N/A
+ 2,250 +
N/A
+ 2,100 +
N/A
+ (6,800) + 6,800
+ (9,780) + 9,780
+ N/A +
N/A
+ N/A + (6,800)
+ N/A +
N/A
+
N/A +
N/A
+
N/A +
N/A
+ 8,750 + 9,780
Items
Direct materials
Direct labor (a)
Manufacturing overhead (a  16) x $7.50
Total product cost
12-43
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Equity
C. Stk. + Ret. Ear.
40,000 + N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ 9,800
N/A
+ (6,800)
N/A
+ (1,400)
N/A
+
N/A
N/A
+
(150)
40,000 + 1,450
Job 1
$2,100
3,200
1,500
$6,800
Job 2
$ 1,700
4,800
2,250
$8,750
Rev.
–
Exp.
= Net Inc.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
9,800
N/A
N/A
N/A
N/A
9,800
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
6,800
1,400
N/A
150
8,350
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Job 3
$ 3,200
4,480
2,100
$9,780
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
9,800
(6,800)
(1,400)
N/A
(150)
1,450
Cash Flow
40,000 FA
(7,900) OA
N/A
(3,200) OA
N/A
(4,800) OA
N/A
(4,480) OA
N/A
N/A
N/A
N/A
N/A
9,800 OA
N/A
(1,400) OA
(6,000) OA
N/A
22,020
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-13B (continued)
d.
Cost of Goods Manf. and Sold
Beg. Raw Mat. Inv.
Purchases
Raw Mat. Avail.
End Raw Mat. Inv.
Raw Mat. Used
Labor
Overhead
Total Manf. Costs
Beg. W-I-P Inv.
Total W-I-P Inv.
End. W-I-P Inv.
Cost of Goods Man.
Beg. Fin. Goods
Goods Available
End. Fin. Goods
Cost of Goods Sold
$
0
7,900
7,900
(900)
7,000
12,480
6,000
25,480
0
25,480
(8,750)
16,730
0
16,730
(9,780)
$ 6,950
Schiller Corporation
Financial Statements for 2006
Income Statement
Balance Sheet
Sales Revenue
Cost of Goods Sold
Gross Margin
Selling and Admin.
Net Income
12-44
$9,800
(6,950)
2,850
(1,400)
$1,450
Assets
Cash
Raw Mat. Inv.
W-I-P Inv.
Fin. Goods Inv.
Total Assets
$22,020
900
8,750
9,780
$41,450
Equity
Common Stk.
Ret. Earnings
Total Equity
$40,000
1,450
$41,450
Statement of Cash Flows
Oper. Activities
Inflow from Rev.
$ 9,800
Outflow for Inventory
(26,380)
Outflow for S & A Exp.
(1,400)
Net Outflow from Oper.
(17,980)
Investing Activities
0
Financing Activities
Inflow from Stock Issue
40,000
Net Change in Cash
22,020
Beginning Cash Balance
0
Ending Cash Balance
$22,020
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-14B a., b., and c.
Cash
2,800
(2,400)
N/A
(640)
N/A
(176)
(240)
(144)
N/A
N/A
2,160
N/A
(496)
N/A
864
+ Raw. M.
+ N/A
+
2,400
+ (2,160)
+
N/A
+ N/A
+
N/A
+
N/A
+
N/A
+ N/A
+ N/A
+
N/A
+ N/A
+
N/A
+ N/A
+
240
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
+
Assets
MOH
N/A
N/A
N/A
N/A
(520)
176
240
144
N/A
N/A
N/A
N/A
N/A
(40)
0
Items
Direct materials
Direct labor
Manufacturing overhead
Total product cost
+ W-I-P + F. Goods
+
N/A +
N/A
+
N/A +
N/A
+ 2,160 +
N/A
+
640 +
N/A
+
520 +
N/A
+
N/A +
N/A
+
N/A +
N/A
+
N/A +
N/A
+ (1,090) +
1,090
+
(574) +
574
+ N/A +
N/A
+ N/A + (1,090)
+ N/A +
N/A
+
N/A +
N/A
+ 1,656 +
574
Roof 1
$ 800
160
130
$1,090
12-45
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
=
Equity
C. Stk. + Ret. Ear.
2,800 + N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ N/A
N/A
+
N/A
N/A
+
N/A
N/A
+
N/A
N/A
+ N/A
N/A
+ N/A
N/A
+ 2,160
N/A
+ (1,090)
N/A
+
(496)
N/A
+
(40)
2,800 +
534
Roof 2
$400
96
78
$574
Roof 3
$ 960
384
312
$1,656
Rev.
–
Exp.
= Net Inc.
Cash Flow
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2,160
N/A
N/A
N/A
2,160
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1,090
496
40
1,626
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
=
N/A
= 2,160
= (1,090)
=
(496)
=
(40)
=
534
2,800 FA
(2,400) OA
N/A
(640) OA
N/A
(176) OA
(240) OA
(144) OA
N/A
N/A
2,160 OA
N/A
(496) OA
N/A
864
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-14B (continued)
d.
Cost of Goods Manf. and Sold
Beg. Raw Mat. Inv.
$
0
Purchases
2,400
Raw Mat. Avail.
2,400
End. Raw Mat. Inv.
(240)
Raw Mat. Used
2,160
Labor
640
Overhead
560
Total Manf. Costs
3,360
Beg. W-I-P Inv.
0
Total W-I-P Inv.
3,360
End. W-I-P Inv.
(1,656)
Cost of Goods Man.
1,704
Beg. Fin. Goods
0
Goods Available
1,704
End. Fin. Goods
(574)
Cost of Goods Sold
$1,130
Kearney Roofing Corporation
Financial Statements for 2007
Income Statement
Balance Sheet
Sales Revenue
Cost of Goods Sold
Gross Margin
S & A Exp.
Net Income
$2,160
(1,130)
1,030
(496)
$ 534
Assets
Cash
Raw Mat. Inv.
W-I-P Inv.
Fin. Goods Inv.
Total Assets
Equity
Common Stk.
Ret. Earnings
Total Equity
12-46
Statement of Cash Flows
Oper. Activities
Inflow from Rev.
Outflow for Inventory
Outflow for S & A Exp.
Net Outflow from Oper.
Investing Activities
Financing Activities
Inflow from Stock Issue
2,800 Net Change in Cash
534 Beginning Cash Balance
$3,334 Ending Cash Balance
$ 864
240
1,656
574
$3,334
$2,160
(3,600)
(496)
(1,936)
0
2,800
864
0
$ 864
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-15B a., b., and c.
Cash
(1)
80,000 (2)
(9) 117,500 (2)
(4)
(6)
(10)
Bal 25,000
(2)
Bal
42,000
7,500
77,000
22,500
23,500
(3)
(4)
(5)
Bal
Work-in-Process
Processing
38,000 (7)
60,500
32,500
26,000
36,000
Raw Materials
42,000 (3)
38,000
4,000
(4)
(5)
(7)
Bal
Work-in-Process
Packaging
Finished Goods
25,500 (8)
70,000 (8)
70,000 (9)
63,000
20,400
Bal
7,000
60,500
36,400
Common Stock
(1)
80,000
Retained Earnings
Cl
31,400
Cl
Production Supplies
(2)
7,500 (11)
4,500
Bal
3,000
Revenue
117,500 (9) 117,500
Cost of Goods Sold
(9)
63,000 (12)
400
Cl
62,600
Manufacturing Overhead
(4)
19,000 (5)
(6)
22,500
(11)
4,500
(12)
400
Bal
0
46,400
Selling & Admin. Exp.
(10) 23,500 Cl
23,500
12-47
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-15B (continued)
d.
Cost of Goods Manf. and Sold
Beg. Raw Mat. Inv.
$
0
Purchases
42,000
Raw Mat. Avail.
42,000
End. Raw Mat. Inv.
(4,000)
Raw Mat. Used
38,000
Labor
58,000
Overhead
46,000
Total Manf. Costs
142,000
Beg. W-I-P Inv.
0
Total W-I-P Inv.
142,000
End. W-I-P Inv.
(72,400)
Cost of Goods Man.
69,600
Beg. Fin. Goods
0
Goods Available
69,600
End. Fin. Goods
(7,000)
Cost of Goods Sold
$62,600
Chaplin Food Company
Financial Statements for 2006
Income Statement
Balance Sheet
Sales Revenue
$117,500 Assets
Cost of Goods Sold
(62,600) Cash
Gross Margin
54,900 Production Sup.
Sell & Admin. Exp.
(23,500) Raw Mat. Inv.
Net Income
$ 31,400 W-I-P Inv.
Fin. Goods Inv.
Total Assets
Equity
Common Stk.
Ret. Earnings
Total Equity
12-48
$ 25,000
3,000
4,000
72,400
7,000
$111,400
$80,000
31,400
$111,400
Statement of Cash Flows
Oper. Activities
Inflow from Rev.
Outflow for Inventory
Outflow for Sell. & Adm.
Net Outflow from Oper.
Investing Activities
Financing Activities
Inflow from Stock Issue
Net Change in Cash
Beginning Cash Balance
Ending Cash Balance
$117,500
(149,000)
(23,500)
(55,000)
0
80,000
25,000
0
$25,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-16B a., b., and c.
Cash
Bal 25,000 (1)
(8) 325,000 (1)
(3)
(5)
(9)
Bal 143,500
Bal
(1)
Bal
51,000
9,000
89,500
25,000
32,000
Bal
(2)
(3)
(4)
Bal
Work-in-Process
Processing
36,000 (6) 125,000
41,000
36,000
28,800
16,800
Raw Materials
4,000 (2)
41,000
51,000
14,000
Bal
(3)
(4)
(6)
Bal
Work-in-Process
Packaging
Finished Goods
36,400 (7) 175,000 Bal
7,000 (8) 171,000
29,500
(7) 175,000
23,600
Bal 11,000
125,000
39,500
Common Stock
Bal
80,000
Retained Earnings
Bal 31,400
Cl 115,400
Bal 146,800
Cl
Revenue
325,000 (8) 325,000
Production Supplies
Bal
3,000 (10) 10,000
(1)
9,000
Bal
2,000
Cost of Goods Sold
(8) 171,000
(11)
6,600 Cl 177,600
Manufacturing Overhead
(3)
24,000 (4)
52,400
(5)
25,000
(10) 10,000
(11)
6,600
Bal
0
Selling & Admin. Exp.
(9)
32,000 Cl
32,000
12-49
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-16B (continued)
d.
Cost of Goods Manf. and Sold
Beg. Raw Mat. Inv.
$ 4,000
Purchases
51,000
Raw Mat. Avail.
55,000
End. Raw Mat. Inv.
(14,000)
Raw Mat. Used
41,000
Labor
65,500
Overhead
59,000
Total Manf. Costs
165,500
Beg. W-I-P Inv.
72,400
Total W-I-P Inv.
237,900
End. W-I-P Inv.
(56,300)
Cost of Goods Man. 181,600
Beg. Fin. Goods
7,000
Goods Available
188,600
End. Fin. Goods
(11,000)
Cost of Goods Sold $177,600
Chaplkin Food Company
Financial Statements for 2007
Income Statement
Balance Sheet
Sales Revenue
$325,000 Assets
Cost of Goods Sold (177,600) Cash
Gross Margin
147,400 Production Sup.
Sell & Admin. Exp.
(32,000) Raw Mat. Inv.
Net Income
$115,400 W-I-P Inv.
Fin. Goods Inv.
Total Assets
Equity
Common Stk.
Ret. Earnings
Total Equity
12-50
Statement of Cash Flows
Oper. Activities
Inflow from Rev.
Outflow for Inventory
Outflow for Sell. & Adm.
Net Inflow from Oper.
Investing Activities
Financing Activities
Net Change in Cash
Beginning Cash Balance
$80,000 Ending Cash Balance
146,800
$226,800
$143,500
2,000
14,000
56,300
11,000
$226,800
$325,000
(174,500)
(32,000)
118,500
0
0
118,500
25,000
$143,500
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-17B
Cost of Production Report for Dale Company
Schedule of Equivalent Units (a.)
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual
1,800
19,200
21,000
Transferred to finished goods
Ending inventory
Total accounted for
15,000
6,000
21,000
Equivalent Units
x 100%
x 50%
Cost per Unit (b.)
Cost Accumulation
Beginning inventory
Cost added to production
Total to be accounted for
$
Cost per unit
$117,000 ÷ 18,000
15,000
3,000
18,000
9,000
108,000
$117,000
Cost Allocation (c.)
To finished goods (15,000 units x $6.50)
To ending inventory (3,000 EQ units x $6.50)
Total allocated cost
12-51
= $6.50
$ 97,500
19,500
$117,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-18B
Cost of Production Report for Shabrova Company
Equivalent Units (a.)
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual
4,500
24,000
28,500
Transferred to finished goods
Ending inventory
Total accounted for
23,500
5,000
28,500
Cost per Unit (b.)
Cost Accumulation
Beginning inventory
Cost added to production
Total to be accounted for
$ 19,000
151,000
$170,000
Cost per unit
$170,000
Cost Allocation (c.)
To finished goods (23,500 units x $6.80)
To ending inventory (1,500 EQ units x $6.80)
Total allocated cost
12-52
Equivalent Units
x 100%
x 30%
23,500
1,500
25,000
÷ 25,000
= $6.80
$159,800
10,200
$170,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-19B
Cost of Production Report for Putney Corporation
Cutting Department – 2006
Equivalent Units (a.)
Quantities:
Actual
Equivalent Units
Beginning inventory
6,000
Units added to production
15,000
Total to be accounted for
21,000
Transferred to the sewing department
Ending inventory
Total accounted for
16,000
5,000
21,000
x 100%
x 40%
Cost per Unit (b.)
Cost Accumulation
Beginning inventory
Cost added to production*
Total to be accounted for
$ 17,544
140,136
$157,680
Cost per unit
$157,680 ÷ 18,000
Cost Allocation (c.)
To the sewing department (16,000 units x $8.76)
To ending inventory (2,000 EQ units x $8.76)
Total allocated cost
*$56,136 (DM) + $67,200 (DL) + $16,800 (Applied MOH) = $140,136
12-53
16,000
2,000
18,000
= $8.76
$140,160
17,520
$157,680
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-19B
d.
Cash
Bal 271,200 (3)
(3)
(5)
Bal 190,920
Work-in-Process Cutting
Cost of Goods Sold
67,200 Bal 17,544 (7) 140,160 (9)
480
5,400 (2)
56,136
7,680 (3)
67,200
(4)
16,800
Bal 17,520
Bal
Raw Materials
Work-in-Process Sewing
90,000 (2)
56,136 (7) 140,160
Bal
33,864
Bal 140,160
Manufacturing Overhead
(3)
5,400 (4)
16,800
(5)
7,680 (9)
480
(8)
4,200
Bal
0
Production Supplies
Bal
4,200 (8)
4,200
12-54
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-20B
Cost of Production Report for Sherman Paper Products Corporation
Printing Department – 2006
Equivalent Units (a.)
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual
300,000
800,000
1,100,000
Transferred to the forming department
Ending inventory
Total accounted for
700,000
400,000
1,100,000
Cost per Unit (b.)
Cost Accumulation
Beginning inventory
Cost added to production*
Total to be accounted for
$ 18,000
99,000
$117,000
Cost per unit
$117,000
Equivalent Units
x 100%
x 50%
700,000
200,000
900,000
÷ 900,000
= $0.13
Cost Allocation (c.)
To the forming department (700,000 units x $.13)
To ending inventory (200,000 EQ units x $.13)
Total allocated cost
*$57,000 (DM) + $28,000 (DL) + $14,000 (MOH) = $99,000
12-55
$ 91,000
26,000
$117,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-20B (continued)
d.
Cash
Bal 50,000 (2)
(1) 110,000 (2)
(4)
(6)
Bal 78,100
Bal
(2)
Bal
40,000
3,500
31,000
7,400
Work-in-Process Print- Work-in-Process Forming
ing
Bal 18,000 (8)
91,000 (8)
91,000
(3)
57,000
(4)
28,000
(5)
14,000
Bal 26,000
Raw Materials
21,000 (3)
57,000
40,000
4,000
Production Supplies
Bal
1,500 (9)
3,600
(2)
3,500
Bal
1,400
Manufacturing Overhead
(4)
3,000 (5)
14,000
(6)
7,400
(9)
3,600
Bal
0
12-56
Common Stock
Bal 90,500
(1) 110,000
Bal 200,500
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-21B
a.
Cowboy Gifts
Cost of Production Report
Compression Department
For the Month Ended June 30, 2006
Equivalent Units
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual Units*
5,000
26,000
31,000
Transferred to the finishing department
Ending inventory
Total accounted for
23,000
8,000
31,000
Cost per Unit
Cost Accumulation
Beginning inventory
Cost added to production*
Total to be accounted for
$ 3,000
152,000
$155,000
Cost per unit
$155,000
Equivalent Units
x 100%
x 25%
÷ 25,000
Cost Allocation
To the finishing department (23,000 units x $6.20/EU)
To ending WIP inventory (2,000 EQ units x $6.20/EU)
Total allocated cost
*Costs added to production: $42,000 + $20,000 + $90,000 = $152,000
12-57
23,000
2,000
25,000
= $6.2/EU
$142,600
12,400
$155,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Problem 12-21B (continued)
b.
Cost of Production Report for Cowboy Gifts
Finishing Department – June 2006
Equivalent Units
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual Units*
1,800
23,000
24,800
Transferred to finished goods inventory
Ending inventory
Total accounted for
20,000
4,800
24,800
Cost per Unit
Cost Accumulation
Beginning inventory
Cost transferred In
Cost added to production*
Total to be accounted for
$14,400
142,600
93,320
$250,320
Cost per unit
$250,320
Cost Allocation
To finished goods inventory (20,000 units x $10.50)
To ending WIP inventory (3,840 EQ units x $10.50)
Total allocated cost
Equivalent Units
x 100%
x 80%
20,000
3,840
23,840
÷23,840
=$10.5/EU
$210,000
40,320
$250,320
*Costs added to production ($18,120 + $13,200 + $62,000 = $93,320)
c.
Revenue
Cost of goods sold (48,000 x $10.50/EU)
Gross margin
12-58
$160,000
126,000
$ 34,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-1
The two schedules that follow show information that is needed to answer most of the requirements for ATC 12-1.
Transactions Recorded in a Horizontal Model
Manuf.
Cash
OH
(166,500) +
+ 12,200
(142,700) +
(22,000) + 22,000
+ 9,500
(3,500) + 3,500
(2,600) + 2,600
+ (50,625)
+
287,800 +
+
825(4)
N/A (5) +
0
(1)
(2)
(3)
(4)
(5)
Work in
R. M.
+
Inv.
+ Process
+ 166,500 +
+ (161,000) + 148,800
+
+ 142,700
+
+
+
+
+
+
+
+
+
+ 50,625(1)
+
+ (298,890)
+
+
+
+
+
5,500 +
43,235
Finished
+
Goods
+
+
+
+
+
+
+
+
+ 298,890(2)
+ (231,645)(3)
+
+ 67,245
+ Equip. = Equity Rev. –
Exp.
+
=
–
+
=
–
+
=
–
+
=
–
+ (9,500) =
–
+
=
–
+
=
–
+
=
–
+
=
–
+
= 56,155 287,800 – 231,645
+
=
825
–
(825)
(5)
(5)
+ N/A
= N/A
287,800 – 230,820
Net
= Inc.
=
=
=
=
=
=
=
=
=
= 56,155
=
825
= 56,980
Cash
Flow
(166,500)
(142,700)
(22,000)
(3,500)
(2,600)
287,800
(49,500)
$13.50 x 3,750 machine hours = $50,625
Sum of cost of Jobs 701, 702, 703, and 704 from the Summary Job Cost Sheet below.
Sum of cost of Jobs 701, 702, and 703 from the Summary Job Cost Sheet below.
Balance in Manufacturing Overhead before overapplied overhead is closed ($49,800 $50,625.
Amounts cannot be determined without beginning balances. They are not relevant to completing the requirements of the problem.
12-59
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-1 (continued)
Job
Number
701
702
703
704
705
Totals
Direct
Materials
$ 33,900
27,800
32,800
31,800
22,500
$148,800
Summary Job Cost Sheet
Direct
Manufacturing
Labor
Overhead
$ 31,400
$ 9,720 ($13.50 x 720)
33,100
$11,475 ($13.50 x 850)
39,300
$12,150 ($13.50 x 900)
23,700
$11,745 ($13.50 x 870)
15,200
$ 5,535 ($13.50 x 410)
$142,700
$50,625
Totals
$ 75,020
72,375
84,250
67,245
43,235
$342,125
Requirements:
The predetermined rate is estimated overhead costs ÷ estimated activity.
Estimated overhead cost is determined as follows:
Rent on factory space
Indirect materials
Maintenance costs for factory equipment
Utilities costs for factory space
Depreciation on factory equipment
Total estimated overhead cost
÷ Estimated direct labor hours to be worked
= Predetermined overhead rate per hour
a.
b.
$25,000
12,000
4,000
3,000
10,000
$54,000
6,500
$8.31
Computations for determining the ending balance in Raw Materials
Inventory are shown on the horizontal model. The amount is $5,500.
Computations for determining the ending balance in Finished Goods
Inventory are shown on the horizontal model and on the Job Order
Cost Sheet Summary (only Job 704 is complete but not yet sold). The
amount is $67,245.
12-60
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-1 (continued)
c.
Computations for determining the ending balance in Work in Process
Inventory are shown on the horizontal model and on the Job Order
Cost Sheet Summary (only Job 705 is still in process). The amount is
$43,235.
d.
Computations for determining the costs of goods manufactured are
shown on the horizontal model and on the Job Order Cost Sheet
Summary. Since there were no beginning balance in Work in Process
Inventory, costs of goods manufactured is equal to the amount transferred into Finished Goods Inventory. This amount is also the sum of
the costs of Jobs 701, 702, 703, and 704. The amount is $298,890.
e.
Computations for determining the costs of goods sold are shown on
the horizontal model. This amount is also the sum of the costs of
Jobs 701, 702, and 703 as shown on the Job Order Cost Sheet Summary. The amount is $231,645.
f.
Computation of Gross Margin for Each Job Sold
Sales Price
Cost to Make(1)
Gross Margin
Job Number
=

701
$100,900
$75,020
=
$25,880

702
96,100
72,375
=
23,725

703
90,800
84,250
=
6,550

(1) From the Job Order Cost Sheet Summary.
g.
Data needed to determine the amount of overapplied or underapplied
overhead are shown on the horizontal model. This amount is the sum
of costs added into the Manufacturing Overhead account ($12,200 +
$22,000 + $9,500 + $3,500 + $2,600 = $49,800) minus the amount of
manufacturing overhead applied to work in process ($50,625). The
resulting difference is overapplied overhead of $825.
12-61
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-2
a.
Bridge 305
Bridge 306
Bridge 307
Total
Mat.
$ 407,200
362,300
801,700
$1,571,200
Lab
$ 352,700
375,000
922,800
$1,650,500
OH*
$ 423,240
450,000
1,107,360
$1,980,600
Total
$1,183,140
1,187,300
2,831,860
$5,202,300
*The amount of overhead is determined by multiplying the amount of labor cost by
$1.20. For example, overhead for Bridge 305 is $423,240 (i.e., $352,700 x $1.20).
b.
Bowen Bridge Company
Income Statement
For the Period 2007
Revenue
Cost of Goods Sold*
Gross Profit
General, Selling, and Administrative Expenses
Net Income (Loss)
$1,357,000
1,377,500
(20,500)
210,000
$ (230,500)
*Under-applied manufacturing overhead = $2,170,800 – $1,980,600
Cost of goods sold = $1,187,300 + $190,200 = $1,377,500
= $190,200
Assets section of the balance sheet includes finished goods inventory of
$1,183,140 and work in process inventory of $2,831,860.
c. The net income does not accurately reflect the profitability associated with Bridge 306 because the underapplied manufacturing
overhead cost was closed to the cost of goods sold account in the
period that the revenue of bridge only 306 was recognized, although the underapplied overhead pertained to all three bridges.
The amount of underapplied manufacturing overhead cost represents about 16% of the original cost of goods sold.
d.
Converting to a process cost system from a job-order cost system
would not improve the accuracy because the products (i.e. bridges)
are not homogeneous and not suited to a process cost system.
12-62
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-3
a.
Ford should use a hybrid costing system. Various models that are
based on a common platform have many common parts. Accounting
for the production cost of these homogeneous parts would require a
process costing system. However, each model, and indeed each different car of each model, could have many parts that differ. Accounting for the production cost of these heterogeneous parts would require would require a job-order type system.
b.
Raw materials costs. Even though the part has been processed previously, it was not processed by Ford. Since the previous processing
was performed by a separate business entity from Ford, the cost of
this item should not be considered transferred-in costs.
c.
By having suppliers closer to its factory, the cost of transporting
parts will be reduced and the level of inventory maintained can be reduced from one to two days to only eight hours. Additionally, engineers from Ford and its suppliers can easily shuttle back and forth to
solve problems as they arise.
ATC 12-4
Dear Mr. Wallace:
Your company’s production procedure is suited to a hybrid cost system.
The first part of your production, that makes homogeneous T-shirts,
should use a process cost system. The second part that adds labels to
T-shirts is suited to a job-order system in which the cost of homogeneous T-shirts, determined in the first part, becomes a cost of direct materials. The combination of two different cost systems in this case makes
the overall operation a hybrid cost system. I wish you success in your
career.
Sincerely,
Julia Silverman
12-63
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-5
a.
Cost of Production Report for Finishing Department
Equivalent Units
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual
5,500
94,500
100,000
Transferred-Out
Ending inventory
Total accounted for
90,000
10,000
100,000
Equivalent Units
x 100%
x 40%
90,000
4,000
94,000
Cost per Unit
Cost per unit $902,400 ÷ 94,000 = $9.60
b.
Cost of Production Report for Finishing Department
Equivalent Units
Quantities:
Beginning inventory
Units added to production
Total to be accounted for
Actual
5,500
94,500
100,000
Transferred-Out
Ending inventory
Total accounted for
90,000
10,000
100,000
Cost per Unit
Cost per unit $902,400 ÷ 96,000 = $9.40
12-64
Equivalent Units
x 100%
x 60%
90,000
6,000
96,000
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-5 (continued)
c.
The finishing department will report an unfavorable variance (i.e.,
$9.60 actual cost versus $9.45 standard) if ending inventory is classified as 40% complete. Conversely, the department will report a favorable variance (i.e. $9.40 actual cost versus $9.45 standard) if the
ending inventory is classified as 60% complete. Given the importance of his image as a manager who controls cost, it seems obvious that Mr. Sawyer is trying to manipulate the ending inventory
balance for reasons of self-interest.
d.
It would not be a violation of confidentiality for Ms. Alverez to report
her dispute with Mr. Sawyer to the chief accountant. Indeed, she
should be reporting to the chief accountant instead of Mr. Sawyer.
Accountants require independence to effectively perform their duties.
e.
Alverez appears to have violated the competency standard that
requires accountants to maintain an appropriate level of professional competence by ongoing development of their knowledge and
skills. She also violated the integrity standard by signing off on
something she thought was incorrect.
f.
Alverez’s desire to maintain her own promotion opportunity in the
company is the pressure in the fraud triangle. The lack of supervision from her immediate supervisor is the opportunity. Although, no
clear rationalization on her part has been disclosed on the case, her
lack of personal integrity makes her feel no remorse on her action.
12-65
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-6
Screen capture of cell values:
12-66
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-6
Screen capture of cell formulas:
12-67
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-6
Screen capture of cell formulas continued):
12-68
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-7
Screen capture of cell values:
12-69
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
ATC 12-7
Screen capture of cell formulas:
12-70
Chapter 12 Job-Order, Process, and Hybrid Cost Systems
Chapter 12 Comprehensive Problem
Equivalent Unit Computations
Equivalent
Units
110
1,840
1,950
(90)
1,860
Beginning inventory
Units Started
Total units available for completion
Units in ending inventory
Units complete
Total equivalent units
Cost per Equivalent Unit
%
Complete
60%
100%
Cost
/ Units =
$26,000
62,000
89,422
58,000
$235,422 /1,914 =
Beginning inventory
Raw materials
Labor
Overhead
Total product cost
Units
54
1,860
1,914
Cost per unit
$123
Allocation of Product Cost
Cost transferred to finished goods
Cost in ending inventory
Total product cost
1,860 units x $123 =
54 units x $123 =
12-71
$228,780
6,642
$235,422