A325
Exam 1 review
Fall, 2010
The exam is EIGHT problems (each with subsidiary questions) and you have ONE
HOUR AND THIRTY minutes (1:30) to complete it. You are permitted to bring one
page of notes with whatever you wish on them – but you must be able to read them
without any special mechanism. The exam has no multiple-choice questions. You
MUST show your work to receive credit.
Here is a summary of the questions and a reference to similar material when such exists.
1. A chapter 3 problem with “fill in the unknowns”. Most like 3-56 (solution attached to
this document) (3-53 in 4th edition – solution also attached).
2. Overhead application and proration of over- or under-applied overhead. This
problem is most similar to Zaf radiator and to the problem attached to this review
sheet but there is a slight twist that refers to job costing (see next problem).
3. Job-Order costing. This problem is most like problem 4-41 in the book (solution
attached to this document) (same problem for 4th edition).
4. Activity-based costing. This problem is most like questions 10 and 16 off of quiz 3.
5. Cost estimation using regression and activity analysis (ABC). This question is almost
EXACTLY like Peterson’s catering.
6. Cost-Volume-Profit. This is much like CVP problems covered in class (ECAT
examples).
7. Cost-Volume-Profit with margin of safety discussed in class.
8. Variable costing problem with inventory changes (like in class).
3-56 (5th edition)
Case A
1. Direct materials used
+ Direct labor
+ Manufacturing overhead
Total manufacturing costs
$18,000
35,000
50,000
$103,000
2. Sales
- Cost of goods sold
Gross margin
$150,000
- ?
= $125,000
$25,000
3. Beginning finished goods
+ Cost of goods manufactured
- Ending finished goods
Cost of goods sold
$ 35,000
+ ?
= $130,000
-40,000
125,000
4. Beginning work in process
+ Total manufacturing costs
- Ending work in process
Cost of goods manufactured
?
+103,000
-22,000
$130,000
= $49,000
5. Gross margin
- Selling and administrative expenses
Operating income
$25,000
-?
$10,000
Case B
1. Sales
- Cost of Goods sold
Gross margin
?
= $84,000
- 61,000
$23,000
= $15,000
2. Beg. Finished goods inventory
+ Cost of goods manufactured
- End. Finished goods inventory
Cost of goods sold
$ 28,000
+45,000
- ?
= $12,000
$61,000
3. Direct materials used
+ Direct labor
+ Manufacturing overhead
$ 8,000
+ 9,000
+
?
= $ 18,000
Total manufacturing costs
4. Total manufacturing costs
+ Work in process inv., Jan.
- Work in process inv., Dec.
Cost of goods manufactured
$35,000
$35,000
14,000
- ?
= $4,000
$45,000
3-53 (4th edition)
Case A
1. Direct materials used
+ Direct labor
+ Manufacturing overhead
Total manufacturing costs
$18,000
15,000
20,000
$53,000
2. Sales
- Cost of goods sold
Gross margin
$100,000
- ?
= $75,000
$25,000
3. Beginning finished goods
+ Cost of goods manufactured
- Ending finished goods
Cost of goods sold
$ 15,000
+ ?
= $76,000
-16,000
75,000
4. Beginning work in process
+ Total manufacturing costs
- Ending work in process
Cost of goods manufactured
?
+53,000
- 7,000
$76,000
5. Gross margin
- Selling and administrative expenses
Operating income
$25,000
-?
$10,000
Case B
1. Sales
- Cost of Goods sold
Gross margin
?
= $46,000
- 43,000
$ 3,000
2. Finished goods inventory
+ Cost of goods manufactured
- Finished goods inventory
Cost of goods sold
$ 8,000
+45,000
- ?
= $10,000
$43,000
3.
+ Direct labor
+ 9,000
= $30,000
= $15,000
+ Manufacturing overhead
Total manufacturing costs
4. Total manufacturing costs
+ Work in process inv., Jan.
- Work in process inv., Dec.
Cost of goods manufactured
+
?
= $ 18,000
$35,000
$35,000
14,000
- ?
= $4,000
$45,000
Background
Tomek Company uses a job costing system that applies factory overhead
on the basis of direct labor-hours. The company's factory overhead
budget for 2007 included the following estimates:
Problem Information
Budgeted total factory overhead
Budgeted total direct labor-hours
Company's Ledger
Actual factory overhead
Actual direct labor-hours
$568,000
71,000
Work-in-process inventory
Finished goods inventory
$582,250
71,500
Applied
Factory
Overhead
$139,000
$216,840
Cost of goods sold
$200,160
Requirements
Compute the firm's predetermined factory overhead
rate for 2007.
Predetermined Factory Overhead
Rate
$8.00
Calculate the amount of overapplied or underapplied
overhead.
Applied Overhead
Actual Overhead
Underapplied Overhead
$572,000
$582,250
$10,250
Applied Overhead Remaining in:
WIP Inventory
Finished Goods Inventory
Cost of Goods Sold (CGS)
Total
Dollar
$139,000
$216,840
$200,160
$556,000
Proration (allocation) of Underapplied Overhead:
To WIP Inventory
$2,562.50
To Finished Goods Inventory
$3,997.50
To CGS
$3,690.00
$10,250.00
%
25.00
39.00
36.00
100.00
4-41 YOU DO NOT NEED TO PREPARE JOURNAL ENTRIES
(SAME PROBLEM 4TH EDITION)
1. Predetermined Overhead Rate = $ 120,000 / 8,000 = $15 per DL
hour
1. Journal Entries
a. Materials Inventory
Accounts Payable
90,000
90,000
b. Work-in-Process Inventory- Job S10
Work-in-process Inventory - Job C20
Work-in-Process Inventory - Job M54
Factory Overhead
Materials Inventory
23,000
42,000
22,000
4,000
c. Work-in-Process Inventory- Job S10
Work-in-Process Inventory- Job C20
Work-in-Process Inventory- Job M54
Factory Overhead
Salary Expense (S & A)
Accrued Payroll
6,110
4,030
1,820
2,500
6,000
d. Factory Overhead
Depreciation Expense (S & A)
Accumulated Depreciation
91,000
20,460
2,200
1,700
3,900
e. Advertising Expense (S & A)
Cash
6,000
f. Factory Overhead
Accounts Payable (or Cash)
1,300
g. Factory Overhead
Accounts Payable (or Cash)
1,600
6,000
1,300
1,600
h. Work-in-Process Inventory
13,800
Factory overhead
13,800
Applied Overhead = $15 x 920 hours = $13,800
i. Finished Goods Inventory-Job S10
46,660
Work-in-Process Inventory- Job S10
46,660
$6,110 / $13 = 470 direct labor-hours
$10,500 + $23,000 + $6,110 + ($15 x 470) = $46,660
j. Accounts Receivable
59,000
Sales
Cost of Goods Sold
54,000
Finished Goods Inventory - Job J21
k. Cash
Accounts Receivable
59,000
54,000
25,000
25,000
3. Ending balance of the Materials Inventory
= Beginning balance + Purchases - Uses
= $27,000 + $90,000 - $91,000 = $26,000
4. Ending balance of the Work-in-Process Inventory
= Job C20 Cost + Job M54 Cost
= (Direct Materials + Direct Labor + Applied Overhead) of 2 jobs
= ($42,000 + $22,000) + ($4,030 + $1,820) + [$15 x (310 + 140)]
= $64,000 + $5,850 + $6,750 = $76,600
where direct labor-hours for Job C20 = $4,030 / $13 = 310 hours
for Job M54 = $1,820 / $13 = 140 hours
Alternative approach:
Ending WIP = Beginning WIP + DM + DL + Applied OH - FG
= $10,500 + ($23,000 + $42,000 + $22,000) + ($6,110 + $4,030 +
$1,820) + $13,800 - $46,660 = $76,600
5. Actual Overhead = $4,000 + $2,500 + $2,200 + $1,300 + $1,600
= $11,600
$11,600 (Actual) - $13,800 (Applied) = $2,200 Overapplied
Overhead