Test 4 Review Problems
Problem 1 Heath Company uses an actual product costing system. The company reported the following amounts for 2003:
Raw materials purchased
$120,000
Direct labor used
$44,000
Manufacturing overhead costs
Beginning raw materials inventory
16,000
36,000
incurred
Ending raw materials inventory
5,000
Selling and administrative expenses
21,000
Beginning finished goods inventory
11,000
Beginning work-in-process inventory
17,000
Ending finished goods inventory
8,000
Ending work-in-process inventory
16,000
A. Calculate the cost of materials used in production.
B. Prepare a statement of cost of goods manufactured in good form.
C. How much is cost of goods sold?
Problem 2 The accounting records of Cinotti Manufacturing Company include the following information:
Dec. 31, 2009
Dec. 31, 2008
Work in process inventory
$ 15,000
$ 12,000
Finished goods inventory
45,000
51,000
Materials purchased
331,000
Raw materials inventory
?
24,000
Direct materials used
325,000
Manufacturing overhead applied
321,000
Manufacturing overhead incurred
132,000
Direct labor
120,000
Selling expenses
70,000
Cinotti uses a normal cost system. Over or underapplied overhead is considered to be immaterial. Calculate the
following:
1. Raw materials inventory at 12-31-09
2.
Total manufacturing costs added to Work in Process Inventory during 2009
3.
Cost of goods manufactured during 2009
4.
Total inventories on Cinotti’s December 31, 2009 balance sheet
5.
By how much would CGM differ in an actual costing system were used?
6.
Assume CGM is $525,000. How much is cost of goods sold for 2009?
Problem 3 Eng Manufacturing Company developed the following data:
Beginning work in process inventory
$ 10,000
Direct materials used
150,000
Actual manufacturing overhead
85,000
Cost of goods manufactured
295,000
Ending work in process
15,000
How much are total manufacturing costs for the period?
Problem 4 - Jiffy Fabricators applies overhead based on direct labor cost. The company provided the following annual
amounts:
Raw Materials Inventory
$ 40,000 Work in Process Inventory
$100,000
Finished Goods
60,000 Cost of Goods Sold
800,000
Estimated direct labor
Actual direct labor
Estimated manufacturing overhead
Actual manufacturing overhead
2,000 hours at $12.50 per hour
1,900 hours at $13 per hour
$30,000
$31,000
A. How much overhead was applied during the year?
B. Determine the amount of over or underapplied overhead.
C. Describe the process if the under or overapplied overhead is determined to be immaterial.
D. If the under or overapplied overhead is determined to be material, to which accounts will it be allocated to and why are
these accounts chosen?
Problem 5 Salonga Company applies manufacturing overhead based on direct labor dollars. Information for June follows:
Direct labor incurred
5,100 hours @ $20 = $102,000
Direct labor estimated
5,240 hours @ $20 = $104,800
Actual manufacturing overhead
$172,920
Estimated manufacturing overhead
$178,160
Direct materials incurred
$234,000
A. How much is the manufacturing overhead rate?
B. 1. Post all necessary amounts to the t-account in
which you would find the amount of over or underapplied
overhead at June 30.
2. Label the account with the correct name.
3. Calculate the balance and label if over or
underapplied.
D. Briefly state the two reasons that manufacturing overhead is applied.
1-Timely information is needed for decision making and the actual OH cost is not know until the end of the period.
2- It is not feasible nor in other cases possible to trace indirect costs to products or services.
Problem 6 - Harmon Company began jobs 35, 36, 37, and 38 during July. At the beginning of July, jobs 31, 33, and 34
were in production, while jobs 30 and 32 were completed and waiting to be shipped to customers. Jobs 31, 33, 34, 36, and
37 were completed during July. Jobs 30, 31, 32, 34, and 36 were shipped to customers during July.
Which jobs were completed and transferred out during July?
Which jobs are in work in process at July 31?
Which jobs are in finished goods at July 31?
Problem 7 - Hoart Company applies overhead based on direct labor hours and calculated an overhead rate of $2. Job 55
used $500 of direct materials, 100 machine hours, $750 of direct labor. The labor rate per hour is $15, with @ of this rate
bring fringe benefits. How much is the cost of job 55?
Problem 8 Gottberg Company bases its predetermined overhead rates on machine-hours. At the beginning of the year,
the company estimated its manufacturing overhead for the year would be $56,000 and there would be a total of 40,000
machine-hours. Actual manufacturing overhead for year amounted to $58,000 and the actual machine-hours totaled
44,800. How much manufacturing overhead was applied for the year?
Problem 9 - Moss Company applies manufacturing overhead based on direct labor hours. It provided the following
information from its accounting records for 2003:
Expected production
30,000 labor hours
Actual production
28,000 labor hours
Budgeted overhead
$1,500,000
Actual overhead
$1,450,000
Jobs 102 & 103 are completed during the period.
A. What is the overhead application rate?
B. How much overhead will be applied to job 103 if its total labor cost was $4,320 and labor is $18 per hour?
Problem 10 - During 2009 Lawson Manufacturing expected to produce 100,000 units with $300,000 of overhead,
$500,000 of material, and $200,000 in labor. Actual production was 110,000 units with an overhead cost of $280,000,
$550,000 in materials used; and $220,000 in labor. All of the goods were completed and transferred to Finished Goods.
A. What amount was transferred to Finished Goods?
B. How much is the amount of over/under applied overhead?
Problem 11 – Edy’s produces 2 types of ice cream bars, Sinful and Tasty Overhead has traditionally been
allocated on the basis of direct labor cost. Direct labor has a budgeted cost of $14.20 per labor hour. Edy’s
recently sat up 3 activity centers to implement ABC costing. Information concerning this follows:
Actual Activity
Estimated Activity
Estimated
Cost
$141,920
$133,400
$81,608
$90,000
$102,900
Actual
Cost
$139,200
$131,600
$83,000
$86,400
$104,040
Sinful
Tasty
Setups
2,000 setups
1,210 setups
830 setups
Materials handling
5,800 machine hours
2,500 machine hours 2,280 machine hours
Quality Control
800 inspections
250 inspections
570 inspections
Direct labor
6,000 hours
2,000 hours
4,000 hours
Direct materials
19,600 pounds
12,400 pounds
8,000 pounds
Units
96,000 units
40,000 units
50,000 units
Actual material cost per pound is $5.10, and actual labor cost per hour is $14.40. Calculate the following amounts:
A. Predetermined overhead rate using the traditional method.
B. Product cost for each Sinful using the traditional method.
C. Overhead cost for each Sinful using ABC.
D. Amount of overhead to be applied to each sinful using ABC
E. Which items are considered ‘cost drivers’? ‘cost objects’? cost pools?