Chapter 4 and 5 Problems
Please complete the following 7 exercises below in either Excel or a word document (but must be single
document). You must show your work where appropriate (leaving the calculations within Excel cells is
acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.
Chapter 4 Exercise 3
3. Cost flows and overhead application
Cleveland Metals uses a job cost system and applies factory overhead to production at a predetermined rate of
180% of direct labor cost. Data pertaining to recent operations follow.

Job no. 636 was the only job in process on January 1 of the current year. The Work in Process account
contained a $24,600 balance on this date.

Jobs no. 637, 638, and 639 were started during January.

Total direct material requisitions and direct labor incurred during January amounted to $89,200 and
$114,500, respectively.

The only job that remained in process on January 31 was job no. 638, with costs of $15,000 for direct
materials and $20,000 for direct labor.
a. Compute the total cost of the work in process inventory on January 31.
b. Compute the cost of jobs completed during January, and present the proper journal entry to reflect job
completion.
Chapter 4 Exercise 7
7. Overhead application: Working backward
The Towson Manufacturing Corporation applies overhead on the basis of machine hours. The following
divisional information is presented for your review:
Actual machine hours
Estimated machine hours
Overhead application rate
Actual overhead
Estimated overhead
Applied overhead
Over- (under-) applied
overhead
Division
A
22,500
20,000
$4.50
$110,000
?
?
?
Division
B
?
?
$5.00
?
$90,000
$86,000
$6,500
FIND THE UNKNOWNS FOR EACH OF THE DIVISIONS.
Chapter 4 Problem 2
2. Computations using a job order system
General Corporation employs a job order cost system. On May 1 the following balances were extracted from the
general ledger;
Work in process
$ 35,200
Finished goods
86,900
Cost of goods sold
128,700
Work in Process consisted of two jobs, no. 101 ($20,400) and no. 103 ($14,800). During May, direct materials
requisitioned from the storeroom amounted to $96,500, and direct labor incurred totaled $114,500. These figures
are subdivided as follows:
Direct Materials
Job No.
Amount
101
$5,000
115
19,500
116
36,200
Other
35,800
$96,500
Direct Labor
Job No.
Amount
101
$7,800
103
20,800
115
42,000
116
18,000
Other
25,900
$114,500
Job no. 115 was the only job in process at the end of the month. Job no. 101 and three "other" jobs were sold
during May at a profit of 20% of cost. The "other" jobs contained material and labor charges of $21,000 and
$17,400, respectively.
General applies overhead daily at the rate of 150% of direct labor cost as labor summaries are posted to job
orders. The firm's fiscal year ends on May 31.
Instructions:
a. Compute the total overhead applied to production during May.
b. Compute the cost of the ending work in process inventory.
c. Compute the cost of jobs completed during May.
d. Compute the cost of goods sold for the year ended May 31.
Chapter 5 Exercise 1
1. High-low method
The following cost data pertain to 19X6 operations of Heritage Products:
Quarter 1
Shipping costs
Orders shipped
Quarter 2
$58,200
120
Quarter 3
$58,620
140
$60,125
175
Quarter 4
$59,400
150
The company uses the high-low method to analyze costs.
a. Determine the variable cost per order shipped.
b. Determine the fixed shipping costs per quarter.
c. If present cost behavior patterns continue, determine total shipping costs for 19X7 if activity amounts to
570 orders.
Chapter 5 Exercise 2
The treasurer anticipates the following costs for the event, which will be held at the Regency Hotel:
Room rental
$300
Dinner cost (per person)
25
Chartered buses
500
Favors and souvenirs (per person)
5
Band
900
Each person would pay $40 to attend; 200 attendees are expected.
a. Will the event be profitable for the sorority? Show computations.
b. How many people must attend for the sorority to break even?
c. Suppose the sorority encouraged its members to drive to the hotel and did not charter the buses. Further, a
planned menu change will reduce the cost per meal by $2. If each member will still be charged $40,
compute the contribution margin per person.
Chapter 5 Exercise 3
3. Break-even and other CVP relationships
Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs
total $4,320,000 per year.
a. How many patient days does the hospital need to break even?
b. What level of revenue is needed to earn a target income of $540,000?
c. If variable costs drop to $36 per patient day, what increase in fixed costs can be tolerated without
changing the break-even point as determined in part (a)?
Chapter 5 Problem 6
6. Direct and absorption costing
The information that follows pertains to Consumer Products for the year ended December 31, 19X6.
Inventory, 1/1/X6
Units manufactured
Units sold
Inventory, 12/31/X6
Manufacturing costs:
Direct materials
Direct labor
Variable factory overhead
Fixed factory overhead
Selling & administrative expenses:
Variable
Fixed
24,000 units
80,000
82,000
? units
$3 per unit
$5 per unit
$9 per unit
$280,000
$2 per unit
$136,000
The unit selling price is $26. Assume that costs have been stable in recent years.
Instructions:
a. Compute the number of units in the ending inventory.
b. Calculate the cost of a unit assuming use of:
1. Direct costing.
2. Absorption costing.
c. Prepare an income statement for the year ended December 31, 19X6, by using direct costing.
d. Prepare an income statement for the year ended December 31, 19X6, by using absorption costing.