Ch 6 Hansen Mowen Solution Manual

114455

CHAPTER 6 JOB ORDER AND PROCESS COSTING

QUESTIONS FOR WRITING AND DISCUSSION

1. Job-order costing accumulates costs by jobs, and process costing accumulates costs by processes. Job-order costing is suitable for operations that produce custom-made products that receive different doses of manufacturing costs. Process costing, on the other hand, is suitable for operations that produce homogeneous products that receive equal doses of manufacturing costs in each process.

2. More paperwork is required. Labor and ma-terials are assigned to departments in a process-costing system. In a job-order cost-ing system, labor and materials must be tracked to each job, requiring time tickets and more use of materials requisitions. Addi-tionally, a job-order costing system requires a separate job-order cost sheet for each job.

3. Job-order costing is appropriate for many service firms. The key factor is that differing amounts of resources must be used for dif-ferent jobs. Examples of service firms that use job-order costing are law firms, account-ing firms, dentists, automobile repair, and architectural firms.

4. Unless all your jobs (lawns) are the same size and require the same services, you will need to use a job-order costing system. At minimum, you will need job-order cost sheets for each customer. You will need la-bor time tickets to record the amount of time spent on each job, both to cost the job and to pay the individual doing the work. A mate-rials requisition form may be needed if ferti-lizer or weed control products are used (al-ternatively, it may be possible to just list the amount of product used directly on the job-order cost sheet). The more complicated your business becomes (e.g., mowing, trimming, fertilizing, trimming shrubbery, and planting shrubs and trees), the more source documents will be needed to keep track of time, materials, and use of capital equip-ment (e.g., trimmers and brushhogs).

5. The cost of a job is often strongly related to the price charged. Logically enough, the higher the cost of the job, the higher the price charged to the customer. This relation-

ship makes sense not only to the business but also to the customer. By comparing the cost of the individual job with the price charged, the firm can determine the profit at-tributable to each job. Then, the firm can de-cide whether the profit is sufficient to contin-ue offering the product or service under the current terms.

6. Materials requisition forms serve as the source documents for posting materials usage and costs to individual jobs. Time or work tickets serve a similar function for la-bor. Predetermined overhead rates are used to allocate overhead to jobs.

7. In sequential processing, products pass through a series of processes, one after another (i.e., in a given sequence). In paral-lel processing, products pass through two or more different sequences at the same time, merging eventually at the final process.

8. Equivalent units are the number of whole units that could have been produced, given the amount of materials, labor, and over-head used. Equivalent units are the meas-ure of a period’s output, a necessary input for the computation of unit costs in a process-costing system.

9. In calculating this period’s unit cost, the weighted average method treats prior-period output and costs carried over to the current period as belonging to the current period. The FIFO method excludes any costs and output carried over from this period’s unit cost computation.

10. If the per-unit cost of the prior period is the same as the per-unit cost of the current pe-riod, there will be no difference between the results of the weighted average and FIFO methods. Additionally, if no beginning work-in-process inventory exists, both the FIFO and weighted average methods give the same results.

11. Separate equivalent units must be calcu-lated for materials and conversion costs.

12. Transferred-in units represent partially com-pleted units and are clearly a material for the

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receiving department. To complete the product (or further process it), additional ma-terials and conversion costs are added by the receiving department.

13. The work-in-process account of the receiv-ing department is debited, and the work-in-process account of the transferring depart-ment is credited. The finished goods ac-count is debited, and the work-in-process account of the final department is credited upon completion of the product.

14. The first step is the preparation of a physical flow schedule. This schedule identifies the physical units that must be accounted for and provides an accounting. The second step is the equivalent unit schedule. This schedule computes the equivalent whole output for the period. The schedule’s com-putations rely on information from the physi-cal flow schedule. The next step is computa-tion of the unit cost. To compute the unit cost, the manufacturing costs of the period for the process are divided by the period’s output. The output is obtained from the equivalent unit schedule. The fourth step

uses the unit cost to value goods transferred out and those remaining in work in process. The final step checks to see if the costs as-signed in step 4 equal the total costs to ac-count for.

15. The weighted average method uses the same unit cost for all goods transferred out. The FIFO method divides goods transferred out into two categories: units started and completed and units from beginning work in process. The period’s unit cost is used to value goods started and completed. The cost of goods transferred out from beginning work in process is obtained by (1) assigning them all costs carried over from the prior pe-riod and (2) using the current period’s unit cost to value the equivalent units completed this period.

16. Service firms generally do not have work-in-process inventories, and so equivalent units of production are not needed. An important factor in process costing for services is de-termining just what constitutes a unit of out-put.

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EXERCISES

6–1

Job-Order Process a. Paint manufacturing X b. Auto manufacturing X c. Toy manufacturing X d. Custom cabinet making X e. Airplane manufacturing X f. Personal computer assembly X g. Furniture making X h. Custom furniture making X i. Dental services X j. Hospital services X k. Paper manufacturing X l. Auto repair X m. Architectural services X n. Landscape design services X o. Light bulb manufacturing X

6–2

1. Auto manufacturing: A job-order example might be Rolls Royce, in which the cars are made to order. A process-costing example might be Ford Motor Company.

2. Dental services: A job-order example might be a local, full-service dentist. A process-costing example might be a denturist (someone who makes only dentures).

3. Auto repair: A job-order example might be a local mechanic or the service department of an automobile dealership. A process-costing example might be a shop that is dedicated to oil changes.

4. Costume making: A job-order example might be a local seamstress who will make the costumes for children in a junior high school play. A process-costing example might be a firm dedicated to the manufacture of dance cos-tumes that are sold nationwide. The designs are preset.

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6–3

1. Job #614 Job #615 Job #616 Job #617 Beginning balance $10,200 $ 9,670 $ 0 $ 0 Direct materials 4,200 9,500 1,000 3,150 Direct labor 1,800 4,000 150 800 Applied overhead 1,080 2,400 90 480 Total cost $17,280 $25,570 $1,240 $4,430 2. Ending balance in Work in Process = Job #614 + Job #616 + Job #617 = $17,280 + $1,240 + $4,430 = $22,950 3. Cost of Goods Sold = Job #615 = $25,570 Price of Job #615 = $25,570 + (0.4)($25,570) = $35,798

6–4

1. Overhead applied in October: Job #265: 0.75 × $15,000 = $11,250 Job #266: 0.75 × $12,000 = $9,000 Job #267: 0.75 × $1,900 = $1,425 Job #268: 0.75 × $7,000 = $5,250 2. Job #265 Job #266 Job #267 Job #268 Beginning balance $30,330 $62,170 $ 0 $ 0 Direct materials 13,000 7,000 3,500 4,750 Direct labor 15,000 12,000 1,900 7,000 Applied overhead 11,250 9,000 1,425 5,250 Total cost $69,580 $90,170 $6,825 $17,000 3. Ending balance in Work in Process = Job #266 + Job #267 + Job #268 = $90,170 + $6,825 + $17,000 = $113,995 4. Cost of Goods Sold = Job #265 = $69,580 Price of Job #265 = $69,580 + (0.30)($69,580) = $90,454

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6–5

1. Direct materials $ 3,400 Direct labor (50 hours × $10) 500 Overhead (50 hours × $4) 200 Total cost $ 4,100 Units ÷ 10 Unit cost $ 410 2. Price per home = 1.5 × $410 = $615 3. Jordan would need to prepare a simple form that included columns for the

date, the beginning time, the ending time, the total number of hours worked, and the job name (or number). She could have a separate page for each day. This would be especially helpful if she hired other employees from time to time to work on jobs.

6–6

1. Ending balance in Work in Process = Job #902 + Job #906 + Job #908 + Job #909 = $400 + $750 + $700 + $905 = $2,755 2. Ending balance in Finished Goods = Job #901 + Job #903 + Job #905 + Job #910 = $650 + $550 + $860 + $803 = $2,863 3. Cost of Goods Sold = Job #904 + Job #907 = $695 + $180 = $875

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6–7

1. Job #70 Job #71 Job #72 Balance, 7/1 $ 25,000 $ 0 $ 0 Direct materials 12,900 9,900 35,350 Direct labor 20,000 6,500 13,000 Applied overhead: Power1 500 400 2,400 Material handling2 1,250 250 5,000 Purchasing3 400 1,600 400 Total cost $ 60,050 $18,650 $ 56,150 1 Job#70:$2 per mh × 250

Job#71:$2 per mh × 200

Job#72:$2 per mh × 1,200

2 Job#70:$25 per move × 50 moves

Job#71:$25 per move × 10 moves

Job#72:$25 per move × 200 moves

3 Job#70: $40 per PO × 10 PO’s

Job#71:$40 per PO × 40 PO’s

Job#72: $40 per PO × 10 PO’s 2. Ending balance in Work in Process = Job #72 = $56,150 3. Ending balance in Finished Goods = Job #71 = $18,650 4. Cost of Goods Sold = Job #70 = $60,050

6–8

Bosserman Company Income Statement

For the Month Ended July 31, 20XX

Sales ($60,050 × 1.40) ................................................. $ 84,070 Cost of goods sold ..................................................... 60,050 Gross margin .............................................................. $ 24,020 Selling expenses (0.10 × $84,070 + $4,100) .............. 12,507 Administrative expenses ........................................... 3,900 Operating income ....................................................... $ 7,613

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6–9

1. Applied overhead = Direct labor cost × Overhead rate $140,000= $80,000 × Overhead rate Overhead rate= 1.75 or 175% of direct labor cost 2. $140,000 Applied overhead 138,500 Actual overhead $ 1,500 Overapplied overhead 3. Direct materials $ 40,000 Direct labor 80,000 Overhead applied 140,000 $ 260,000 Add: Beginning work in process 17,000 Less: Ending work in process (32,000) Cost of goods manufactured $ 245,000 4. Overhead Control ...................................... 1,500 Cost of Goods Sold ............................. 1,500

Adjusted cost of goods sold: $ 210,000 (1,500) $ 208,500 5. Direct materials ($32,000 – $10,000 – $17,500) $ 4,500 Direct labor (1,000 × $10) 10,000 Overhead applied (175% × $10,000) 17,500 Ending work in process $ 32,000

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6–10

1. Overhead rate = $180,000/20,000 = $9 per DLH 2. Direct materials $ 4,140 Direct labor 4,000 Applied overhead 3,600* Total cost $ 11,740

*$3,600 = $9 × ($4,000/$10) 3. Overhead Control ...................................... 189,300 Lease Payable ........................................... 5,000 Accumulated Depreciation ....................... 20,000 Wages Payable .......................................... 101,300 Utilities Payable ........................................ 18,000 Other Payables .......................................... 45,000

Work in Process ($9 × 21,000) .................. 189,000 Overhead Control ...................................... 189,000 4. Actual overhead $189,300 Applied overhead 189,000 Underapplied overhead $ 300 5. Normal cost of goods sold $740,000 Add: Underapplied overhead 300 Adjusted cost of goods sold $740,300

6–11

1. Cutting Sewing Packaging Department Department Department Direct materials $5,400 $ 900 $ 225 Direct labor 150 1,800 900 Applied overhead 750 3,600 900 Transferred-in cost: From cutting 6,300 From sewing 12,600 Total manufacturing cost $6,300 $12,600 $14,625

2. a. Transferred from Cutting to Sewing $6,300 b. Transferred from Sewing to Packaging $12,600 c. Transferred from Packaging to Finished Goods $14,625

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3. Unit cost = $14,625/600 = $24.38* per pair

*Rounded

6–12

1. Equivalent unit, Ending work in process = 300 × 0.20 = 60 2. Equivalent units in Total = 60 + 600 = 660

6–13

1. Physical flow schedule:

Units in beginning work in process 14,000 Units started during the period 40,000 Total units to account for 54,000

Units transferred out 45,500 Units in ending work in process 8,500 Total units accounted for 54,000 2. Equivalent units of production: Materials Conversion Units completed 45,500 45,500 Add: Units in ending work in process: (8,500 × 100%) 8,500 (8,500 × 25%) 2,125 Equivalent units of output 54,000 47,625

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6–14

1. Cost of ending work in process: Materials ($1.30 × 0) $ 0 Conversion ($0.50 × 4,800) 2,400 Total cost $2,400

Cost of goods transferred out: $1.80 × 45,000 = $81,000 2. Physical flow schedule:

Units to account for: Units accounted for: Units in beginning WIP ? Units completed 45,000 Units started ? Units in ending WIP 8,000 Total units 53,000 Total units 53,000

The schedule of equivalent units using the weighted average method does not give sufficient information to reconstruct the complete physical flow schedule. Units in beginning work in process are embedded in units com-pleted.

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6–15

1. Department 1:

a. Units transferred to Department 2 = Total units* – Ending WIP = 6,480 – 3,600 = 2,880

*Total units = Beginning WIP + Units started = 0 + 6,480 = 6,480

b. Materials Conversion Units completed 2,880 2,880 Add: Units in ending work in process: 3,600 × 100% 3,600 3,600 × 50% 1,800 Equivalent units of output 6,480 4,680 2. Department 2:

a. Units transferred out = Total units* – Ending WIP = 4,080 – 600 = 3,480 *Total units = Beginning WIP + Units transferred in = 1,200 + 2,880 = 4,080

b. Materials Conversion Units completed 3,480 3,480 Add: Units in ending work in process: 600 × 0% 0 600 × 40% 240 Equivalent units of output 3,480 3,720

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6–16


Units to account for: Units in beginning work in process 60,000 Units started during the period 220,000 Total units to account for 280,000

Units accounted for: Units completed and transferred out: Started and completed 180,000 From beginning work in process 60,000 240,000 Units in ending work in process 40,000 Total units accounted for 280,000 2. Units completed 240,000 Add: Units in ending WIP × Fraction complete (40,000 × 20%) 8,000 Equivalent units of output 248,000 3. Unit cost = ($1,171,800 + $390,600)/248,000 = $6.30 4. Cost transferred out = 240,000 × $6.30 = $1,512,000 Cost of ending WIP = 8,000 × $6.30 = $50,400 5. Costs to account for: Beginning work in process $ 390,600 Incurred during June 1,171,800 Total costs to account for $ 1,562,400 Costs accounted for: Goods transferred out $1,512,000 Goods in ending work in process 50,400 Total costs accounted for $1,562,400

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6–17 Cocolots Company Mixing Department Production Report

For the Month of June 20XX (Weighted Average Method)

Unit Information Physical flow: Units to account for: Units accounted for: Units in beginning WIP 60,000 Units completed 240,000 Units started 220,000 Units in ending WIP 40,000 Total units to account for 280,000 Total units accounted for 280,000 Equivalent units: Units completed 240,000 Units in ending work in process 8,000 Total equivalent units 248,000

Cost Information Costs to account for: Beginning work in process $ 390,600 Incurred during March 1,171,800 Total costs to account for $1,562,400

Cost per equivalent unit $ 6.30 Costs accounted for: Transferred Ending Out Work in Process Total Goods transferred out ($6.30 × 240,000) $1,512,000 — $1,512,000 Goods in ending WIP ($6.30 × 8,000) — $50,400 50,400 Total costs accounted for $1,512,000 $50,400 $1,562,400

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6–18 A B C D Completed 16,200a 24,000c 31,000d 60,000f Ending WIP 1,000b 0 900e 2,500g Equivalent units 17,200 24,000 31,900 62,500 a(3,200 + 17,000 – 4,000) e(9,000 × 0.10) b(4,000 × 0.25) f(30,000 + 40,000 – 10,000) c(1,000 + 23,000 – 0) g(10,000 × 0.25) d(40,000 – 9,000)

6–19

A B C D Completed* 16,200 24,000 31,000 60,000 Add: Ending WIP* 1,000 0 900 2,500 Less: Beginning WIP** 960 400 0 22,500 Equivalent units 16,240 23,600 31,900 40,000

*See solution to Exercise 6–18. **Beginning WIP for A: 3,200 × 0.30 = 960

Beginning WIP for B: 1,000 × 0.40 = 400 Beginning WIP for C: 0 × 0 = 0 Beginning WIP for D: 30,000 × 0.75 = 22,500

6–20


Units to account for: Units in beginning work in process 10,000 Units started during the period 70,000 Total units to account for 80,000

Units accounted for: Units completed and transferred out: Started and completed 50,000 From beginning work in process 10,000 60,000 Units in ending work in process (60% complete) 20,000 Total units accounted for 80,000

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6–20 Concluded

2. Materials Conversion Units completed 60,000 60,000 Add: Units in ending WIP × Fraction complete (20,000 × 100%; 20,000 × 60%) 20,000 12,000 Equivalent units of output 80,000 72,000 3. Unit materials cost ($49,000 + $351,000)/80,000 = $5.00 Unit conversion cost ($2,625 + $78,735)/72,000 = 1.13 Total unit cost $6.13 4. Cost transferred out: 60,000 × $6.13 = $367,800

Cost of ending WIP: Materials: 20,000 × $5.00 = $100,000 Conversion: 12,000 × $1.13 = 13,560 Total ending WIP cost $113,560 5. Costs to account for: Beginning WIP $ 51,625 Incurred during August 429,735 Total costs to account for $481,360

Costs accounted for: Goods transferred out $367,800 Goods in ending WIP 113,560 Total costs accounted for $481,360

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6–21

Bath Linens Department Production Report

For the Month of August 20XX (Weighted Average Method)

Unit Information

Physical flow: Units to account for: Units accounted for: Units in beginning WIP 10,000 Units completed 60,000 Units started 70,000 Units in ending WIP 20,000 Total units to account for 80,000 Total units accounted for 80,000 Equivalent units: Materials Conversion Units completed 60,000 60,000 Units in ending work in process 20,000 12,000 Total equivalent units 80,000 72,000

Cost Information Costs to account for: Materials Conversion Total Beginning WIP $ 49,000 $ 2,625 $ 51,625 Incurred during August 351,000 78,735 429,735 Total costs to account for $400,000 $ 81,360 $481,360

Cost per equivalent unit $ 5.00 $ 1.13 $ 6.13 Costs accounted for: Transferred Ending Out Work in Process Total Goods transferred out ($6.13 × 60,000) $367,800 — $367,800 Goods in ending WIP: Materials ($5 × 20,000) — $100,000 100,000 Conversion costs ($1.13 × 12,000) — 13,560 13,560 Total costs accounted for $367,800 $113,560 $481,360

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6–22

1. b 2. d 3. b 4. b 5. a 6. c 7. c 8. e

Supporting computations:

Materials Conversion Units completed 92,000 92,000 Units in ending WIP (24,000 × 90%) 21,600 (24,000 × 40%) 9,600 Equivalent units (WA) 113,600 101,600 Less EU in BWIP (16,000 × 60%) (9,600) (16,000 × 20%) (3,200)

Equivalent units (FIFO) 104,000 98,400 Unit cost: FIFO: $468,000/104,000 $573,040/98,400 $4.50 $5.82

WA: ($468,000 + $54,560)/113,600 ($573,040 + $35,560)/101,600 $4.60 $5.99

EWIP: FIFO: ($4.50 × 21,600) + ($5.82 × 9,600) = $153,072 WA: ($4.60 × 21,600) + ($5.99 × 9,600) = $156,864

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6–23


Units to account for: Units in beginning work in process (75% complete) 120,000 Units started during August 370,000 Total units to account for 490,000

Units accounted for: Units completed and transferred out: Started and completed 280,000 From beginning work in process 120,000 400,000 Units in ending work in process (25% complete) 90,000 Total units accounted for 490,000

2. Units started and completed 280,000

Add: Units to complete beginning WIP (120,000 × 25%) 30,000 Add: Units ending WIP × Fraction completed (90,000 × 30%) 27,000 Equivalent units of output 337,000 3. FIFO unit cost = $1,516,500/337,000 = $4.50 4. Costs transferred out: Costs from beginning WIP $ 340,600 Costs to complete beginning WIP (30,000 × $4.50) 135,000 Started and completed (280,000 × $4.50) 1,260,000 Total costs transferred out $ 1,735,600

Cost of ending WIP = 27,000 × $4.50 = $121,500 5. Costs to account for: Costs accounted for: Beginning WIP $ 340,600 Transferred out $1,735,600 Added in August 1,516,500 Ending WIP 121,500 Total $ 1,857,100 Total $1,857,100

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6–24

Nogaleen Company Blending Department

Production Report For the Month of August 20XX

(FIFO Method)

Unit Information Physical flow: Units to account for: Units in beginning work in process 120,000 Units started during August 370,000 Total units to account for 490,000 Units accounted for: Physical Flow Equivalent Units Units started and completed 280,000 280,000 Units completed from beginning work in process 120,000 30,000 Units in ending work in process 90,000 27,000 Total units accounted for 490,000 337,000

Cost Information Costs to account for: Beginning work in process $ 340,600 Incurred during August 1,516,500 Total costs to account for $1,857,100

Cost per equivalent unit $ 4.50 Costs accounted for: Transferred Ending Out Work in Process Total Units in beginning work in process: From prior period $ 340,600 — $ 340,600 From current period (30,000 × $4.50) 135,000 — 135,000 Units started and completed (280,000 × $4.50) 1,260,000 — 1,260,000 Goods in ending work in process (27,000 × $4.50) — $121,500 121,500 Total costs accounted for $1,735,600 $121,500 $1,857,100

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6–25

1. Job #64: Direct materials $ 1,240 Direct labor 6,150 Overhead ($12 × 410) 4,920 $12,310

Unit cost = $12,310/50 = $246.20 2. Ending Work in Process = Cost of Job #65 = $985 + $8,745 + ($12 × 583) = $16,726 3. Finished Goods ......................................... 12,310 Work in Process .................................. 12,310

Cost of Goods Sold ................................... 12,310 Finished Goods ................................... 12,310

Accounts Receivable ................................ 19,696* Sales Revenue ..................................... 19,696

*(160% × $12,310 = $19,696)

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PROBLEMS

6–26

1. Overhead rate = $270/$900 = 0.30 or 30% of direct labor dollars. (This rate was calculated using information from the Fazel job; however, the

Myron and Patton jobs would give the same answer.) 2. Fazel Myron Patton Raider Willis Beginning WIP $ 1,730 $1,180 $2,500 $ 0 $ 0 Direct materials 600 350 260 780 725 Direct labor 1,200 980 650 1,350 900 Applied overhead 360 294 195 405 270 Total $ 3,890 $2,804 $3,605 $ 2,535 $ 1,895

Note: This is just one way of setting up the job-order cost sheets. You might prefer to keep the detail on the materials, labor, and overhead in beginning inventory costs.

3. Since the Fazel and Myron jobs were completed, the others must still be in

process. Therefore, the ending balance in Work in Process is the sum of the costs of the Patton, Raider, and Willis jobs.

Patton $3,605 Raider 2,535 Willis 1,895 Ending Work in Process $8,035

Cost of Goods Sold = Fazel job + Myron job = $3,890 + $2,804 = $6,694 4. Aldrin Company Income Statement

For the Month Ended June 30, 20XX

Sales (1.4 × $6,694) ................................................................... $9,372 Cost of goods sold .................................................................... 6,694 Gross margin ............................................................................. $2,678 Marketing and administrative expenses ................................. 1,200 Operating income ...................................................................... $1,478

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6–27

1. Overhead rate = $90,000/10,000 = $9 per MHr Overhead costs = $30,000 + 15,000 + 20,000 + 25,000 = $90,000

Job #1 Job #2 Direct materials $4,500 $ 8,600 Direct labor 1,000 2,000 Overhead ($9 × 200 MHrs.) 1,800 1,800 Total manufacturing cost $7,300 $12,400 Plus 30% markup 2,190 3,720 Bid price $9,490 $16,120 2. Purchasing rate = $30,000/5,000 = $6 per purchase order Setup cost rate = $15,000/1,000 = $15 per setup Engineering rate = $20,000/500 = $40 per engineering hour Other cost rate = $25,000/10,000 = $2.50 per MHr Job #1 Job #2 Direct materials $4,500 $ 8,600 Direct labor 1,000 2,000 Overhead: Purchasing ($6 × 15); ($6 × 20) 90 120 Setups ($15 × 2); ($15 × 3) 30 45 Engineering ($40 × 25); ($40 × 10) 1,000 400 Other ($2.50 × 200); ($2.50 × 200) 500 500 Total manufacturing cost $7,120 $11,665 Plus 30% markup 2,136 3,500 Bid price $9,256 $15,165 3. The activity-based approach to assigning overhead gives a more accurate

cost figure because so much of the overhead is non unit-level and there is product diversity.

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6–28

1. a. Materials ............................................... 44,200 Accounts Payable ......................... 44,200

b. Work in Process .................................. 27,000 Materials ........................................ 27,000

c. Work in Process .................................. 28,200 Wages Payable .............................. 28,200

d. Overhead Control ................................ 19,950 Cash ............................................... 19,950

e. Work in Process .................................. 18,800 Overhead Control .......................... 18,800 2. Job #703 Beginning balance, Work in Process $13,000 Direct materials 12,500 Direct labor 11,700 Overhead applied 7,800 Total $45,000

Job #704 Direct materials $14,500 Direct labor 16,500 Overhead applied 11,000 Total $42,000 3. f. Finished Goods ................................... 45,000 Work in Process ............................ 45,000

h. Cost of Goods Sold ............................. 6,240 Finished Goods ............................. 6,240

Accounts Receivable .......................... 8,736 Sales Revenue ............................... 8,736 4. a. Materials: Beginning balance $ 6,070 Add: Purchases 44,200 Less: Materials requisitioned (27,000) Ending balance $ 23,270

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6–28 Concluded b. Work in Process: Beginning balance $ 13,000 Add: Materials requisitioned 27,000 Direct labor 28,200 Overhead applied 18,800 Less: Jobs completed (45,000) Ending balance $ 42,000

c. Finished Goods: Beginning balance $ 6,240 Add: Jobs completed 45,000 Less: Jobs sold (6,240) Ending balance $ 45,000 6–29

1. a. Materials ............................................... 3,000 Accounts Payable ......................... 3,000

b. Work in Process .................................. 1,700 Materials ........................................ 1,700

c. Work in Process [$8 × (50 + 100)] ....... 1,200 Wages Payable .............................. 1,200

d. Work in Process ($7.50 × 150) ............ 1,125 Overhead Control .......................... 1,125

e. Overhead Control ................................ 1,230 Cash ............................................... 1,230 2. Job #443 Job #444

Direct materials $ 500 Direct materials $1,200 Direct labor 400 Direct labor 800 Applied overhead 375 Applied overhead 750 Total $1,275 Total $2,750

f. Finished Goods ................................... 1,275 Work in Process ............................ 1,275

g. Cost of Goods Sold ............................. 2,000 Finished Goods ............................. 2,000

Accounts Receivable .......................... 2,500 Sales Revenue ............................... 2,500

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6–29 Concluded 3. Kearney Company Statement of Cost of Goods Manufactured

For the Month Ended April 30, 20XX

Direct materials: Beginning materials inventory ...................... $1,400 Purchases of materials .................................. 3,000 Total materials available ................................ $4,400 Ending materials ............................................. 2,700 Materials used ................................................. $1,700 Direct labor ........................................................... 1,200 Overhead ............................................................... $1,230 Less: Underapplied overhead ............................. 105 Overhead applied ................................................. 1,125 Current manufacturing costs .............................. $4,025 Add: Beginning work in process ........................ 0 Total manufacturing costs .................................. $4,025 Less: Ending work in process ............................ 2,750 Cost of goods manufactured .............................. $1,275

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6–30

Debroux Company Assembly Department

Production Report For the Month of February 20XX

(Weighted Average Method)

Unit Information

Units to account for: Units accounted for:

Units in beginning WIP 12,000 Units completed 34,600 Units started 28,000 Units in ending WIP 5,400 Total units 40,000 Total units 40,000 Equivalent units: Units completed 34,600 Units in ending WIP (5,400 × 70%) 3,780 Total equivalent units 38,380

Cost Information

Costs to account for: Costs in beginning WIP $142,760 Costs added by department 333,152 Total costs to account for $475,912

Cost per equivalent unit ($475,912/38,380) $ 12.40 Costs accounted for: Goods transferred out (34,600 × $12.40) $429,040 Ending work in process (3,780 × $12.40) 46,872 Total costs accounted for $475,912

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6–31

Debroux Company Assembly Department

Production Report For the Month of February 20XX

(FIFO Method)

Unit Information

Units to account for: Units accounted for: Started and completed 22,600 Units in beginning WIP 12,000 From beginning WIP 12,000 Units started 28,000 From ending WIP 5,400 Total units 40,000 Total units 40,000 Equivalent units: Started and completed 22,600 To complete beginning WIP (12,000 × 40%) 4,800 Units in ending WIP (5,400 × 70%) 3,780 Total equivalent units 31,180

Cost Information

Costs to account for: Costs in beginning WIP $142,760 Costs added by department 333,152 Total costs to account for $475,912

Cost per equivalent unit ($333,152/31,180) $10.6848 Costs accounted for: Transferred out: Units started and completed (22,600 × $10.6848) $241,476 Units in beginning work in process: From prior period 142,760 From current period (4,800 × $10.6848) 51,287 Total cost transferred out $435,523 Goods in ending work in process (3,780 × $10.6848) 40,389 Total costs accounted for $475,912

117722

6–32

1. a. Physical flow schedule: Units to account for: Units accounted for: Started and completed 480,000 Units in BWIP 20,000 From BWIP 20,000 Units started 510,000 From EWIP 30,000 Total units 530,000 Total units 530,000

b. Equivalent unit schedule: Paraffin Pigment Conversion Units completed 500,000 500,000 500,000 Units in ending WIP 30,000 30,000 21,000* Total equivalent units 530,000 530,000 521,000

*(30,000 × 70%) 2. Unit cost computation: Paraffin Pigment Conversion Total Costs in BWIP $ 120,000 $ 100,000 $ 40,000 $ 260,000 Costs added 3,060,000 2,550,000 5,170,000 10,780,000 Total costs $3,180,000 $2,650,000 $5,210,000 $11,040,000

Unit cost = Unit paraffin cost + Unit pigment cost + Unit conversion cost = ($3,180,000/530,000) + ($2,650,000/530,000) + ($5,210,000/521,000) = $6 + $5 + $10 = $21 3. Ending work in process = (30,000 × $6) + (30,000 × $5) + (21,000 × $10) = $180,000 + $150,000 + $210,000 = $540,000

Cost of goods transferred out: 500,000 × $21 = $10,500,000 4. Cost reconciliation: Costs to account for: Costs accounted for: Beginning WIP $ 260,000 Transferred out $10,500,000 August costs 10,780,000 Ending WIP 540,000 Total to account for $11,040,000 Total accounted for $11,040,000

117733

6–33

Grace Sauces, Inc. Mixing Department Production Report

For the First Quarter 20XX (FIFO Method)

Unit Information

Units to account for: Units accounted for: Units in beginning WIP 144,000 Units transferred out 292,500* Units started 180,000 Units in ending WIP 31,500 Units to account for 324,000 Units accounted for 324,000 * Started and completed = 148,500 + B-WIP 144,000 = 292,500 Equivalent Units Transferred In Materials Conversion Units started and completed 148,500 148,500 148,500 Units in BWIP (to complete) — — 36,000 Units in EWIP 31,500 31,500 6,300 Total units accounted for 180,000 180,000 190,800

Cost Information

Costs to account for: Transferred In Materials Conversion Total Beginning WIP $ 45,600 $ 6,432 $ 14,400 $ 66,432 Incurred during quarter 230,400 33,500 72,640 336,540 Total costs to account for $276,000 $39,932 $ 87,040 $402,972

Equivalent units 180,000 180,000 190,800 Cost incurred during quarter ÷ Equivalent units $ 1.28 $ 0.1861 $ 0.3807 $ 1.8468 Costs accounted for: Transferred Out EWIP Total Started/complete (148,500 × $1.8468) $274,250 — $274,250 Units in beginning WIP: From prior period 66,432 — 66,432 Current period (36,000 × $0.3807) 13,705 — 13,705 Units in ending WIP: Transferred in (31,500 × $1.28) — $40,320 40,320 Materials (31,500 × $0.1861) — 5,862 5,862 Conversion (6,300 × $0.3807) — 2,398 2,398 Total costs accounted for $354,387 $48,580 $402,967*

*Difference due to rounding.

117744

6–34

Grace Sauces, Inc. Mixing Department Production Report

For the First Quarter 20XX (Weighted Average Method)

Unit Information

Units to account for: Units accounted for: Units in beginning WIP 144,000 Units transferred out 292,500 Units started 180,000 Units in ending WIP 31,500 Units to account for 324,000 Units accounted for 324,000

Equivalent Units Transferred In Materials Conversion Units completed 292,500 292,500 292,500 Units in ending WIP 31,500 31,500 6,300 Total units accounted for 324,000 324,000 298,800

Cost Information

Costs to account for: Transferred In Materials Conversion Total Beginning WIP $ 45,600 $ 6,432 $ 14,400 $ 66,432 Incurred during quarter 230,400 33,500 72,640 336,540 Total costs to account for $276,000 $ 39,932 $ 87,040 $402,972

÷ Equivalent units 324,000 324,000 298,800

Cost per equivalent unit $ 0.852 $ 0.12 $ 0.291 $ 1.27 Costs accounted for: Transferred Out EWIP Total Goods transferred out (292,500 × $1.27) $370,421 — $370,421 Ending work in process: Transferred in (31,500 × $0.852) — $26,838 26,838 Materials (31,500 × $0.12) — 3,780 3,780 Conversion (6,300 × $0.291) — 1,835 1,835 Total costs accounted for $370,421 $32,453 $402,874*


117755

6–35

1. Department A

a. Physical flow schedule:

Units in beginning WIP 5,000 Units started in November 25,000 Total units to account for 30,000

Units completed and transferred out: Started and completed 23,000 From beginning WIP 5,000 Units in ending WIP 2,000 Total units accounted for 30,000

Costs charged to the department:

Materials Conversion Total Beginning WIP $10,000 $ 6,900 $ 16,900 Incurred during November 57,800 95,220 153,020 Total costs $67,800 $102,120 $169,920 b. Equivalent unit calculation: Materials Conversion Units completed 28,000 28,000 Add: Equivalent units in ending WIP 2,000 1,600 Total equivalent units 30,000 29,600 c. Unit cost calculation:

Unit cost = Unit material cost + Unit conversion cost = $67,800/30,000 + $102,120/29,600 = $2.26 + $3.45 = $5.71

117766

6–35 Continued

d. and e. Cost reconciliation: Total costs accounted for: Goods transferred out (28,000 × $5.71) .................. $159,880 Costs in ending WIP: Materials (2,000 × $2.26) ..................................... $4,520 Conversion (1,600 × $3.45) ................................. 5,520 10,040 Total costs accounted for .................................. $169,920

Costs to account for: Beginning work in process ................................ $ 16,900 Costs incurred during November ...................... 153,020 Total costs to account for .................................. $169,920 2. Journal entries:

Work in Process—Dept. A ....................... 57,800 Materials Inventory .............................. 57,800

Work in Process—Dept. A ....................... 95,220 Conversion Costs—Dept. A ............... 95,220*

Work in Process—Dept. B ....................... 159,880 Work in Process—Dept. A .................. 159,880

*When conversion costs are not broken into labor and overhead components, a control account for conversion costs is used. Some firms now combine overhead and direct labor costs into one category. This practice is develop-ing because direct labor is becoming a small percentage of total manufactur-ing costs.

117777

6–35 Continued

3. Department B


Units in beginning WIP 8,000 Units started in November (transferred in) 28,000 Total units to account for 36,000


Costs charged to the department:

Transferred Materials Conversion In Total Beginning WIP $ 0 $ 16,800 $ 45,320 $ 62,120 Incurred in Nov. 37,950 128,100 159,880 325,930 Total costs $37,950 $144,900 $205,200 $388,050 b. Equivalent unit calculation: Transferred Materials Conversion In Units completed 33,000 33,000 33,000 Add: Equivalent units in EWIP 0 1,500 3,000 Total equivalent units 33,000 34,500 36,000 c. Unit cost calculation:

Unit cost = Unit material cost + Unit conversion cost + Unit transferred in cost = ($37,950/33,000) + ($144,900/34,500) + ($205,200/36,000) = $1.15 + $4.20 + $5.70 = $11.05

117788

6–35 Concluded

d. and e. Cost reconciliation: Total costs accounted for: Goods transferred out (33,000 × $11.05) ................ $364,650 Costs in ending WIP: Materials ............................................................... $ 0 Conversion (1,500 × $4.20) ................................. 6,300 Transferred in (3,000 × $5.70) ............................. 17,100 Total costs in ending WIP ........................................ 23,400 Total costs accounted for .................................. $388,050

Costs to account for: Beginning work in process ................................ $ 62,120 Costs incurred during November ...................... 325,930 Total costs to account for .................................. $388,050 Journal entries for Department B:

Work in Process—Dept. B .................. 159,880 Work in Process—Dept. A ........... 159,880

Work in Process—Dept. B .................. 37,950 Materials Inventory ....................... 37,950

Work in Process—Dept. B .................. 128,100 Conversion Costs—Dept. B ......... 128,100*

Finished Goods ................................... 364,650 Work in Process—Dept. B ........... 364,650

*Because conversion costs are not broken into labor and overhead com-ponents, a control account for conversion costs is used. Some firms are now combining overhead and direct labor costs into one category. This practice is developing because direct labor is becoming a small percen-tage of total manufacturing costs.

117799

6–36

1. Department A

a. Physical flow schedule: Units in beginning WIP 5,000 Units started in November 25,000 Total units to account for 30,000


Costs charged to the department: Materials Conversion Total Beginning WIP $10,000 $ 6,900 $ 16,900 Incurred during November 57,800 95,220 153,020 Total costs $67,800 $102,120 $169,920 b. Equivalent unit calculation: Materials Conversion Units started and completed 23,000 23,000 Equivalent units in beginning WIP — 3,000 Equivalent units in ending WIP 2,000 1,600 Total equivalent units 25,000 27,600 c. Unit cost calculation:

Unit cost = Unit material cost + Unit conversion cost = ($57,800/25,000) + ($95,220/27,600) = $2.312 + $3.45 = $5.762

118800

6–36 Continued

d. and e. Cost reconciliation:

Cost of units started and completed (23,000 × $5.762) $132,526 Cost of units in beginning WIP: Prior-period costs ............................................... 16,900 Current cost to finish units (3,000 × $3.45) ....... 10,350 Total cost of units transferred out .......................... $159,776 Costs in ending WIP: Materials (2,000 × $2.312) ................................... $4,624 Conversion (1,600 × $3.45) ................................. 5,520 Total costs in ending WIP ........................................ 10,144 Total costs accounted for .................................. $169,920

Costs to account for: Beginning WIP ..................................................... $ 16,900 Costs incurred ..................................................... 153,020 Total costs to account for .................................. $169,920 2. Journal entries:

Work in Process—Dept. A ....................... 57,800 Materials Inventory .............................. 57,800

Work in Process—Dept. A ....................... 95,220 Conversion Costs—Dept. A ............... 95,220*

Work in Process—Dept. A ....................... 159,776 Work in Process—Dept. A .................. 159,776

*Because conversion costs are not broken into labor and overhead com-ponents, a control account for conversion costs is used. Some firms are now combining overhead and direct labor costs into one category. This practice is developing because direct labor is becoming a small percen-tage of total manufacturing costs.

118811

6–36 Continued

3. Department B


Units in beginning WIP 8,000 Units started in November (transferred in) 28,000 Total units to account for 36,000


Costs charged to the department: Transferred Materials Conversion In Total Beginning WIP $ 0 $ 16,800 $ 45,320 $ 62,120 Incurred during Nov. 37,950 128,100 159,776 325,826 Total costs $37,950 $144,900 $205,096 $387,946 b. Equivalent unit calculation: Transferred Materials Conversion In Units started and completed 25,000 25,000 25,000 Equivalent units in BWIP 8,000 4,000 0 Equivalent units in EWIP 0 1,500 3,000 Total equivalent units 33,000 30,500 28,000 c. Unit cost calculation: Unit cost = Unit material cost + Unit conversion cost + Unit transferred in cost = $37,950/33,000 + $128,100/30,500 + $159,776/28,000 = $1.15 + $4.20 + $5.706 = $11.056

118822

6–36 Concluded

d. and e. Cost reconciliation: Cost of units started and completed (25,000 × $11.056) $276,400 Cost of units in beginning WIP: Prior-period costs ............................................... 62,120 Current cost to finish units: Materials (8,000 × $1.15) ..................................... 9,200 Conversion (4,000 × $4.20) ................................. 16,800 Total costs of goods transferred out ...................... $364,520 Costs in ending WIP: Conversion (1,500 × $4.20) ................................. $ 6,300 Transferred in (3,000 × $5.706) ........................... 17,118 Total costs in ending WIP ........................................ 23,418 Total costs accounted for .................................. $387,938*

Costs to account for: Beginning work in process ................................ $ 62,120 Costs incurred during November ...................... 325,826 Total costs to account for .................................. $387,946*

*Difference due to rounding. Journal entries for Department B:

Work in Process—Dept. B .................. 159,776 Work in Process—Dept. A ........... 159,776

Work in Process—Dept. B .................. 37,950 Materials Inventory ....................... 37,950

Work in Process—Dept. B .................. 128,100 Conversion Costs—Dept. B ........ 128,100*

Finished Goods ................................... 364,520 Work in Process—Dept. B ........... 364,520

*As before, a control account for conversion cost is used to combine over-head and direct labor cost into one category.

118833

6–37

1. a. Molding Units to account for: Units accounted for: Beginning WIP 500 Transferred out 1,300 Started 1,000 Ending WIP 200 1,500 1,500

b. Assembly Units to account for: Units accounted for: Beginning WIP 0 Transferred out 900 Started 1,300 Ending WIP 400 1,300 1,300

c. Packaging Units to account for: Units accounted for: Beginning WIP 150 Transferred out 1,050 Started 900 Ending WIP 0 1,050 1,050 2. Equivalent units: Molding Assembly Packaging Mat. Conv. Tr. In Mat. Conv. Tr. In Mat. Conv. Trans. out 1,300 1,300 900 900 900 1,050 1,050 1,050 EWIP 200 40 400 160 160 0 0 0 1,500 1,340 1,300 1,060 1,060 1,050 1,050 1,050 3. Molding Assembly Packaging Unit prior department cost — $11.50 $13.06 Unit materials cost $ 5.00 0.46 2.65 Unit conversion cost 6.50 1.10 3.05 Total unit cost $11.50 $13.06 $18.76

Molding: Unit materials cost: ($2,500 + $5,000)/1,500 = $5.00 Unit conversion cost: ($1,050 + $7,660)/1,340 = $6.50

118844

6–37 Concluded

Assembly: Unit transferred-in cost: (0 + $14,950)/1,300 = $11.50 Unit materials cost: (0 + $487.60)/1,060 = $0.46 Unit conversion cost: (0 + $1,166)/1,060 = $1.10

Packaging: Unit transferred-in cost: ($1,959 + $11,754)/1,050 = $13.06 Unit materials cost: ($375 + $2,407.50)/1,050 = $2.65 Unit conversion cost: ($225 + $2,977.50)/1,050 = $3.05 4. Molding: Transferred out: (1,300 × $11.50) = $14,950 Ending WIP: (200 × $5) + (40 × $6.50) = $1,260

Assembly: Transferred out: (900 × $13.06) = $11,754 Ending WIP: (400 × $11.50) + (160 × $1.56) = $4,849.60

Packaging: Transferred out: (1,050 × $18.76) = $19,698 Ending WIP: 0 5. Costs to account for: BWIP + Current = Total Molding $3,550.00 $12,660.00 $16,210.00 Assembly 0.00 16,603.60 16,603.60 Packaging 2,559.00 17,139.00 19,698.00 Costs accounted for: Trans. Out + EWIP = Total Molding $14,950.00 $1,260.00 $16,210.00 Assembly 11,754.00 4,849.60 16,603.60 Packaging 19,698.00 0.00 19,698.00

118855

6–38

1. Equivalent units: Molding Assembly Packaging Mat. Conv. Tr. In Mat. Conv. Tr. In Mat. Conv. Started and completed 800 800 900 900 900 900 900 900 BWIP 0 350 0 0 0 0 0 75 EWIP 200 40 400 160 160 0 0 0 1,000 1,190 1,300 1,060 1,060 900 900 975 2. Molding: Unit materials cost: $5,000/1,000 = $ 5.000 Unit conversion cost: $7,660/1,190 = 6.437 Total unit cost $11.437

Assembly: Unit transferred-in cost: $14,950/1,300 = $11.500 Unit materials cost: $487.60/1,060 = 0.460 Unit conversion cost: $1,166/1,060 = 1.100 Total unit cost $13.060

Packaging: Unit transferred-in cost: $11,754/900 = $13.060 Unit materials cost: $2,407.50/900 = 2.675 Unit conversion cost: $2,977.50/975 = 3.054 Total unit cost $18.789 3. Molding: Transferred out: Started and completed (800 × $11.437) $ 9,149.60 Prior-period cost 3,550.00 Complete beginning WIP (350 × $6.437) 2,252.95 Total transferred out $ 14,952.55

Ending WIP: (200 × $5) + (40 × $6.437) $ 1,257.48

118866

6–38 Concluded

Assembly: Transferred out: Started and completed (900 × $13.06) $ 11,754.00 Prior-period cost 0.00 Complete beginning WIP 0.00 Total transferred out $ 11,754.00

Ending WIP: (400 × $11.50) + (160 × $1.56) $ 4,849.60

Packaging: Transferred out: Started and completed (900 × $18.789) $ 16,910.10 Prior period cost 2,559.00 Complete beginning WIP (75 × $3.054) 229.05 Total transferred out $ 19,698.15

Ending WIP: $ 0 4. Cost reconciliation:

Costs to account for: BWIP + Current = Total Molding $3,550.00 $12,660.00 $16,210.00 Assembly 0.00 16,603.60 16,603.60 Packaging 2,559.00 17,139.00 19,698.00

Costs accounted for: Trans. Out + EWIP = Total Molding $14,952.55 $1,257.48 $16,210.03* Assembly 11,754.00 4,849.60 16,603.60 Packaging 19,698.15 0.00 19,698.15*


118877

MANAGERIAL DECISION CASES

6–39

1. Gary’s proposal requires Donna to falsify the equivalent unit calculation so that income and assets can be inflated and reported incorrectly. Falsification of the production report would be a violation of at least two major ethical standards: integrity and objectivity. Falsification does not allow the organiza-tion to attain its legitimate and ethical objectives. Moreover, if Donna agrees to the proposal, she would be taking action that would discredit her profes-sion. Finally, Donna has an ethical obligation to communicate information fairly and objectively, disclosing all information that would be needed for the loan officer to fairly assess the merits of the company’s request for a loan. Clearly, Donna should not agree to falsify the production report.

2. Donna has an obligation to report Gary to a superior only if an actual ethical

problem exists. If Gary decides that the course of action he is suggesting is not really in his or the company’s best interests, then no ethical problem ex-ists, and no action by Donna is needed.

3. If Gary insists on his idea of falsification of the division’s reports, Donna

should attempt to resolve the conflict by appealing to Gary’s immediate su-pervisor (and on up, if necessary, until a satisfactory resolution is achieved). If no satisfactory resolution is possible, then Donna should resign and sub-mit an informative memo to a representative of the organization.

4. In this situation, the ethical dilemma is complicated by two factors: Donna’s

age and a low likelihood of resolution by appealing to higher-level authorities. Donna’s age may make it more difficult to find alternative employment (at least at the same level and pay), and it may mean possible forfeiture of re-tirement benefits. Many students will likely respond that Donna should still resign (assuming that resolution is not likely), recommending the ideal out-come. While Donna’s ultimate resignation is the right choice if resolution fails, students should realize that ethical behavior may often carry with it some very significant personal sacrifices. It could be argued, however, that the costs of unethical behavior are even greater.

Another possibility is to encourage Donna to see a lawyer. She has the option of fighting back, and at her age (with retirement benefits at stake), a good of-fense may be her best defense.

118888

RESEARCH ASSIGNMENT

6–40

Answers will vary. 6–41

Answers will vary.

Documents

Ch 6 Hansen Mowen Solution Manual