Download Exercises and Problems and more Exercises Accounting in PDF only on Docsity!
EXERCISES AND PROBLEMS
- The Zygon Corporation was recently formed to produce aemiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. June is Zygon's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $895,000, while conversion costs equaled $4,225,000. Accounting records indicate that 475,000 chips were started in June and 425,000 chips were completed. Ending inventory was 50% complete as to conversion costs. Required : a. What is the total manufacturing cost per chip for June? b. Allocate the total costs between the completed chips and the chips in ending inventory. Answer : a. Direct Materials Conversion Costs Total Cost to account for $895,000 $4,225,000 $5,120, Divided by equiv units 475,000 450, Cost per equivalent units $1.88 $9.39 $11. Equivalent unit for conversion costs = 425,000 completed + (50,000 x 0.5 completed) = 425,000 + 25,000 = 450, b. Completed units = $11.27 x 425,000 = $4,789, Ending work in process = Direct materials = 50,000 x $1.88 = $ 94, Conversion costs = 25,000 x $9.39 = 234, Total $328, Difficulty : 2 Objective : 2 Terms to Learn : process-costing system, equivalent units
- Cedar Rapids Chemical placed 220,000 liters of direct materials into the mixing process. At the end of the month, 10,000 liters were still in process, 30% converted as to labor and factory overhead. All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process. Cedar Rapids Chemical uses weighted-average costing. Required : a. Determine the equivalent units in process for direct materials and conversion costs, assuming there was no beginning inventory. b. Determine the equivalent units in process for direct materials and conversion costs, assuming that 12,000 liters of chemicals were 40% complete prior to the addition of the 220,000 liters. Answer : a. Direct materials: Beginning inventory 0 liters Units started 220,000 liters Equivalent units 220,000 liters Conversion costs: Beginning inventory 0 liters Units started 220,000 liters To account for 220,000 liters Units transferred out 210,000 liters Ending inventory 10,000 liters Units transferred out 210,000 liters Ending inventory, 30% complete 3,000 liters Equivalent units 213,000 liters b. Direct materials: Completed and transferred out (210,000 + 12,000) 222,000 liters Ending inventory, 100% complete 10,000 liters Equivalent units 232,000 liters Conversion costs: Completed and transferred out 222,000 liters Ending inventory, 30% complete 3,000 liters Equivalent units 225,000 liters Difficulty : 2 Objective : 5 Terms to Learn : weighted-average process-costing method, equivalent units
- (continued) Assignment of costs Costs transferred out (25,000 x $1.90) $47, Work in process, ending Direct materials (5,000 x $1.20) 6, Conversion (5,000 x $0.70 x 0.60) 2, Costs accounted for $55, Difficulty : 3 Objective : 5 Terms to Learn : weighted-average process-costing method, equivalent units
- Four Seasons Company makes snow blowers. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of September, work in process is 40% complete and at the end of the month it is 60% complete. Other data for the month include: Beginning work-in-process inventory 1,600 units Units started 2,000 units Units placed in finished goods 3,200 units Conversion costs $200, Cost of direct materials $260, Beginning work-in-process costs: Materials $154, Conversion $ 82, Required : a. Prepare a production cost worksheet with supporting schedules using the weighted-average method of process costing. b. Prepare journal entries to record transferring of materials to processing and from processing to finished goods.
Answer : a. PRODUCTION COST WORKSHEET Flow of Production Physical Units Direct Materials Conversion Work in process, beginning 1, Started during period 2, To account for 3, Units completed 3,200 3,200 3, Work in process, ending 400 400 240 Accounted for 3,600 3,600 3, Costs Totals Direct Materials Conversion Work in process, beginning $236,080 $154,000 $ 82, Costs added during period 460,000 260,000 200, Total costs to account for $696,080 $414,000 $282, Divided by equivalent units 3,600 3, Equivalent-unit costs $197 $ 115 $ 82 Assignment of costs Completed units (3,200 x $197) $630, Work in process, ending Direct materials (400 x $115)
Conversion (400 x $82 x 0.60)
Costs accounted for $696, b. Work in Process 260, Materials Inventory 260, Finished Goods 630, Work in Process 630, Difficulty : 3 Objective : 4, 5 Terms to Learn : weighted-average process-costing method, equivalent units
- (continued) Assignment of costs Work in process, beginning $ 2, Completion of beginning (2,000 x $0.70) 1, Total beginning inventory 3, Started and Completed (6,000 x $1.45) 8, Total costs transferred out $12, Work in process, ending Direct materials (6,000 x $0.75) $4, Conversion (6,000 x $0.70 x 0.50) 2,100 6, Costs accounted for $19, Difficulty : 3 Objective : 6 Terms to Learn : first-in, first-out (FIFO) process-costing method, equivalent units
- The Laramie Factory produces expensive boots. It has two departments that process all the items. During January, the beginning work in process in the tanning department was 40% complete as to conversion and 100% complete as to direct materials. The beginning inventory included $6,000 for materials and $18,000 for conversion costs. Ending work-in-process inventory in the tanning department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 60% complete as to conversion. Beginning inventories included $7,000 for transferred-in costs and $10,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows: Tanning Finishing Beginning work-in-process units 5,000 4, Units started this period 14,000? Units transferred this period 16,000 18, Ending work-in-process units? 2, Material costs added $18,000? Conversion costs 32,000 $19, Transferred-out cost 50,000? Required : Prepare a production cost worksheet using weighted-average costing for the finishing department.
Answer : Production Cost Worksheet Finishing Department Weighted-Average Method Flow of production Physical Units Conversion Trans-In Work in process, beginning 4, Transferred in during period 16, To account for 20, Units transferred out 18,000 18,000 18, Work in process, ending 2,000 600 2, Accounted for 20,000 18,600 20, Costs Totals Conversion Trans-in Work in process, beginning $17,000 $10,000 $ 7, Costs added during period 69,000 19,000 50, Total costs to account for $86,000 $29,000 $57, Divided by equivalent units 18,600 20, Equivalent-unit costs $ 4.41 $ 1.56 $ 2. Assignment of costs Transferred out (18,000 x $4.41) $79, Work in process, ending Transferred-in costs (2,000 x $2.85) $5, Conversion (600 x $1.56) 936 6, Costs accounted for $86, Difficulty : 3 Objective : 8 Terms to Learn : weighted-average process-costing method, equivalent units
- (continued) Costs Totals DMaterials Conversion Trans-In WIP, beginning $ 52, Costs added during period 230,500 $34,000 $68,500 $128, Total costs to account for $282,500 $34,000 $68,500 $128, Divided by equivalent units 68,000 54,800 64, Equivalent-unit costs $ 3.75 $ 0.50 $ 1.25 $ 2. Assignment of costs Work in process, beginning $ 52, Completion of beginning: Direct Materials (24,000 x $0.50) $12, Conversion (4,800 x $1.25) 6,000 18, Total Beginning Inventory 70, Started and Completed (44,000 x $3.75) 165, Total costs transferred out 235, Work in process ending: Transferred-in (20,000 x $2.00) $40, Conversion (20,000 x $1.25 x 0.30) 7,500 47, Costs accounted for $282, Difficulty : 3 Objective : 8 Terms to Learn : first-in, first-out (FIFO) process-costing method, equivalent units
- General Fabricators assembles its product in several departments. It has two departments that process all units. During October, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $12,000 for materials and $3,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 75% complete as to conversion. Direct materials are added at the end of the process. Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs. Ending inventory was 25% complete. Additional information about the two departments follows: Cutting Finishing Beginning work-in-process units 20,000 20, Units started this period 40,000 50, Units transferred this period 50, Ending work-in-process units 10,000 20, Material costs added $48,000 $28, Direct manufacturing labor $16,000 $40, Other conversion costs $ 8,000 $24,
Required : Prepare a production cost worksheet using weighted-average for the cutting department and FIFO for the finishing department. Answer : Production Cost Worksheet Cutting Department Weighted-Average Method Flow of Production Physical Units Direct Materials Conversion Work in process, beginning 20, Started during period 40, To account for 60, Units transferred out 50,000 50,000 50, Work in process, ending 10,000 10,000 4, Accounted for 60,000 60,000 54, Costs Totals Direct Materials Conversion Work in process, beginning $15,000 $12,000 $ 3, Costs added during period 72,000 48,000 24, Total costs to account for 87,000 60,000 27, Divided by equivalent units 60,000 54, Equivalent-unit costs $ 1.50 $ 1.00 $ 0. Assignment of costs Transferred out (50,000 x $1.50) $75, Work in process, ending Direct materials (10,000 x $1.00) $10, Conversion (10,000 x 0.40 x $0.50) 2,000 12, Costs accounted for $87,
Costs Totals Direct Materials Conversion Trans-In Work in process, beginning $ 36, Costs added during period 167,000 $28,000 $64,000 $75, Total Costs to account for $203,000 $28,000 $64,000 $75, Divided by equivalent units 50,000 40,000 50, Equivalent-unit costs $ 3.66 $ 0.56 $ 1.60 $ 1. Assignment of costs Work in process, beginning $ 36, Completion of beginning: Direct Materials (20,000 x $0.56) $11, Conversion (20,000 x 0.25 x $1.60) 8,000 19, Total Beginning Inventory 55, Started and Completed (30,000 x $3.66) 109, Total costs transferred out 165, Work in process ending Transferred-in (20,000 x $1.50) $30, Conversion (20,000 x $1.60 x 0.25) 8,000 38, Costs accounted for $203, Difficulty : 3 Objectives : 5- Terms to Learn : first-in, first-out (FIFO) process-costing method, equivalent units
EXERCISES AND PROBLEMS
- The president of the company, Gregory Peters, has come to you for help. Use the following data to prepare a flexible budget for possible sales/production levels of 10,000, 11,000, and 12,000 units. Show the contribution margin at each activity level. Sales price $24 per unit Variable costs: Manufacturing $12 per unit Administrative $ 3 per unit Selling $ 1 per unit Fixed costs: Manufacturing $60, Administrative $20,
- Strauss Table Company manufactures tables for schools. The 20X5 operating budget is based on sales of 20,000 units at $100 per table. Operating income is anticipated to be $120,000. Budgeted variable costs are $64 per unit, while fixed costs total $600,000. Actual income for 20X5 was a surprising $354,000 on actual sales of 21,000 units at $104 each. Actual variable costs were $60 per unit and fixed costs totaled $570,000. Required: Prepare a variance analysis report with both flexible-budget and sales-volume variances. Answer : Strauss Table Company Variance Analysis Actual Flexible Flexible Sales-Volume Static Results Variances Budget Variances Budget Units sold 21,000 21,000 20, Sales $2,184,000 $84,000 F $2,100,000 $100,000 F $2,000, Variable costs 1,260,000 84,000 F 1,344,000 64,000U 1,280, Contribution margin $924,000 $168,000 F $756,000 $36,000 F $720, Fixed costs 570,000 30,000 F 600,000 0 600, Operating income $354,000 $198,000 F $156,000 $36,000 F $120, Total flexible-budget variance = $198,000 favorable. Total sales-volume variance = $36,000 favorable. Difficulty : 2 Objective : 2 Terms to Learn : static budget, flexible-budget variance, sales-volume variance
- Nicholas Company manufacturers TVs. Some of the company's data was misplaced. Use the following information to replace the lost data: Analysis Actual Results Flexible Variances Flexible Budget Sales-Volume Variances Static Budget Units Sold 112,500 112,500 103, Revenues $42,080 $1,000 F (A) $1,400 U (B) Variable Costs (C) $200 U $15,860 $2,340 F $18, Fixed Costs $8,280 $860 F $9,140 $9, Operating Income $17,740 (D) $16,080 (E) $15, Required: : a. What are the respective flexible-budget revenues (A)? b. What are the static-budget revenues (B)? c. What are the actual variable costs (C)? d. What is the total flexible-budget variance (D)? e. What is the total sales-volume variance (E)? f. What is the total static-budget variance? Answer : a. $42,080 – $1,000 = $41, b. $41,080 + $1,400 = $42, c. $15,860 + $200 = $16, d. $17,740 – $16,080 = $1,660 favorable e. $2,340 favorable + $1,400 unfavorable = $940 favorable f. $17,740 – $15,140 = $2,600 favorable Difficulty : 2 Objective : 2 Terms to Learn : flexible budget, static budget, static-budget variance, flexible- budget variance, sales-volume variance
- The following data for the Alma Company pertain to the production of 1,000 urns during August. Direct Materials (all materials purchased were used): Standard cost: $6.00 per pound of urn. Total actual cost: $5,600. Standard cost allowed for units produced was $6,000. Materials efficiency variance was $120 unfavorable. Direct Manufacturing Labor: Standard cost is 2 urns per hour at $24.00 per hour. Actual cost per hour was $24.50. Labor efficiency variance was $336 favorable. Required: a. What is standard direct material amount per urn? b. What is the direct material price variance? c. What is the total actual cost of direct manufacturing labor? d. What is the labor price variance for direct manufacturing labor?
Answer : a. Standard cost per urn = $6,000/1, = $6.00 per urn Standard number of pounds per urn = $6.00/$6. = 1.0 pound per urn b. Materials price variance = Total variance – efficiency variance = ($5,600 – $6,000) – $ unfavorable = $520 favorable c. Total standard labor cost of actual hours = ((1,000/2) x $24) – $ favorable = $11, Actual hours = $11,664/24 = 486 hours Total actual costs = 486 x $24.50 = $11, d. Labor price variance = $11,907 – $11, = $243 unfavorable Difficulty : 3 Objective : 4 Terms to Learn : price variance, efficiency variance
