ACTG 2300 Lecture 4: Day 4 Notes

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purplecicada511

7 Feb 2017

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Topics: allocation of manufacturing overhead, calculation of cogs. To determine the cost of a product. Dl and mo together = conversion cost: we use labor and overhead to convert material into finished goods. Regular: volume = 1,000 gallons, unit production time = 10 hours, total production time = 10,000 hours. Fat free: volume = 1,000 gallons, unit production time = 15 hours, total production time = 15,000 hours. Add tpt = 10,000 + 15,000 = 25,000. 3/5 of = : to fat free, to regular. Ex ans: allocation method how we assign indirect cost to the cost object. 1,000 / (10,000 + 15,000) = sh. 04 avg. per hour: every hour worked we generate sh. 04 of supervisor salary. Reg: * sh. 04 = 10,000 hours. Fatfree: * sh. 04 = 15,000 hours. Allocation method 2 parts (normal vs. actual) ^ do not = predetermined = estimated = forecasted = budgeted.

Related Questions

1. ABC generally causes the least amount of cost distortionamong products because indirect costs are allocated to the productsbased on

types of activities used by theproduct.

the extent to which the activitiesare used.

both A and B.

none of the above.

Chicago Steel's operating activities for the year are listedbelow:

Beginning inventory	$1,000,800
Ending inventory	$350,500
Purchases	$750,300
Sales revenue	$1,500,400
Operating expenses	$700,200

What is the cost of goods sold for the year?

$1,751,100

$1,400,600

$750,100

$50,100

The following is selected financial data from Turtle BayManufacturing for the most recent year:

Ending raw materials inventory	$21,200
Ending work in process inventory	$44,900
Ending finished goods inventory	$53,200
Amount of underallocated manufacturing overhead	$5,100
Cost of goods sold for year	$85,500
Cost of raw materials purchased during year	$45,700
Cost of direct materials requisitioned during year	$44,300
Cost of indirect materials requisitioned during year	$7,200
Cost of goods completed during year	$120,200
Manufacturing overhead allocated	$60,400
Manufacturing overhead % of direct labor cost	135%

What is the beginning raw materials inventory?

$27,000

$51,500

$19,800

$5,800

4. Which of the following is not an activity inan ABC system that determines the cost of a manufacturedproduct?

Materials handling

Inspecting

Machining

Accounting

5. Which type of company utilizes managerialaccounting?

Manufacturers

Service

Retailers

All of the above

6. On a traditional income statement, all manufacturing-relatedcosts, whether fixed or variable, are listed

above the gross profit line.

below the operating incomeline.

above the sales line.

above the contribution margin line.

7. In a process costing system, direct labor and manufacturingoverhead are normally

incurred evenly throughout theprocess.

incurred at the end of theprocess.

incurred in full at the beginningof the process.

not recorded.

8. Manufacturing overhead costs for a productinclude

operating expenses.

indirect manufacturing costs.

direct material.

prime costs.

Here are selected basic data for Wilson Company:

Estimated manufacturing overhead	$243,750	Factory utilities	$30,900
Estimated labor hours	35,000	Indirect labor	$22,600
Actual direct labor hours	36,000	Sales commissions	$54,600
Estimated direct labor cost	$325,000	Factory rent	$47,800
Actual direct labor cost	$320,000	Factory property taxes	$28,700
Factory depreciation	$65,600	Indirect materials	$33,300

If the company allocates overhead based on direct labor cost,what are the total actual manufacturing overhead costs?

$173,000

$283,500

$228,900

$260,900

10. ERP stands for

	Enterprise Resource Planning.
	Enclosed Resource Placement.
	Edwin R. Perry, the man thatcreated the first system.
	Entity Replacement Product.

lavendermarten476

Ohno Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Ohno's monthly manufacturing cost and other expense data are as follows. Rent on factory equipment $11,000 Insurance on factory building 1,500 Raw materials (plastics, polystyrene, etc.) 75,000 Utility costs for factory 900 Supplies for general office 300 Wages for assembly line workers 58,000 Depreciation on office equipment 800 Miscellaneous materials (glue, thread, etc.) 1,100 Factory manager's salary 5,700 Property taxes on factory building 400 Advertising for helmets 14,000 Sales commissions 10,000 Depreciation on factory building 1,500 Margin check figures provide key numbers to confirm that you are on the right track. Instructions (a) Prepare an answer sheet with the following column headings. Product Costs Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. Total the dollar amounts in each of the columns. DM $75,000 DL $58,000 MO $22,100 PC $25,100 (b) Compute the cost to produce one helmet. P1-2A Classify manufacturing costs into different categories and compute the unit cost. (LO 2), AP Bell Company, a manufacturer of audio systems, started its production in October 2017. For the preceding 3 years, Bell had been a retailer of audio systems. After a thorough survey of audio system markets, Bell decided to turn its retail store into an audio equipment factory. Raw materials cost for an audio system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. An audio system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000. Factory janitorial costs are $1,300 monthly. Advertising costs for the audio system will be $9,500 per month. The factory building depreciation expense is $7,800 per year. Property taxes on the factory building will be $9,000 per year. Instructions (a) Prepare an answer sheet with the following column headings. Product Costs Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Assuming that Bell manufactures, on average, 1,500 audio systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns. DM $111,00 DL $ 90,000 MO $ 18,100 PC $ 9,500 (b) Compute the cost to produce one audio system.

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Fast-Flow Paints produces mixer base paint through a twoâstageprocess, Mixing and Packaging. The following events depict themovement of value into and out of production. Journalize each eventif appropriate; if not, provide a short narrative reason as to whyyou chose not to journalize the action. Nelson, the productionmanager, accepts an order to continue processing the current run ofmixer base paint.

(a)	Materials worth $27,000.00 arewithdrawn from raw materials inventory. Of this amount, $25,500.00will be issued to the Mixing Department, and the balance will beissued to the Maintenance Department to be used on production linemachines.
(b)	Nelson calculates that labor forthe period is $12,500.00. Of this amount, $1,750.00 is formaintenance and indirect labor. The remainder is directlyassociated with mixing.
(c)	Nelson, who is paid a salary butearns about $35.00 per hour, spends one hour inspecting theproduction line.
(d)	The manufacturing overhead driversfor mixing are hours of mixer time at $575.00 per hour, andmaterial movements from materials at $125.00 per movement. Aninspection of the machine timers reveals that a total of eighthours has been consumed in making this product. An inspection of"stocking orders" indicates that only one material movement wasutilized to load the raw materials. (Note: All values havebeen journalized to Factory Overhead. You need only apply them tothe production run.)
(e)	Within Fast-Flow, items aretransferred between departments at a standard cost. This productionrun has created 4,015 gallons of mixer base paint. This paint istransferred to Packaging at a standard cost of $10.05 per gallon.(Round calculation to the nearest whole dollar.)
(f)	Packaging draws $755.00 ofmaterials for packaging of this production run.
(g)	Packaging documents that 12 hoursof direct labor at $10.25 per hour were consumed in the packagingof this production run.
(h)	Packaging uses a cost driver ofdirect labor hours to allocate manufacturing overhead at the rateof $25.00 per hour.
(i)	Packaging transfers 4,015 gallonsof packaged goods to Finished Goods Inventory at a standard cost of$10.34 per gallon. (Round calculation to the nearest wholedollar.)

Chart of Accounts

CHARTOF ACCOUNTS

General Ledger

	ASSETS
110	Cash
121	Accounts Receivable
122	Supplies
123	Prepaid Insurance
130	Materials
132	Work in Process-Mixing
133	Work in Process-Packaging
134	Factory Overhead - Mixing
135	Factory Overhead - Packaging
136	Finished Goods Inventory
181	Land
191	Machinery

	LIABILITIES
210	Accounts Payable
231	Notes Payable
232	Interest Payable
251	Wages Payable

	EQUITY
311	Common Stock
340	Retained Earnings
351	Dividends
390	Income Summary

	REVENUE
410	Sales

	EXPENSES
510	Cost of Goods Sold
520	Wages Expense
531	Insurance Expense
532	Utilities Expense
533	Supplies Expense
560	Depreciation Expense-Machinery
590	Miscellaneous Expense
710	Interest Expense

General Journal

Prepare the journal entries for each event depict the movementof value into and out of production on December 31. Refer to theChart of Accounts for exact wording of account titles. Roundanswers to the nearest dollar.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST.REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

Final Question

c. Nelson, who is paid a salary but earns about $35.00 per hour,spends one hour inspecting the production line.

Nelson's inspection of the assembly line is chargeable toproduction. Since he is the manager of a production unit, it willbe incorporated in the cost of production through the allocation ofoverhead.

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ACTG 2300 Lecture 4: Day 4 Notes

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