in class - review class.pdf

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Department
Accounting
Course
ACCTG322
Professor
Trish Stringer
Semester
Winter

Description
Midterm Review Class #1.1- COGM; Inventory balances On January 30, 2013, the manufacturing facility of Trucks R Us was severely damaged by a fire. As a result, the company’s direct materials, work-in-process, and finished goods inventories were destroyed. The company did have access to certain incomplete accounting records, which revealed the following: Beginning inventories at January 1, 2013: Direct Materials $ 32,000 Work in Process $ 68,000 Finished Goods $ 30,000 Key ratios for the month of January 2013 are as follows: Manufacturing Overhead = 40% of conversion costs Prime costs = 70% of total manufacturing costs for the period Gross margin = 20% of sales Ending Work in Process (WIP) is always 10% of the total manufacturing costs for the period. All costs are incurred uniformly in the manufacturing process. Actual operations data for the month of January 2013: Sales $ 900,000 Direct material purchases $ 320,000 Direct labour incurred $ 360,000   Required 1: Prepare a statement of cost of goods manufactured (COGM). Required 2: Calculate the total cost of inventory lost, identifying each category where possible (i.e. Direct Materials, Work in process and Finished Goods) at January 31, 2013. Midterm Review Class #1.2- Plantwide versus Departmental Overhead Rates; Underapplied or Overapplied Overhead “Don’t tell me we’ve lost another bid!” exclaimed Sandy Kovallas, president of Lenko Products Inc. “I’m afraid so” replied Doug Martin, the operations vice-president. “One of our competitors underbid us by about $10,000 on the Hasting job.” “I just can’t figure it out,”said Kovallas, “It seems we’re either too high to get the job or too low to make any money on half the jobs we bid. What’s happened?” Lenko Products manufactures specialized goods to customers’ specifications and operates a job- order costing system. Manufacturing overhead cost is applied to jobs on the basis of direct labour cost. The following estimates were made at the beginning of the year: MachiningCu Attnembly Total Direct labour $300,000 $200,000 $400,000 $900,000 Manufacturing $540,000 $800,000 $100,000 $1,440,000 overhead Jobs require varying amounts of work in the three departments. The Hastings job, for example, would have required manufacturing costs in the three departments as follows: Machining AC settbgly Total Direct materials $12,000 $900 $5,600 $18,500 Direct labour $6,500 $1,700 $13,000 $21,200 Manufacturing overhead ? ? ? ? The company uses a plantwide overhead rate to apply manufacturing overhead cost to jobs. Required 1: Assuming the use of a plantwide overhead rate: a. Compute the rate for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. Required 2: Suppose that instead of using a plantwide overhead rate, the company had used a separate predetermined overhead rate in each department. Under these conditions” a. Compute the rate for each department for the current year. b. Determine the amount of manufacturing overhead cost that would have been applied to the Hastings job. Required 3: Explain the difference between the manufacturing overhead that would have been applied to the Hastings job using the plantwide rate in question 1(b) above and using the departmental rates in question 2(b). Required 4: Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labour, and applied overhead). What was the company’s bid price on theh Hastings job? What would the bid price have been if departmental overhead rates had been used to apply overhead cost? Required 5: At the end of the year,
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