AFM101 Study Guide - Midterm Guide: Decision Rule, Fixed Cost, Earnings Before Interest And Taxes
AFM101 Full Course Notes
Document Summary
Get access
Related Documents
Related Questions
Basic Job Costing Project
Reed Incorporated uses a job-order costing system and a predetermined overhead rate based on machine hours.
At the beginning of the year, the company estimated manufacturing overhead for the year would be $240,000 and machine hours would be 8,000.
The following information pertains to December of the current year:
Job 10 | Job 11 | Job 12 | Total | |
Work-in-process, Dec. 1 | $16,000 | $26,000 | $38,000 | $80,000 |
The following transactions took place during the month of December:
1. Purchased raw materials for $25,000 on credit;
2. Requisitioned and used direct materials for the three jobs:
a. $4,000 for Job 10
b. $4,800 for Job 11
c. $7,200 for Job 12
3. Used indirect materials worth $20,000
4. . Incurred direct labor costs as follows:
a. $ 2,400 for Job 10
b. $3,600 for Job 11
c. $4,000 for Job 12
5. Incurred $30,000 worth of indirect manufacturing labor costs.
6. Depreciation on manufacturing plant and equipment $21,000.
7. During the month of December, the company used the following direct labor hours and machine hours for the three jobs:
Job 10 | Job 11 | Job 12 | Total | ||
Machine hours | 400 | 700 | 900 | 2,000 | |
Labor hours | 120 | 180 | 200 | 500 |
Required:
1. Compute the predetermined overhead application rate. |
2. Prepare the journal entries for the transactions that took place in December and apply manufacturing overhead to the jobs using the actual machine hours. 3. Determine the total cost associated with each job. 4. If jobs 10 and 12 were completed, prepared the journal entry to move jobs 10 and 12 to finished goods. 5. Delivered job 10 to customers that paid $40,000 cash; prepare the journal entries to sell job 10 and to recognize the associated cost of goods sold. 6. What is the cost assigned to ending work in process (control account)? 7. What is the cost assigned to ending finished goods (control account)? 8. How much was manufacturing overhead over/underapplied? |
Watson’s revised pro forma cost of goods sold is closest to | |
A. | $16,565,000 |
B. | $16,942,000 |
C. | $17,377,000 |
D. | $17,760,000 |
The following information was adapted from a question on Part 4 of the December 1990 CMA examination that concerned preparation of a pro forma statement of cost of goods sold. The following is Watson Corporation’s pro forma statement of cost of goods sold for the year ended August 31, Year 2.
| The results for the first quarter required the following changes in the budget assumptions: The estimated production in units for the fiscal year should be revised from 140,000 to 145,000 units with the balance of production being scheduled in equal segments over the last 9 months of the year. The actual first quarter’s production was 25,000 units. The planned inventory for finished goods of 3,300 units at the end of the fiscal year remains unchanged and will be valued at the average manufacturing cost for the year. The finished goods inventory of 9,300 units on September 1, Year 1, had dropped to 9,000 units by November 30, Year 1. Due to a new labor agreement, the labor rate will increase 8% effective June 1, Year 2, the beginning of the fourth quarter, instead of the previously anticipated effective date of September 1, Year 2, the beginning of the next fiscal year. The assumptions remain unchanged for direct materials inventory at 16,000 units for the beginning inventory and 18,500 units for the ending inventory. Direct materials inventory is valued on a FIFO basis. During the first quarter, direct materials for 27,500 units of output were purchased for $2,200,000. Although direct materials will be purchased evenly for the last 9 months, the cost of the direct materials will increase by 5% on March 1, Year 2, the beginning of the third quarter. One unit of raw material is used in each unit of product. Indirect materials costs will continue to be projected at 10% of the cost of direct materials consumed. One-half of general factory overhead is considered fixed. |