Practice Test #2

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Business And Administration
Debbie Mortimer

DEPARTMENT OF BUSINESS AND ADMINISTRATION BUS2003 Test 2 October 18, 2010 Name:____________________________________________________ Student Number: __________________________________________ Instructions: Please answer the following questions on the examination test sheets. If you need more room, please use the back of the pages. Show your calculations in detail. Grading: Q1 /16 Q2 /20 Q3 / 9 Q4 / 3 Total /48 Question One: (16 marks) Staffordville Company produces baseball bats and cricket paddles. It has two departments that process all products, Cutting and Finishing. During July 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 $40,000 for materials and $60,000 for conversion costs. Ending work in process inventory in the Cutting department was 40 percent complete. Direct materials are added at the beginning of the cutting process. Beginning work in process in the Finishing department was 80 percent complete as to conversion. Direct materials for finishing the units are added at the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending work in process inventory for the Finishing department was 30 percent converted. Additional information about the two departments follows: Cutting Finishing ---------- ------------ Beginning work in process units 20,000 24,000 Units started this period 60,000 ? Units transferred this period 64,000 68,000 Ending work in process units 20,000 Material costs added $48,000 $34,000 Conversion costs 28,000 68,200 Transferred-out cost 128,240 ? Required: a) Prepare a production cost worksheet using the weighted average method for the Finishing department. Be sure to reconcile total units and total costs. (Round to the nearest cent for dollar calculations). (14 marks) b) Prepare the journal entry to record the transfer of goods from the Cutting Department to the Finishing Department for the month. (2 marks) Question One Solution: a) Finishing Department Cost Production Worksheet Equivalent Units Calc Physical DM CON Trans-In BI 24,000 Started 64,000 Total 88,000 Completed 68,000 100% 68,000 100% 68,000 100% 68,000 EI 20,000 0% 0 30% 6,000 100% 20,000 Total 88,000 68,000 74,000 88,000 1 mark for balancing to 88,000 units 1 mark for units started 1 mark for each ending inventory cost category = 3 marks Unit Cost Total DM CON Trans-In BI 52,000 0 28,000 24,000 Added 230,440 34,000 68,200 128,240 Total 282,440 34,000 96,200 152,240 / units 68,000 74,000 88,000 Unit cost 3.53 0.50 1.30 1.73 1 mark for added trans-in costs 1 mark for each unit cost amounts – cfw = 4 marks Cost Reconciliation: Cost of units transferred (68,000 x 3.53240,040 1 mark Ending Inventory: CON (6,000 x $1.30) 7,800 1 mark Trans-in (20,000 x $1.73) 34,600 42,400 1 mark Total 282,440 1 mark for matching 282,440 totals b) WIP – Finishing 128,240 WIP – Cutting 128,240 1 mark for each line = 2 marks total Question Two (20 marks) Cabanos Company manufactures two products, Product C and Product D. The company estimated it would incur $160,790 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labour hours. Data concerning the current period's operations appear below: Product C Product D Estimated Volume 3,400 units 4,800 units Direct Labour Hours per Unit 1.40 hour 1.90 hours Direct Materials Cost per Unit $ 7.40 $12.70 Direct Labour Cost per Unit $14.00 $19.00 Required: a) Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year. Round calculations to the nearest cent) (6 marks) b) The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on
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