Tuesday, May 21, 2019

Cost Accounting Answers

CHAPTER 4 JOB COSTING 4-1 appeal pussa grouping of several(prenominal) verifying equal items. Cost tracingthe assigning of site be to the chosen cost object. Cost allocationthe assigning of indirect be to the chosen cost object. Cost-allocation viewpointa factor that links in a systematic way an indirect cost or group of indirect be to cost objects. 4-2In a crease-cost system, cost are assigned to a distinct unit, batch, or lot of a product or service.In a process- be system, the cost of a product or service is obtained by consumption broad averages to assign cost to masses of identical or like units. 4-3An advertising campaign for Pepsi is probably to be very specific to that individual client. mull over costing enables all the specific aspects of each tune to be identified. In contrast, the processing of checking account withdrawals is similar for many customers. Here, process costing can be used to compute the cost of each checking account withdrawal. -4The seven steps in meditate costing are (1) identify the job that is the chosen cost object, (2) identify the direct costs of the job, (3) select the cost-allocation bases to use for allocating indirect costs to the job, (4) identify the indirect costs associated with each cost-allocation base, (5) compute the localise per unit of each cost-allocation base used to allocate indirect costs to the job, (6) compute the indirect costs allocated to the job, and (7) compute the check cost of the job by adding all direct and indirect costs assigned to the job. -5Major cost objects that managers focus on in companies using job costing are a product such as a specialized machine, a service such as a repair job, a envision such as running the Expo, or a task such as an advertising campaign. 4-6Three major source documents used in job-costing systems are (1) job cost ecord or job cost sheet, a document that records and accumulates all costs assigned to a specific job, starting when work begins (2) m aterials requisition record, a document that contains development about the cost of direct materials used on a specific job and in a specific department and (3) pains- conviction sheet, a document that contains information about the amount of assiduity time used for a specific job in a specific department. -7The main advantages of using computerized source documents for job cost records are the accuracy of the records and the ability to provide managers with instantaneous feedback to help control job costs. 4-8Two reasons for using an annual budget fulfilment are a. The numerator reasonthe longer the time period, the less the influence of seasonal patterns in crash costs, and b. The denominator reasonthe longer the time period, the less the effect of variations in output levels or quantities of the cost-allocation bases on the allocation of fixed costs. -9 genuine costing and normal costing take issue in their use of authentic or budgeted indirect cost judge Actual Normal Costing Costing sway-cost set ups Actual rates Actual rates Indirect-cost rates Actual rates Budgeted rates each(prenominal) costing method uses the real(a) quantity of the direct-cost input and the echt quantity of the cost-allocation base. 4-10A house construction firm can use job cost information (a) to determine the profitability of individual jobs, (b) to assist in bidding on future jobs, and (c) to evaluate maestros who are in charge of managing individual jobs. 4-11The statement is false. In a normal costing system, the Manufacturing bang image account will not, in general, equal the amounts in the Manufacturing Overhead Allocated account.The Manufacturing Overhead assert account aggregates the essential budget items costs incurred while Manufacturing Overhead Allocated allocates command processing smasher time costs to jobs on the basis of a budgeted rate times the actual quantity of the cost-allocation base. Underallocation or overallocation of indirect ( ba ng) costs can arise because of (a) the Numerator reasonthe actual strike costs differ from the budgeted command processing overhead time costs, and (b) the Denominator reasonthe actual quantity used of the allocation base differs from the budgeted quantity. 4-12Debit entries to Work-in- routine avow represent increases in work in process.Examples of debit entries under normal costing are (a) direct materials used (credit to Materials envision), (b) direct manufacturing ride calculate to job (credit to Wages collectable restrainer), and (c) manufacturing overhead allocated to job (credit to Manufacturing Overhead Allocated). 4-13Alternative ways to make end-of-period adjustments to dispose of underallocated or overallocated overhead are as follows (i)Proration found on the total amount of indirect costs allocated (before proration) in the ending balances of work in process, destroyed goods, and cost of goods sold. ii)Proration based on total ending balances (before proratio n) in work in process, finished goods, and cost of goods sold. iii) Year-end write-off to Cost of Goods Sold. iv) The adjusted allocation rate approach that restates all overhead entries using actual indirect cost rates rather than budgeted indirect cost rates. 4-14A company might use budgeted costs rather than actual costs to compute direct labor rates because it may be difficult to trace direct labor costs to jobs as they are completed (for example, because bonuses are only cognize at the end of the year). -15Modern technology of electronic data interchange (EDI) is helpful to managers because it ensures that a purchase order is transmitted quickly and accurately to suppliers with minimum paperwork and costs. 16. (10 min) affair order costing, process costing. a. air costingl. railway line costing b. work out costingm. Process costing c. Job costingn. Job costing d. Process costingo. Job costing e. Job costingp. Job costing f. Process costingq. Job costing g. Job costingr. Pr ocess costing h. Job costing (but some process costing)s. Job costing i.Process costingt. Process costing j. Process costingu. Job costing k. Job costing 4-17(20 min. )Actual costing, normal costing, accounting for manufacturing overhead. 1. pic=pic =pic= 1. 80 or clxxx% pic=pic =pic= 1. 9 or 190% 2. cost of Job 626 under actual and normal costing follow ActualNormal CostingCosting repoint materials$ 40,000$ 40,000 Direct manufacturing labor costs30,00030,000 Manufacturing overhead costs $30,000 ( 1. 90 $30,000 ( 1. 80 57,000 54,000 essential manufacturing costs of Job 626$127,000$124,000 3. pic=pic ( pic =$1,450,000 ( 1. 80 =$2,610,000 pic=pic pic =$2,755,000 ( $2,610,000 = $one hundred forty-five,000 There is no under- or overallocated overhead under actual costing because overhead is allocated under actual costing by multiplying actual manufacturing labor costs and the actual manufacturing overhead rate. This, of course equals the actual manufacturing overhead costs. All actu al overhead costs are allocated to products. Hence, there is no under- or overallocated overhead. 4-18(20 -30 min. ) Job costing, normal and actual costing. 1. pic=pic = pic =$50 per direct labor-hour pic=pic = pic =$40 per direct labor-hour These rates differ because both the numerator and the denominator in the both calculations are different i based on budgeted numbers and the other based on actual numbers. 2a. Laguna Mission Model Model Normal costing Direct costs Direct materials $106,760 $127,550 Direct labor 36,950 41,320 143,710 168,870 Indirect costs Assembly support ($50 ( 960 $50 ( 1,050) 48,000 52, euchre Total costs $191,710 $221,370 2b.Actual costing Direct costs Direct materials $106,760 $127,550 Direct labor 36,950 41,320 143,710 168,870 Indirect costs Assembly support ($40 ( 960 $40 ( 1,050) 38,400 42,000 Total costs $182,110 $210,870 3. Normal costing enables Amesbury to report a job cost as soon as the job is completed, assu ming that both the direct materials and direct labor costs are known at the time of use. Once the 960 direct labor-hours are known for the Laguna Model (June 2011), Amesbury can compute the $191,710 cost figure using normal costing. Amesbury can use this information to manage the costs of the Laguna Model job as well as to bid on similar jobs later in the year. In contrast, Amesbury has to clench until the December 2011 year-end to compute the $182,110 cost of the Laguna Model using actual costing.Although not required, the following overview diagram summarizes Amesbury Constructions job-costing system. pic 4-19(10 min. )Budgeted manufacturing overhead rate, allocated manufacturing overhead. 1. Budgeted manufacturing overhead rate = pic = pic = $24 per machine-hour 2. Manufacturing = Actual ( Budgeted manufacturing overhead machine-hours overhead rate allocated = 170,000 ? $24 = $4,080,000 3.Since manufacturing overhead allocated is greater than the actual manufacturing overhead costs, Gammaro overallocated manufacturing overhead Manufacturing overhead allocated$4,080,000 Actual manufacturing overhead costs 4,050,000 Overallocated manufacturing overhead$ 30,000 4-20(20-30 min. )Job costing, accounting for manufacturing overhead, budgeted rates. 1. An overview of the product costing system is pic Budgeted manufacturing overhead divided by allocation base Machining overheadpic = $36 per machine-hour Assembly overheadpic = 180% of direct manuf. labor costs 2. Machining department, 2,000 hours ( $36$72,000 Assembly department, 180% ( $15,000 27,000 Total manufacturing overhead allocated to Job 494$99,000 3.MachiningAssembly Actual manufacturing overhead$2, coulomb,000$ 3,700,000 Manufacturing overhead allocated, $36 ( 55,000 machine-hours1,980,000 180% ( $2,200,000 3,960,000 Underallocated (Overallocated)$ 120,000$ (260,000) 4-21 (20(25 min. ) Job costing, consulting firm. 1. Budgeted indirect-cost rate for client support can be calculated as follows Budgeted indirect-cost rate = $13,600,000 ? $5,312,500 = 256% of professional labor costs 2. At the budgeted revenues of $21,250,000 Taylors in operation(p) income of $2,337,500 equals 11% of revenues. Markup rate = $21,250,000 ? $5,312,500 = 400% of direct professional labor costs 3. Budgeted costsDirect costs Director, $198 ( 4$ 792 Partner, $101 ( 171,717 Associate, $49 ( 422,058 Assistant, $36 ( 153 5,508$10,075 Indirect costs Consulting support, 256% ( $10,075 25,792 Total costs$35,867 As calculated in requirement 2, the bid toll to earn an 11% income-to-revenue margin is 400% of direct professional costs. Therefore, Taylor should bid 4 ( $10,075 = $40,300 for the Red Rooster job. Bid price to earn target operating income-to-revenue margin of 11% can also be calculated as follows permit R = revenue to earn target income R 0. 11R = $35,867 0. 89R = $35,867 R = $35,867 ? 0. 89 = $40,300 Or Direct costs $10,075 Indirect costs 25,792Operating income (0. 11 ( $40,300) 4,433 Bid price$40,300 4-22(1520 min. )Time period used to compute indirect cost rates. 1. rump 1 2 3 4 Annual (1) Pools sold 700 500 cl 150 1,500 (2) Direct manufacturing labor hours (0. 5 ( 350 250 75 75 750 Row 1) (3) Fixed manufacturing overhead costs $10,500 $10,500 $10,500 $10,500 $42,000 (4) Budgeted fixed manufacturing overhead $30 $42 $ cxl $140 $56 rate per direct manufacturing labor hour ($10,500 ( Row 2) Budgeted be Based on shadownly Manufacturing Overhead Rate 2nd Quarter 3rd Quarter Direct material costs ($7. 0 ( 500 pools 150 pools) $ 3,750 $ 1,cxxv Direct manufacturing labor costs 4,000 1,200 ($16 ( 250 hours 75 hours) Variable manufacturing overhead costs 3,000 900 ($12 ( 250 hours 75 hours) Fixed manufacturing overhead costs 10,500 10,500 ($42 ( 250 hours $140 ? 5 hours) Total manufacturing costs $21,250 $13,725 Divided by pools manufactured each quarter ? 500 ? 150 Manufacturing cost per pool $ 42. 50 $ 91. 50 2. Budgeted Costs Based on Annual Manufacturing Overhead Rate 2nd Quarter 3rd Quarter Direct material costs ($7. 0 ( 500 pools 150 pools) $ 3,750 $1,125 Direct manufacturing labor costs 4,000 1,200 ($16 ( 250 hours 75 hours) Variable manufacturing overhead costs 3,000 900 ($12 ( 250 hours 75 hours) Fixed manufacturing overhead costs 14,000 4,200 ($56 ( 250 hours 75 hours) Total manufacturing costs $24,750 $7,425 Divided by pools manufactured each quarter ( 500 ( 150 Manufacturing cost per pool $ 49. 50 $49. 50 3. 2nd Quarter 3rd Quarter Prices based on quarterly budgeted manufacturing overhead rates calculated in $55. 25 $118. 5 requirement 1 ($42. 50 ( cxxx% $91. 50 ( 130%) Price based on annual budgeted manufacturing overhead rates calculated in $64. 35 $64. 35 requirement 2 ($49. 50 ( 130% $49. 50 ( 130%) Splash should use the budgeted annual manufacturing overhead rate because capacity decisions are based on longer annual periods rathe r than quarterly periods. Prices should not vary based on quarterly fluctuations in production. Splash could vary prices based on market conditions and demand for its pools. In this case, Splash would charge higher prices in quarter 2 when demand for its pools is high. set based on quarterly budgets would cause Splash to do the oppositeto decrease rather than increase prices 4-23(1015 min. ) answer foring for manufacturing overhead. 1. Budgeted manufacturing overhead rate= pic = $30 per machine-hour 2. Work-in-Process Control7,350,000 Manufacturing Overhead Allocated7,350,000 (245,000 machine-hours ( $30 per machine-hour = $7,350,000) 3. 7,350,000 $7,300,000 = $50,000 overallocated, an insignificant amount of actual manufacturing overhead costs $50,000 ? $7,300,000 = 0. 68%. Manufacturing Overhead Allocated7,350,000 Manufacturing part Overhead Control7,300,000 Cost of Goods Sold50,000 4-24(35(45 min. ) Job costing, journal entries. most instructors may also want to assign Exerci se 4-25. It demonstrates the relationships of the general ledger to the underlying subsidiary ledgers and source documents. 1. An overview of the product costing system is 2. & 3. This answer assumes COGS disposed of $4,020 does not include the writeoff of overallocated manufacturing overhead. 2. (1) Materials Control 800 Accounts Payable Control 800 (2) Work-in-Process Control 710 Materials Control 710 (3) Manufacturing Overhead Control 100 Materials Control 100 (4) Work-in-Process Control 1,300 Manufacturing Overhead Control 900 Wages Payable Control 2,200 (5) Manufacturing Overhead Control 400 Accumulated Depreciationbuildings and manufacturing equipment 400 (6) Manufacturing Overhead Control 550 Miscellaneous accounts 550 (7) Work-in-Process Control 2,080 Manufacturing Overhead Allocated 2,080 (1. 60 ( $1,300 = $2,080) (8) faultless Goods Control 4,120 Work-in-Process Control 4,120 (9) Accounts Receivable Control (or Cash) 8,000 Revenues 8,000 (10) Cost of Goods Sold 4,020 Finished Goods Control 4,020 (11) Manufacturing Overhead Allocated 2,080 Manufacturing Overhead Control 1,950 Cost of Goods Sold 130 3. Materials Control Bal. /1/2011 100 (2) Work-in-Process Control (Materials used) (1) Accounts Payable Control (3) Manufacturing Overhead Control (Materials 710 (Purchases) 800 used) 100 Bal. 12/31/2011 90 Work-in-Process Control Bal. /1/2011 60 (8) Finished Goods Control (Goods completed) (2) Materials Control (Direct 4,120 materials) 710 (4) Wages Payable Control (Direct manuf. labor) (7) Manuf. Overhead Allocated 1,300 2,080 Bal. 2/31/2011 30 Finished Goods Control Bal. 1/1/2011 500 (10) Cost of Goods Sold 4,020 (8) WIP Control (Goods completed) 4,120 Bal. 12/31/2011 600 Cost of Goods Sold (10) Finished Goods Control (Goods (11) Manufacturing Overhead Allocated (Adjust sold) 4,020 for over allocation) 130 Bal. 12/31/2011 3,890 Manufacturing Overhead Control (3) Materials Control (Indirect materials) (11) To close 1,950 (4) Wages Payable Control (Indirect manuf. 100 labor) (5) Accum. Deprn.Control (Depreciation) 900 (6) Accounts Payable Control (Miscellaneous) 400 550 Bal. 0 Manufacturing Overhead Allocated (11) To close 2,080 (7) Work-in-Process Control (Manuf. overhead allocated) 2,080 Bal. 0 4-25(35 minutes) Journal entries, T-accounts, and source documents. 1. i. Direct Materials Control 124,000 Accounts Payable Control124,000 root system Document Purchase Invoice, Receiving Report Subsidiary Ledger Direct Materials Record, Accounts Payable ii. Work in Process Control a 122,000 Direct Materials Control122,000 showtime Document Material Requisition Records, Job Cost Record Subsidiary Ledger Direct Materials Record, Work-in-Process Inventory Records by Jobs iii. Work in Process Control80,000 Manufacturing Overh ead Control54,500 Wages Payable Control134,500 Source Document Labor Time Sheets, Job Cost Records Subsidiary Ledger, Manufacturing Overhead Records, Employee Labor Records, Work-in-Process Inventory Records by Jobs iv. Manufacturing Overhead Control129,500 Salaries Payable Control 20,000 Accounts Payable Control 9,500 Accumulated Depreciation Control 30,000 Rent Payable Control 70,000 Source Document Depreciation Schedule, Rent Schedule, Maintenance wages due, Invoices for miscellaneous factory overhead items Subsidiary Ledger Manufacturing Overhead Records v.Work in Process Control200,000 Manufacturing Overhead Allocated200,000 ($80,000 pic $2. 50) Source Document Labor Time Sheets, Job Cost Record Subsidiary Ledger Work-in-Process Inventory Records by Jobs vi. Finished Goods Control b387,000 Work in Process Control387,000 Source Document Job Cost Record, Completed Job Cost Record Subsidiary Ledger Work-in-Process Inventory Records by Jobs, Finished Goods Inventory Records by Jobs vii. Cost of Goods Sold c432,000 Finished Goods Control432,000 Source Document Sales Invoice, Completed Job Cost Record Subsidiary Ledger Finished Goods Inventory Records by Jobs viii. Manufacturing Overhead Allocated200,000Manufacturing Overhead Control ($129,500 + $54,500)184,000 Cost of Goods Sold 16,000 Source Document Prior Journal Entries ix. Administrative Expenses 7,000 Marketing Expenses120,000 Salaries Payable Control30,000 Accounts Payable Control90,000 Accumulated Depreciation, short letter Equipment 7,000 Source Document Depreciation Schedule, Marketing Payroll Request, Invoice for Advertising, Sales Commission Schedule. Subsidiary Ledger Employee Salary Records, Administration Cost Records, Marketing Cost Records. aMaterials used = pic + Purchases pic pic bpic = pic + pic pic pic cCost of goods sold = pic + pic pic pic 2. T-accounts Direct Materials Control Bal. 1/1/2011 9,000 (2) Work-in-Process Control (Materials used) (1) Accounts Payable Control (Purchases ) 122,000 124,000 Bal. 12/31/2011 11,000 Work-in-Process Control Bal. 1/1/2011 6,000 (6) Finished Goods Control (Cost of goods (2) Materials Control manufactured) (Direct materials used) 122,000 387,000 (3) Wages Payable Control (Direct manuf. labor) (5) Manuf.Overhead Allocated 80,000 200,000 Bal. 12/31/2011 21,000 Finished Goods Control Bal. 1/1/2011 69,000 (7) Cost of Goods Sold 432,000 (6) WIP Control (Cost of goods manuf. ) 387,000 Bal. 2/31/2011 24,000 Cost of Goods Sold (7) Finished Goods Control (Goods sold) (8) Manufacturing Overhead Allocated (Adjust 432,000 for overallocation) 16,000 Manufacturing Overhead Control (3) Wages Payable Control (8) To close 184,000 (Indirect manuf. labor) 54,500 (4) Salaries Payable Control (Maintenance) (4) Accounts Payable Control (Miscellaneous) 20,000 (4) Accum. Deprn.Control (Depreciation) (4) Rent Payable Control (Rent) 9,500 30,000 7 0,000 Bal. 0 Manufacturing Overhead Allocated (8) To close 200,000 (5) Work-in-Process Control (Manuf. verhead allocated) 200,000 Bal. 0 4-26(45 min. )Job costing, journal entries. Some instructors may wish to assign paradox 4-24. It demonstrates the relationships of journal entries, general ledger, subsidiary ledgers, and source documents. 1. An overview of the product-costing system is 2. Amounts in millions. (1) Materials Control 150 Accounts Payable Control 150 (2) Work-in-Process Control 145 Materials Control 145 (3) Manufacturing Department Overhead Control 10 Materials Control 10 (4) Work-in-Process Control 90 Wages Payable Control 90 (5) Manufacturing Department Overhead Control 30 Wages Payable Control 30 (6) Manufacturing Department Overhead Control 19 Accumulated Depreciation 19 (7) Manufacturing Department Overhead Control 9 Various liabilities 9 (8) Work-in-Process Control 63 Manufacturing Overhead Allocated 63 (9) Finished Goods Control 294 Work-in-Process Control 294 (10a)Cost of Goods Sold 292 Finished Goods Control 292 (10b) Accounts Receivable Control (or Cash ) 400 Revenues 400 The posting of entries to T-accounts is as follows Materials Control Work-in-Process Control Bal 12 (2) 145 Bal. (9) 294 (2) 145 (4) 90 (8) 63 (1) 150 (3) 10 Bal. 7 Bal. Finished Goods Control Cost of Goods Sold Bal. 6 (10a) 292 (10a) 292 (9) 294 (11) 5 Bal. 8 Manufacturing Department Overhead Control Manufacturing Overhead Allocated (3) 10 (11) 68 (11) 63 (8) 63 (5) 30 (6) 19 (7) 9 Accounts Payable Control Wages Payable Control (1) 150 (4) 90 (5) 30 Accumulated Depreciation Various Liabilities (6) 19 (7) 9 Accounts Receivable Control Revenues (10b) 400 (10b) 400 The ending balance of Work-in-Process Control is $6. 3. (11) Manufacturing Overhead Allocated63 Cost of Goods Sold5 Manufactur ing Department Overhead Control68 Entry posted to T-accounts in Requirement 2. 4-27(15 min. )Job costing, unit cost, ending work in progress. 1. Direct manufacturing labor rate per hour $26 Manufacturing overhead cost allocated $20 per manufacturing labor-hour Job M1 Job M2 Direct manufacturing labor costs $273,000 $208,000 Direct manufacturing labor hours ($273,000pic$26 10,500 8,000 $208,000pic$26) Manufacturing overhead cost allocated (10,500 pic $20 $210,000 $ one hundred sixty,000 8,000 pic $20) Job Costs May 2011 Job M1 Job M2 Direct materials $ 78,000 $ 51,000 Direct manufacturing labor 273,000 208,000 Manufacturing overhead allocated 210,000 160,000 Total costs $561,000 $419,000 2. Number of pipes produced for Job M1 1,100 Cost per pipe ($561,000 pic1,100) $510 3. Finished Goods Control561,000 Work-in-Process Control 561,000 4.Rafael Company began May 2011 with no work-in-process inventory. During May, it started and finished M1. It also started M2, which is still in work-in-process inventory at the end of May. M2s manufacturing costs up to this point, $419,000, remain as a debit balance in the Work-in-Process Inventory account at the end of May 2011. 4-28(20(30 min. ) Job costing actual, normal, and variation from normal costing. 1. Actual direct cost rate for professional labor=$59 per professional labor-hour Actual indirect cost rate = pic=$42 per professional labor-hour pic = pic=$55 per professional labor-hour Budgeted indirect cost rate = pic=$43 per professional labor-hour (a) (b) (c) Actual Normal Variation of Costing Costing Normal Costing Direct-Cost Rate $59 $59 $55 (Actual rate) (Actual rate) (Budgeted rate) Indirect-Cost Rate $42 $43 $43 (Actual rate) (Budgeted rate) (Budgeted rate) 2. (a) (b) (c) Actual Normal Variation of Costing Costing Normal Costing Direct Costs $59 ( 160 = $ 9,440 $59 ( 160 = $ 9,440 $55 ( 160 = $ 8,800 Indirect Costs $42 ( 160 = 6,720 $43 ( 160 = 6,880 $43 ( 160 = 6,880 Total Job Costs $16,160 $16,320 $15,680 All three costing systems use the actual professional labor time of 160 hours. The budgeted 150 hours for the Pierre Enterprises audit job is not used in job costing. However, Chico may pay used the 150 hour number in bidding for the audit. The actual costing figure of $16,160 is less than the normal costing figure of $16,320 because the actual indirect-cost rate ($42) is less than the budgeted indirect-cost rate ($43).The normal costing figure of $16,320 is more than the variation of normal costing (based on budgeted rates for direct costs) figure of $15,680, because the actual direct-cost rate ($59) is more than the budgeted direct-cost rate ($55). Although not required, the following overview diagram summarizes Chicos job-costing system. pic 4-29(20(30 min. ) Job costing actual, normal, and variation from normal costing. 1. Actual direct cost rate for architectural labor=$92 per architectural labor-hour Actual indirect cost rate = pic=$50 per architectural labor-hour pic = pic=$90 per architectural labor-hour Budgeted indirect cost rate = pic=$54 per architectural labor-hour (a) (b) (c) Actual Normal Variation of Costing Costing Normal Costing Direct-Cost Rate $92 $92 $90 (Actual rate) (Actual rate) (Budgeted rate) Indirect-Cost Rate $50 $54 $54 (Actual rate) (Budgeted rate) (Budgeted rate) 2. (a) (b) (c) Actual Normal Variation of Costing Costing Normal Costing Direct Costs $92 ( 250 = $23,000 $92 ( 250 = $23,000 $90 ( 250 = $22,500 Indirect Costs $50 ( 250 = 12,500 $54 ( 250 = 13,500 $54 ( 250 = 13,500 Total Job Costs $35,500 $36,500 $36,000 All three costing systems use the actual architectural labor time of 250 hours. The budgeted 275 hours for the supporter Tower job is not used in job costing. However, Braden Brothers may have used the budgeted number of hours in bidding for the job. 30. (30 min. ) Proration of overhead. pic = pic pic 2. Overhead allocated = 50% pic Actual direct manufacturing labor cost = 50% pic $228,000 = $114,000 Underallocated = Actual Allocated plant manufacturing manufacturing overhead costs overhead overhead costs = $117,000 $114,000 = $3,000 Underallocated manufacturing overhead = $3,000 3a. All underallocated manufacturing overhead is written off to cost of goods sold. Both work in process (WIP) and finished goods inventory remain unchanged. Account Dec. 31, 2011 Proration of $3,000 Dec. 31, 2011 equilibrate Underallocated Balance (Before Proration) Manuf.Overhead (After Proration) (1) (2) (3) = (1) + (2) WIP $ 50,700 $ 0 $ 50,700 Finished Goods 245,050 0 245,050 Cost of Goods Sold 549,250 3,000 552,250 Total $845,000 $3,000 $848,000 3b. Underallocated manufacturing overhead prorated based on ending balances Account Dec. 31, 2011 Account Account Proration of $3,000 Dec. 1, 2011 Account Balance Balance as a Underallocated Balance (Before Proration) Percent of Total Manuf. Overhead (After Proration) (1) (2) = (1) ? $845,000 (3) = (2)pic$3,000 (4) = (1) + (3) WIP $ 50,700 0. 06 0. 06 pic $3,000 = $ 180 $ 50,880 Finished Goods 245,050 0. 29 0. 29 pic $3,000 = 870 245,920 Cost of Goods Sold 549,250 0. 65 0. 5 pic $3,000 = 1,950 551,200 Total $845,000 1. 00 $3,000 $848,000 3c. Underallocated manufacturing overhead prorated based on 2011 overhead in ending balances Account Dec. 31, 2011 Allocated Manuf. Allocated Manuf. Overhead Proration of $3,000 Dec. 31, 2011 Account Overhead in in Underallocated Account Balance Dec. 31, 2011 Balance Dec. 31, 2011 Manuf.Overhead Balance (Before Proration) (Before Proration) Balance as a (4) = (3)pic$3,000 (After Proration) (1) (2) Percent of Total (5) = (1) + (4) (3) = (2) ? $114,000 WIP $ 50,700 $ 10,260a 0. 09 0. 09 pic $3,000 = $ 270 $ 50,970 Finished Goods 245,050 29,640b 0. 26 0. 6 pic $3,000 = 780 245,830 Cost of Goods Sold 549,250 74,100c 0. 65 0. 65 pic $3,000 = 1,950 551,200 Total $845,000 $114,000 1. 00 $3,000 $848,000 a,b,c Overhead allocated = Direct manuf. labor costpic50% = $20,520 $59,280 $148,200pic50% 4. Writing off all of the underallocated manufacturing overhead to Cost of Goods Sold (CGS) is usually warranted when CGS is large relative to Work-in-Process and Finished Goods Inventory and the underallocated manufacturing overhead is immaterial. Both these conditions establish in this case.ROW should write off the $3,000 underallocated manufacturing overhead to Cost of Goods Sold Account. 4-31 (20(30 min)Job costing, accounting for manufacturing overhead, budgeted rates. 1. An overview of the job-costing system is pic 2. Budgeted manufacturing overhead divided by allocation base a. Machining Department pic= $52 per machine-hour b. Finishing Department pic= 194% of direct manufacturing labor costs 3. Machining Department overhead, $52 ( 130 machine-hours$6,760 Finishing Department overhead, 194% of $1,100 2,134 Total manufacturing overhead allocated$8,894 4. Total costs o f Job 431 Direct costs Direct materialsMachining Department$15,500 Finishing Department5,000Direct manufacturing laborMachining Department400 Finishing Department 1,100$22,000 Indirect costs Machining Department overhead, $52 ( 130$ 6,760 Finishing Department overhead, 194% of $1,100 2,134 8,894 Total costs$30,894 The per-unit product cost of Job 431 is $30,894 ? 400 units = $77. 235 per unit The point of this part is (a) to get the definitions straight and (b) to underscore that overhead is allocated by multiplying the actual amount of the allocation base by the budgeted rate. 5. MachiningFinishing Manufacturing overhead incurred (actual)$11,070,000$8,236,000 Manufacturing overhead allocated 210,000 hours ( $5210,920,000 94% of $4,400,000 8,536,000 Underallocated manufacturing overhead$ 150,000 Overallocated manufacturing overhead$ 300,000 Total overallocated overhead = $300,000 $150,000 = $150,000 6. A homogeneous cost pool is one where all costs have the same or a similar cause- and-effect or benefits-received relationship with the cost-allocation base. Fasano likely assumes that all its manufacturing overhead cost items are not homogeneous. Specifically, those in the Machining Department have a cause-and-effect relationship with machine-hours, while those in the Finishing Department have a cause-and-effect relationship with direct manufacturing labor costs.Fasano believes that the benefits of using two cost pools (more accurate product costs and better ability to manage costs) exceeds the costs of implementing a more complex system. 4-32(15(20 min. ) Service industry, job costing, law firm. 1. pic 2. pic= pic =pic =$65 per professional labor-hour Note that the budgeted professional labor-hour direct-cost rate can also be calculated by dividing total budgeted professional labor costs of $2,600,000 ($104,000 per professional ( 25 professionals) by total budgeted professional labor-hours of 40,000 (1,600 hours per professional ( 25 professionals), $2,600,000 ( 40,000 = $65 per professional labor-hour. picpic= pic pic =pic =$55 per professional labor-hour 4. Richardson Punch Direct costs victor labor, $65 ( 100 $65 ( 150 $ 6,500 $ 9,750 Indirect costs Legal support, $55 ( 100 $55 ( 150 5,500 8,250 $12,000 $18,000 4-33(2530 min. Service industry, job costing, two direct- and indirect-cost categories, law firm (continuation of 4-32). Although not required, the following overview diagram is helpful to understand Keatings job-costing system. pic 1. Professional Professional Partner Labor Associate Labor Budgeted remuneration per professional $ 200,000 $80,000 Divided by budgeted hours of billable time per professional ? 1,600 ? ,600 Budgeted direct-cost rate $125 per hour* $50 per hour *Can also be calculated as pic= pic= pic=$125 Can also be calculated as pic= pic= pic=$ 50 2. General Secretarial Support Support Budgeted total costs $1,800,000 $400,000 Divided by budgeted quantity of allocation base ? 40,000 hour s ? ,000 hours Budgeted indirect cost rate $45 per hour $50 per hour 3. Richardson Punch Direct costs Professional partners, $125 ( 60 hr. $125 ( 30 hr. $7,500 $3,750 Professional associates, $50 ( 40 hr. $50 ( 120 hr. 2,000 6,000 Direct costs $ 9,500 $ 9,750 Indirect costs General support, $45 ( 100 hr. $45 ( 150 hr. 4,500 6,750 Secretarial support, $50 ( 60 hr. $50 ( 30 hr. 3,000 1,500 Indirect costs 7,500 8,250 Total costs $17,000 $18,000 4. Richardson Punch wizard direct Single indirect (from Problem 4-32) $12,000 $18,000 Multiple direct Multiple indirect (from requirement 3 of Problem 4-33) 17,000 18,000 Difference $ 5,000 $ 0 undercosted no change The Richardson and Punch jobs differ in their use of resources. The Richardson job has a mix of 60% partners and 40% associates, while Punch has a mix of 20% partners and 80% associates. Thus, the Richardson job is a relatively high user of the more costly partner-related resources (both direct partner costs and indirect partner secretarial support). The Punch job, on the other hand, has a mix of partner and associate-related hours (14) that exactly equals the mix of partner and associate hours for the firm as a whole. The refined-costing system in Problem 4-33 increases the reported cost in Problem 4-32 for the Richardson job by 41. % (from $12,000 to $17,000) while it happens to correctly cost the Punch job. 4-34(20(25 min. ) Proration of overhead. pic 2. pic=pic pic =$4,900,000 $4,500,000* =$400,000 *$60 ( 75,000 actual machine-hours = $4,500,000 a. Write-off to Cost of Goods Sold Dec. 31, 2011 Write-off Dec. 31, 2011 Account of $400,000 Account Balance Underallocated Balance Account (Before Proration) Manufacturing (After Proration) (1) (2) Overhead (4) = (2) + (3) (3) Work in Process $ 750,000 $ 0 $ 750,000 Finished Goods 1,250,000 0 1,250,000 Cost of Goods Sold 8,000,000 400,000 8,400,000

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