Notes and Study Guide
Notes and Study Guide 10288
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This 7 page Study Guide was uploaded by Aarti patel on Thursday October 22, 2015. The Study Guide belongs to 10288 at Portland State University taught by Scott Hawkins in Fall 2015. Since its upload, it has received 418 views. For similar materials see INTRO TO MANAGERIAL ACCOUNTING in Accounting at Portland State University.
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Date Created: 10/22/15
v Indirect costs I to produce a physical product inside the manufacturing factory Indirect material labor rent insurance and utilities v Manufacturing Overhead I Eq Conversion costDirect Labor 39239 Direct Material Total manufacturing Manufacturing OH Direct Labor Direct Material 39339 Conversion Cost I Direct Labor Manufacturing OH 39339 Predetermined OH Cost I Est Manufacturing OH costEst total units in the allocation base 1 Top Shelf Company builds oak bookcase Assume you have the following information about Top Shelf s cost for the most recent month Dep On factory Equipment 1800 Depr on delivery trucks 80000 Wood used to build bookcases 1500 Prod Supervisor s salary 2800 Glue amp Screws used in the bookcases 250 Wages of assemblers 2500 Cost of ads to run on local radio station 600 Rent for factory 3500 CEO s Salary 3000 Wages for person who sands the wood after cut 1600 Answer Direct Materials Used1500 Direct Laborll250016004100 Manufacturing Costl 1800280025035008350 Prime CostD150041005600 Conversion Costl 4100835012450 Total Manufacturing Cost15004100835013950 Total Manufacturing period costll80060030004400 2 For each of the following independent cases compute the missing values in the table Case Prime Cost ConvCost Direct M Direct L MOH TMC A 9400 16100 4300 a 15100 1 1000 B20400 B C 19300 D31800 12000 7300 24500 43800 C 55300 107500 43200 E 12100 F95400 G 150700 D H34650 47350 21400 I 13250 J 34100 68750 E K32800 L 38000 M 17700 15100 22900 55700 A Direct LaborConversion cost MOH1 1000161005 100 B Total ManufacturingDLDMMOH43005 1001 100020400 C Prime CostDMDL120007300019300 D Conversion CostDLMOH73002450031800 E 10750095400 FMOHConversion costDl1075001210095400 M Direct MaterialTotal Man Man OH DL 3 Wheelers Bike Comp Manufactures custom racing bicycles The comp Used a job cost system to determine the cost of each bike Est cost amp expense for coming year Bike Parts 350000 Factory Machine Dep 55000 Factory Supervising Salaries 140000 Factory Direct Labor 300000 Factory Supplies 7500 Factory property taxes 37500 Adv Cost 14500 Admin Salaries 80000 Admin Related dep 16000 Total expected costs 1000500 A Calculate the predetermine OH rate per direct labor hours if the average direct labor rate is 15 per hour Est DL cost DL rateEst DL Hours 3000001520000 DL hours expected Predetermined Total Manufacturing OHEst DL Hours 2400002000012 per hour DL Est Total MOH Factory Machining Dep 55000 Factory Supervising Salary 140000 Factory Supplies 7500 Factory Property Tax 37500 Total Est MOH 240000 Determine the amount of applied overhead if 18500 actual hours are worked in the upcoming year B Applied OHOH rate x Actual DL hours 12 x 18500222000 4Jenkins Company uses a job order cost system with overhead applied to jobs on the basis of direct labor hours The direct labor rate is 20 per hour and the predetermined overhead rate is 15 per direct labor hour The company worked on three jobs during April Jobs A and B were in process at the beginning of April Job A was completed and delivered to the customer Job B was completed during April but not sold Job C was started during April but not completed The job cost sheets revealed the following costs for April 412013 Job A Job B Job C Cost of jobs in proc 12000 1000 DM s Used 2000 8000 9000 DL 10000 8000 3000 Applied MOH If no other jobs were started completed or sold determine the balance in each of the following accounts at the end of April a Work in Process Job DLDL hr rate x preOH 2250 22509000300014250C bFinished Goods 800020 X156000 600080001000800023000 c Cost of goods Sold 1000020 X 15 75001000020001200031500 5Verizon Company uses a job order cost system with manufacturing overhead applied to products based on direct labor hours At the beginning of the most recent year the company estimated its manufacturing Overhead cost at 300000 Estimated direct labor cost was 400000 for 20000 hours Actual costs for the most recent month are summarized here DL 1500 hrs 33000 Indirect Costs Indirect Labor 4500 Indirect Materials 2500 Factory rent 4200 Factory supervision 4700 Factory depr 5600 Factory Janitorial work 1200 Factory insurance 2600 General amp Admin Salaries 3100 Selling expense 2300 A Calculate the predetermined OH rate 30002000015 dollars per DL rate B Calculate the amount of applied manufacturing overhead OH rate x Actual value of allocation base Applied MOH15 x 1500from the actual chart 22500 C Calculate actual manufacturing overhead costs Indirect labor 4500 Factory Janitorial 1200 Indirect material 2500 Factory Insurance 2600 Factory rent 4200 Total MOH cost 25300answer Factory supervision 4700 Factory dep 5600 D Compute over or under applied overhead Under applied by 2800 6 Tyler Tooling Company uses a job order cost system with overhead applied to products on the basis of machine hours For the upcoming year the company estimated its total manufacturing overhead cost at 420000 and total machine hours at 60000 During the first month of operations the company worked on three jobs and recorded the following actual direct materials cost direct labor cost and machine hours for each job JOB 1 J OB2 JOB 3 Total DM USED 19200 14400 9600 43200 DL 28800 11200 9600 49600 Machine Hrs 1000 hrs 4000hrs 2000hrs 7000hrs Job 101 was completed and sold for 60000 Job 102 was completed but not sold Job 103 is still in process Actual overhead costs recorded during the first month of operations totaled 45000 a Calculate the predetermined overhead rate 42000060000700 per machine hr b Compute the total manufacturing overhead applied to the Work in Process Inventory account during the first month of operations Total Applied MOH 7000hrs X 700 49000 c Compute the balance in the work in process inventory account at the end of the first month Ending work in process inventory job3960096002000 X733200 d How much gross pro t would the company report during the rst month of operations before making an adjustment for over or under applied MOH Cost of job 1 1920028001000x755000 since it was the only job sold the gross profit before the adjustment for overorunder applies 60000 550005000 e Determine the balance in the Manufacturing Overhead account at the end of the first month Actual45000 Applied 49000 49000450004000 it s over applied 1 Stone Company produces carrying cases for CDs It has compiled the following information for the month of June Physical Units Complete for conv Beg Work in process 70000 55 Ending work in process 92000 70 Stone adds all materials at the beginning of its manufacturing process During the month it started 180000 units a Using the weightedaverage method reconcile the number of physical units Physical Units Physical Units Beginning Inv 70000 Units Completed 2500009200015 8000 Units Started 180000 Ending Inventory 92000 Total 250000 Total 250000 b Using the weightedaverage method calculate the number of equivalent units Equivalent Units Physical Units Direct Materials Conversion Units Completed 158000 158000 158000 Ending Inventory 92000 92000 92000x7064400 Total 250000 250000 222400 2 The Cutting Department of Sonora s Textiles has the following information about production and costs for the month of July 0 Beginning work in process 9200 units that are 100 percent complete as to materials and 35 percent complete as to conversion costs 0 15000 units transferred out 0 Ending work in process 6200 units 100 percent complete as to materials and 65 percent complete for conversion a Using the weightedaverage method compute the number of equivalent units of production for materials and conversion for the month of July Equivalent Units Physical units Direct Materials Conversion Units Completed 15 000 15 000 15 000 Ending Inventory 6200 6200 6200X654030 Total 21200 21200 19030 3 Arboles Company manufactures pencils and has the following information available for the month of July Work in process July1 100 complete for materials 60 for conversion 75000 units Direct Materials 5000 Conversion Cost 17500 Of units started 100000 units July Cost Direct Materials 6500 Conversion Cost 24000 Work in Process July 31 100 complete for materials 10 for conversion 70000 units Using the weightedaverage method of process costing complete each of the following steps a Reconcile the number of physical units worked on during the period Physical Units Physical Units Beginning Units 75 000 Units Completed 105000 Units Started 100000 Ending Units 70000 Total Units 175000 Total Units 175 000 Units Completed Beg UnitsUnits Started175000 then subtract the last units on hand of the month 17500070000105000 b Calculate the number of equivalent Units Physical Units Direct Materials Conversion Units Com 105000 105000 105000 Ending Inv 70000 70000100 70000x107000 Total Units 175000 175000 1 12000 c Calculate cost per equivalent unit Direct Materials Conversion Cost per equiv units 06571 37054 Handwrite below how to solve d Reconcile the total cost of work in process Direct Materials Conversion Total Cost Units Completed 6900 38907 45807 Ending Inventory 4600 2594 7194 Total Cost act for 11500 41501 53001 Units Completed DM105000X 06571689955 Ending Inventory DM70000X 065714600 Units Completed CC105000X 3705438rr907 Ending Inventory CC70000 a370542594 Total Cost add DMCCTota1 cost 1Using activity rates determine the amount of quality control cost to be assigned to each of the product line Acoma has identi ed 1 cost pool to be quality control assigned 125000 to that pool Acoma performs 2500 inspections annually Suppose Acoma manufactures 2 products that consume 100000 and 15000 inspections each 1QC 125000x250005 per inspection 2QC 1000x50050000 3QC 15000x50075000 2 Lakeside Inc Manufactures 4 lines of remote control boats amp uses activity based costing to calculate product cost Estimated Activity Cost Pool Total Cost Est Cost Drive Machining 366600 13000 machine hrs Set up 69825 350 batches Quality Control 108800 800 inspections Suppose Speedy boat requires 2500 machine hrs 100 batches amp300 inspections Using Activity rate determine the amoun t of OH assigned to the speedy product line 366600130002820 machine hr 6982535019950 batch 108800800136 per inspection rate Speedy uses 2500mhx282070500 100batchesx1995019950 300inspectionsx13640800 705001995040800131250 ACTIVITY RATE 3 Halsted Corp identified 3 cost pools in manufacturing process equipment maintence setups and quality control Total cost assigned to 3 pools is 214500 101400 and 153000 Cost driver estimated for the pools 100000 machine hours 150 setups 450 inspections ACalculate the activity rate for each of the Halsted s cost pools I MHMaintencecosts 214500cost drivers 100002145mh JObUPredeterm39 G M0 SlSetupscosts101400cost drivers 150676 per set up DMampDLeSt39 tOta mOh d39V39ded by Ofinspections153000450340 inspections eSt39 TOta39 COSt dr39VermaCh39 e hours 4 Fellar Corp has identified the following information M O h D W M O H Activity Cost Pools Materials Handling 60000 Machine Matience 51570 Cost Drives Of material moves 960 Of machine hours 75000 a Calculate the activity rate for each cost pool Activity Rate Machine Handling 600009606250 per material move Machine Maintence 5175075000 69 per machine hour b Determine the amount of overhead assigned to Fellar s products if they have the following activity demands Product A Product B Of material moves 600 360 Of machine hours 42000 33000 Total Assigned OH Product A 600 x 625042000 x 6966480 Product B 360 x 625033000 x 6945270 4 Schell Company manufactures automobile oor mats It currently has two product lines the Standard and the Deluxe Suppose that Schell has conducted further research into its overhead and potential cost drivers As a result the company has compiled the following detailed information breaking total overhead into three cost pools Activity Cost Cost Driver Cost QuantityAmt QuantityAmt Pool Assign consumed by consumed by To pool Standard Floor Deluxe Floor Machine Of moves 3750 30 moves 70 moves Handling Quality Control Of 13860 40 inspections 600 inspections inspections Machine Of machine 21450 4150 machine 3000 machine Maintence hours hrs hrs a Calculate the activity rates for each cost pool assuming Schell uses an ABC system Activity Rate Material Handling 375030703750 per material move Quality Control 1386010001386 per inspection Maintence 214507150300 per machine hrs b Calculate the amount of overhead that Schell will assign to the Standard oor mat line Total OH Assigned 1911930 x 3750400x13804159x3 c Determine the amount of overhead Schell will assign to the deluxe product line 70x375600x1386300x319941 5 Julio produces two types of calculator standard and deluxe The company is currently using a traditional costing system with machine hours as the cost driver but is considering a move to activitybased costing In preparing for the possible switch Julio has identified two cost pools materials handling and setup The collected data follow Standard Model Deluxe Model Of Machine hrs 25000 30000 Of material moves 550 850 Of setups 80 500 Total estimated overhead costs are 303560 of which 140000 is assigned to the material handling cost pool and 163560 is assigned to the setup cost pool a Calculate the overhead assigned to each product using the traditional cost system 3035605500055193 55000 was got by adding 25000 and 30000 Standard Model OH Assigned 25 000x5 5 193137982 Deluxe Model 55193x30 000165579 b Calculate the overhead assigned to each product using ABC Material Moves5508501400 1400001400100 per material move Setup500805 80 163000580282 per set up Standard Model Material 550x10055000 Move80x28222560 Total Assigned OH for Standard Model77560 Total OH assigned Deluxe Model Material 850x10085000 500x282141000 Total Assigned OH for Deluxe Model 226000 Total OH assigned 6 Majesty Company uses target costing to ensure that its products are profitable Assume Majesty is planning to introduce a new product with the following estimates Estimated Market price 1200 Annual Demand 100000 units Life Cycle 5 years Target Pro t 30 on sales Compute the target cost of this product 120030x120084000 Compute the target cost if Majesty wants a 40 return on sales 1200 40x120072000 Compute the target cost if Majesty wants a 15 return on sales 1200 15x120001020 7 Harbor Company makes two models of electronic tablets the Home and the Work Basic production information follows Home Work Direct Materials cost per unit 3000 48 Direct labor cost per unit 20 30 Sales price per unit 300 units 500 units Expected production per month 700 units 400 units Harbor has monthly overhead of 175200 which is divided into the following cost pools Set Costs 68800 Control 400 Maintence 48000 Total 175 The company has also compiled the following information about the chosen cost drivers Home Work Total Of setups 42 58 100 Of inspections 340 390 730 Of machine hrs 1700 1300 3000 A Suppose Harbor uses a traditional costing system with machine hours as the cost driver Determine the amount of overhead assigned to each product line 1752003000machine hrs 5840 per machine hrs Overhead assigned Home model 1700x584099280 Work Model 1300x584075920 Total OH9928075920 17520000 B Calculate the production cost per unit for each of Harbor s products under a traditional costing system Home OH9928070014183 Work OH7592040018980 Home DM 30DL 20OH 1418319183 Unit cost of home Work DM 48DL 30OH 1898026780 C Calculate Harbor s gross margin per unit for each product under the traditional costing system Gross Profit for Home 300price per unit19183unit cost108 17 Gross Profit for Work 500price per unit26780unit cost23230 D Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbor wanted to implement an ABC system Set up Costs Set up 68800100setup688 per set up Quality Control Inspections 58400730ins80 per inspection Maintence Machine Hrs 480003000machine hrs 16 per mhr E Assuming an ABC system assign overhead costs to each product based on activity demands OH assigned to home OH assigned to work Set up costs 688 42x68828896 58x68839904 Quality Control 80 340x8027200 390x8031200 Maintence 16 1700x1627200 1300x1620800 Total OH Cost 83296 91904 F Calculate the production cost per unit for each of Harbor s products in an ABC system OH Home 83296700 units11899 DM 30DL 20OH 1189916899 UNIT COST OH Work 91904400units22976 DM 48DL 30OH 2297630776 UNIT COST G Calculate Harbor s gross margin per unit for each product under an ABC system Home price per unit 300unit cost 1689913101 GROSS PROFIT Work Price per unit 500unit cost 3077619224 GROSS PROFIT H Compare the gross margin of each product under the traditional system and ABC HOME WORK Gross Margin Traditiona1 10817 23220 Gross Margin ABC 13101 19224
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