ACCT 390 Test 3 Fall 2011
150 points on grade scale other points are possible bonus
1. (20 pts)
Carver Test Systems manufactures automated test systems that perform quality inspections during and at the completion of the manufacturing process. As most manufacturing processes are unique, Carver’s test equipment is designed to customer specifications, and each system has a selling price in excess of $300,000. The company uses a job-order cost system based on the full absorption of actual costs and applies overhead on the basis of machine hours using a predetermined overhead rate. For the fiscal year ended November 30 budgeted manufacturing overhead was $1,960,000, and the expected activity level was 98,000 machine hours. Data regarding several jobs at Carver are presented below.
By the end of November all jobs but RX-115 were completed, and all completed jobs had been delivered to customers with the exception of SL-205.
(a) Determine the balance in the Finished Goods Inventory on November 30.
(b) Compute the cost of goods manufactured for November.
(c) Compute the Cost of Goods Sold for November.
(d) Determine the balance in Work-In-Process Inventory on November 30.
2. (20 pts)
Shawano Corporation applies overhead based upon machine-hours. Budgeted factory overhead was $266,400 and budgeted machine-hours were 18,500. Actual factory overhead was $287,920 and actual machine-hours were 19,050. Before disposition of over- or underapplied overhead, the cost of goods sold was $560,000 and ending inventories were as follows:
a. Compute the amount of overhead applied to production.
b. Prepare the journal entry to dispose of the over/under-applied overhead using the write-off to cost of goods sold approach.
c. Prepare the journal entry to dispose of the over/under-applied overhead using the proration approach.
3. (20 pts.)
Prepare the necessary journal entries from the following information for Beaulieu Company.
a. Purchased materials on account, $56,700.
b. Requisitioned materials for production as follows: direct materials – 80 percent of purchases, indirect materials – 15 percent of purchases
c. Direct labor for production is $33,100, indirect labor is $12,500.
d. Overhead incurred (not including materials or overhead): $52,900.
e. Overhead is applied to production based on direct labor cost at the rate of 220 percent.
f. Goods costing $97,600 were completed during the period.
g. Goods costing $51,320 were sold on account for $77,600.
h. Close the overhead control account to Cost of Goods Sold.
4. (20 pts.)
The Clarke Chemical Company produces a special kind of body oil that is widely used by professional sports trainers. The oil is produced in three processes: Refining, Blending, and Mixing. Raw oil materials are introduced at the beginning of the refining process. A “mountain-air scent” material is added in the blending process when processing is 50% completed.
The following Work-in-Process account for the Refining Department is available for the month of July. The July 1 Work-in-Process Inventory contains $1,500 in material costs.
The Clarke Chemical Company uses weighted-average costing.
Required (use 4 decimal places for computations):
(a) Compute the equivalent units of production for Refining for July.
(b) Compute the material cost per unit and the conversion cost per unit for July.
(c) Compute the costs transferred to the Blending Department for July.
(d) Compute the July 31 Work-in-Process Inventory balance.
Bisson Furniture uses a process cost system to account for its chair factory. Beginning inventory consisted of 5,000 units (100% complete as to material, 55% complete as to labor) with a cost of $124,800 materials and $104,500 conversion. 58,000 units were started into production during the month with material costs of $1,537,000 and $2,124,375 of conversion costs. The ending inventory of 6,000 chairs was 100% complete as to materials and 40% complete as to labor. Bisson uses first-in, first-out (FIFO) costing.
Required: HINT: use 4 decimal places in your calculations
a. Compute the equivalent units of production for each input.
b. Compute the cost per unit.
c. Compute the cost transferred out to finished goods.
d. Compute the ending work in process inventory balance.
6. (20 pts.)
Acme Enterprises has identified the following overhead costs and cost drivers for the coming year:
Budgeted direct labor cost was $200,000 and budgeted direct material cost was $300,000. The following information was collected on three jobs that were completed during the month:
a. If the company uses traditional costing and allocates overhead using direct labor cost, how much overhead cost should be assigned to Job A, B and C?
b. If the company uses activity-based costing (ABC), how much overhead cost should be assigned to Job A, B, and C?
7. (20 pts.)
Wayne Shen established Windy City Placement Service (WCPS) to provide executive counseling and job placement services to its clients. Wayne charges a fee of $450.00 per hour for each service. The revenues and costs for the year are shown in the following income statement:
Wayne has kept good records of the following data for cost allocation purposes:
a. Complete the income statement using activity-based costing and WCPSs three cost drivers.
b. Recompute the income statement using direct labor-hours as the only allocation base (150 hours for executive counseling; 450 hours for placement services).
Moab Supply provides the following information about resources:
Required: Compute the unused resource capacity for each preceding item.
9. (15 pts.)
The following represents quality cost data for Banbury Corporation:
a. Classify these items into prevention, appraisal, internal failure, or external failure costs. Determine the total cost of each category.
10. (10 pts)
Explain the major differences between the weighted average costing and FIFO costing.