Kinney 2edCh05

8/12/2019 Kinney 2edCh05

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Chapter 5

JOB ORDER COST SYSTEMExercises

10. Two characteristics of the proposal are critical in advising London

about a costing system:a. the expected high sales volume andb. the repetitive nature of production implied by that high sales

volume.

These characteristics indicate that Londons best choice would be touse a process costing system and standard cost valuations.

Standard costing would benet London because it would help identifyine!ciencies in production operations and help her identify waysto reduce production costs.

The homogeneous nature of the product ma"es the use of #oborder costing unnecessary $its higher cost is not #ustied%.

11. &ach student will have a di'erent answer( depending on theparticular yacht selected. Some will discuss the yachts si)e*others will discuss the interior nishes* others will discuss thenavigation e+uipment. The ,-./ million ichmond Lady ull 23provides numerous features upon which students can focus.

1-. a. &mployee time cardb. 4or" in 5rocess 6nventory 7ontrol or 8inished 9oods 6nventoryc. aw aterial 6nventoryd. ;ob order cost sheete. anufacturing


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Chapter 5

the estimated and actual amounts( then either the price paidfor the material or the +uantity of material used wassustantially !ig!er t!an expected. To begin the validationprocess(

1. details of the original estimate to identify prices and

+uantities of materials for this #ob would need to be examined.

The starting point to validate the material prices and +uantitiespurchased is to examine vendor invoices billed to @uindo.These invoices will validate material purc!ase "uantitiesand prices paid by @uindo.-. ?dditionally( material re+uisition forms should be examinedto validate t!e "uantity o# material actually used inproduction.. Aext( an examination of the material cost $material +uantitymultiplied by material price% on the $o order cost s!eet

should reconcile to the +uantity of material shown on thematerial re+uisition forms.

b. The direct labor charge of ,=-3(000 is higher than the estimateby ,--3(000. ?ssuming that there were no errors in theestimated and actual amounts( then either the hourly rate paidto or the number of hours wor"ed by employees wassubstantially higher than expected.

To begin the validation process(1. details of the original estimate to identify rates and hours for labor

on this #ob would need to be examined.

The starting point to validate the labor rates and hours wor"edis to

-. examine employee time sheets $or other labor accumulationdocuments%. The time sheets will validate which employeeswor"ed on the #ob and for what period of time.

. ? discussion with the payroll manager should help ascertain theactual or average wage rates paid to employees.

B. 5ossibly some of @uindos employees who were listed as wor"ing on

the #ob should be interviewed to determine the accuracy of thetime sheets.

c. The predetermined overhead rate could have been manipulatedto a higher rate by using a lo%er denominator level of

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Chapter 5

activity than was appropriate. ?dditionally( inappropriate costs$such as period costs in addition to product overhead costs%could have been included in the numerator. ? large estimate forspoilage and defect costs might also have been included in thenumerator when( in fact( such costs rarely occur at @uindo

6ndustries.

d. The companys behavior is at best +uestionable. 9iven that thedi'erence between actual and estimated direct material costwas li"ely "nown at the point of purchase( @uindo should havenotied Salem 7orp. immediately of the excessive increase incost. Similar notication should have been provided when itwas seen that direct labor and machine times were higher thanexpected.

1B. a. aw aterial 6nventory -0B(000

?ccounts 5ayable -0B(000

4or" in 5rocess 6nventoryC2B-= 1=(>004or" in 5rocess 6nventoryC2B-=B 1(>D0anufacturing (10

4or" in 5rocess 6nventoryC2B-= 3B(0004or" in 5rocess 6nventoryC2B-=B 1(>00 7ash $(=00 x ,13% 33(>00

anufacturing (D00 7ash $,1>(000 E ,D(-00 E ,/(300% B(D00

?ccumulated Fepreciation -1(300 4ages 5ayable 1-(300

4or" in 5rocess 6nventoryC2B-= =B(>004or" in 5rocess 6nventoryC2B-=B -(1=0

anufacturing 00 C ,1-(B=0 C,1(>D0 G

,0(1D0

c. Hecause the company wor"ed only on ;ob 2B-= until the endof ?pril( all costs in beginning 465 for other #obs are still inthat account at the end of the month.

Heginning 465 ,11(B00Less costs associated with ;ob 2B-= $>00%

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Chapter 5

7osts associated with other #obs ,10(=007osts for ;ob 2B-=B $,1(>D0 E ,1(>00 E ,-(1=0% 3(>0&nding 465 ,1=(B0

d. 79 G Heginning 465 E 7urrent period costs I &nding 465

G ,11(B00 E ,1=(>00 E ,1(>D0 E ,33(>00 E ,==(/=0 C,1=(B0G ,->(B00

Jnit cost G ,->(B00 K 10(000 G ,->.B

e. ?pplied 00 K ,1/-(000 G 1B0 of direct labor

b. &nding 465 Halance:

F , D3(B30FL =(-00

0&nding balance ,1=-(0

c. 79 G Heg. 465 E 7urrent costs I 7ost of #obs completedG ,0 E ,-DD(-00 E ,1/-(000 E ,-=>(>00 C ,1=-(0G ,3D3(=D0

1=. a. aw aterial 6nventory D=(000?ccounts 5ayable D=(000

465 C ;ob 2-1D BB(>00465 C ;ob 2-1> D(-00465 C other #obs 3(=00

Firect aterial 6nventory 103(=00

465 C ;ob 2-1D 10(B00465 C ;ob 2-1> 1B(000465 C other #obs 1/(=00

7ash $or 4ages 5ayable% BB(000

anufacturing 0465 C ;ob 2-1> =/(00465 C other #obs /D(0-0

anufacturing 00

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Chapter 5

$?ctual rate per FL, G ,BB(000 x ,B./3%

8inished 9oods 6nventory 11D(>>0465 6nventory C ;ob 2-1D 11D(>>0

$,11(-00 E ,BB(>00 E ,10(B00 E ,31(B>0 G ,11D(>>0%

7ash 13/(1>Sales 13/(1>

$,11D(>>0 N 1.3 G ,13/(1>%

7ost of 9oods Sold 11D(>>08inished 9oods 6nventory 11D(>>0

b. &nding 465 G Heg. 465 E 7urrent costs I 7ost of ;ob 2-1Dcompleted

G ,1=(>00 E ,103(=00 E ,BB(000 E ,-1D(>00 C

,11D(>>0G ,-==(-0

&nding balance in ;ob 2-1> G ,3(=00 E ,D(-00 E ,1B(000 E,=/(00 G

,/=(100

1D. a. 0 K D(=00 G ,1=.>0 per FL

b. ?verage FL rate G ,13/(=00 K D(=00 G ,-1 per FL

c. 13(-00 x $,-1.00 E ,1=.>0% G 13(-00 x ,D.>0 G ,3DB(3=0FL O


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Chapter 5

b. Heg. 89 E 79 I &nd. 89 G 79S,/0(000 E 79 C ,3D(000 G ,1(>/0(000

79 E ,(000 G ,1(>/0(00079 G ,1(>3D(000

c. ?pplied 3D(000F G ,>>0(=B0

e. Heg. F E 5 I F used G &nd. F,-B(=00 E 5 C ,>>0(=B0 G ,B(1005 C ,>3=(0B0 G ,B(1005 G ,>=0(1B0

1/. a. 79S G .D3 x Sales G .D3$,1(3/>(000% G ,1(1/>(300.

b. Heg. 89 E 79 I &nd. 89 G 79S,=>(/00 E 79 C ,1=3(=00 G ,1(1/>(30079 C ,/=(D00 G ,1(1/>(30079 G ,1(-/3(-00

c. ;ob H-3: ?pplied 3 of FL, G .>3 $1-> x ,1-./0% G .>3 x ,1(=31.-0 G ,1(B0.3-

;ob @B->: ?pplied 3 of FL, G .>3 $-B0 x ,1-./0% G .>3 x ,(0/=.00 G ,-(=1.=0

d. ;ob H-3 @B->F ,-1(/>0.00 ,1B(D00.00FL 1(=31.-0 (0/=.00-(B3>.B0

C ,B3(B=-.-,1(-/3(-00 G ,3>(/00.0> E F used

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Chapter 5

F used G ,D11(-//./-

Heg. F E 5urchases C F used G &nd. F,1/(300 E ,>B(-D= C ,D11(-//./- G &nd. F&nd. F $destroyed% G ,131(BD=.0>

-0. a. 7ase 21 7ase 2- 7ase 27ase 2BF , B>0 , >(>00

, (D00 , >30FL $,1/0 per hour% D(=00 1D(100 1(00 -(>3000 /(D30 1>(000 =(000

Totals ,/(>>0 ,3(=30,3(000 ,/(D00

b. F ,10(100FL $1DB x ,1/0% (0=0

00Total cost ,3(/=0ar"up $B3% -B(->-Total billed to client ,D>(-B-

-1. a.


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Chapter 5

Firect material ,-1(=30Firect labor $,=(00 K ,-0 G 13 FLs% =(00?pplied overhead $,1D x 13% 3(33 (03

,B-(B>0&6 of 465 $B(0%

7ost of goods manufactured ,>(130

c. ?ctual overhead ,3(03B?pplied overhead $3(33% per 5aving: ,D00(000 K ->(000 G ,-3 per FL

b. ixing $-/0 s x ,>%

, -(-05aving $B0 FLs x ,-3% >(300Total overhead applied ,10(>-0

c. $,B>0(000 E ,D00(000% K $=0(000 E 1-(000% G ,1(1>0(000 KD-(000 G ,1=./

,1=./ x B G ,3(BDB.-= applied to ;ob 2--0

? plantCwide rate would not have been indicative of the actualcost of each #ob because the ixing department is very

machineCintensive while the 5aving department is very laborCintensive.

-B. a. Fepartment 1 G ,B=3(000 K 0(000 s G ,13.30 per Fepartment - G ,>0(=00 K --(000 FLs G ,1D.0 per FL

b. aw aterial 6nventory B=(000?ccounts 5ayable B=(000

4or" in 5rocess 6nventory I ;ob 2B=- 1/(0004or" in 5rocess 6nventory I other #obs-1(000

aw aterial 6nventory B0(000

4or" in 5rocess 6nventory I ;ob 2B=- -D34or" in 5rocess 6nventory I other #obs -(>=0

7ash $->3 x ,11% (13

4or" in 5rocess 6nventory I ;ob 2B=- B(/=04or" in 5rocess 6nventory I other #obs-(-B0

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Chapter 5

/=

7ash $1(B0 x ,1>% -3(DB0

4or" in 5rocess 6nventory I ;ob 2B=- B=4or" in 5rocess 6nventory I other #obs -(D=>

0 x ,1D.0% (11B

8inished 9oods 6nventory I ;ob 2B=- -D(B-34or" in 5rocess 6nventory I ;ob 2B=- -D(B-3

$,1/(000 E ,-D3 E ,B(/=0 E ,-(>BB E ,B=%

?ccounts eceivable I 5ower -(/10Sales $,-D(B-3 x 1.-0% -(/10

7ost of 9oods Sold -D(B-38inished 9oods 6nventory I ;ob 2B=- -D(B-3

c. 7ost per unit G ,-D(B-3 K 300 G ,3B.>3Selling price per unit G ,=3.>-aw material G ,1/(000 K 300 G ,>

d. Total issued ,B0(000Total units $300 E -0(000% K -0(300 cost per unit ,1=.3/ $rounded%

Total cost per unit G ,3B.>3 C ,>.00 E ,1=.3/ G ,.BBSelling price per unit G ,.BB x 1.- G ,B0.1 $rounded%

Sales without error ,-(/10Sales with error $300 x ,B0.1% -0(0=3Total PsavingsQ of the error ,1-(>B3

-3. ? standard costing system is most appropriate in productionsettings in which activities are repetitive. That criterion is met inthe case of Latamore 6ndustries. Fevelopment of such standards

re+uires that reliable expectations about input cost amounts and+uantities be determined for the more routine aspects of clientservices.


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Chapter 5

-=. 5M G ?ctual cost for paper purchasedI Standard cost for paperpurchased G $,0.0- x />0(000% I $,0.0= x />0(000% G ,1(=0C ,3(->0 G C,(/-0.Since actual cost was less than standard( the variance is

favorable.

@M G ?ctual cost for paper used I Standard cost for paper thatshould have been used G $,0.0= x />0(000% I $,0.0= x/>B(000% G ,3(->0 C ,3(B-B G C,1BB.

Since actual paper usage was less than the standard allowed( thevariance is favorable.

-D. a. Total payroll G /(000 N ,/.=3 G ,>=(>30

b. LM G ?ctual payroll I Standard cost for actual hours wor"ed

G ,>=(>30 I $,/.>3 x /(000% G ,>=(>30 C ,>>(=30 G C,1(>00.

Since direct labor employees were paid less than the standardrate( the variance is favorable.

c. L@M G Standard cost for actual hours wor"ed I Standard costfor standard hours allowed for production G ,>>(=30 I $,/.>3x >(=00% G ,>>(=30 C ,>B(D10 G ,(/B0.

Since the number of hours wor"ed was greater than thestandard hours allowed( the variance is unfavorable.

d.


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Chapter 5

b. ? pricing policy that ignores the costs of direct labor andoverhead $in addition to mar"eting and administrative costs%is Rawed.


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Chapter 5

and 4alCart.

b. 6t is easier to doctor the records now than in the past becauserecords are computeri)ed and managers generally have accessto the les. 5reviously( managers would have had to conspire

with payroll cler"s or accountants to change paper or punchCcard records.

c. &ach student will have a di'erent answer. owever( moststudents will probably indicate that store managers ma"ingsuch changes would be red $shortCrun%. 8or the longCrun(ethics training would probably be recommended and possiblya change in the way store managers bonuses are computed.

-. a. anufacturing 1(130aw aterial 6nventory -304ages 5ayable /00

9iven that the rewor" costs were not necessary to thecompletion of the #ob( San ?ngelo 7orp. should probably notcharge its mar"up percentage on the ,1(130 of rewor" costsunless the customer had already been informed that such

charges might be charged and the customer had agreed tosuch charges.

c. Loss on ?bnormal ewor" 1(130aw aterial 6nventory -304ages 5ayable /00

. a. 5redetermined 0 per

Firect material ,BD(300Firect labor -1(>00

0% (1>3Total cost ,D-(B>3

5er unit cost G ,D-(B>3 K 1(300 G ,B>.- $rounded%

b. The ,D30 rewor" cost is included in anufacturing 3

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Chapter 5

7ost of new 0 units 1(/0Less sale of defective units $-B0%Total cost of ;ob 2>D= ,D(=3

B. a. The estimated cost of the spoilage should be included incalculating the predetermined overhead rate. This approach

spreads the cost of spoilage across all good units produced.

b. The cost of this spoilage should be charged to the specic #ob.Since there is no salvage value for the spoilage( no #ournalentry would be necessary as the cost of the spoiled unitswould be included in the prior charges to the #ob for directmaterials( direct labor and manufacturing overhead.

c. 6n this case( the spoilage is unexpected and the net costshould be recorded as a loss of the period in which it occurred.?ny salvage value associated with the spoilage will reduce theamount of the loss. To record the transaction( wor" inprocess $and the specic #obs #ob order cost sheet% should be

credited for the cost of the spoilage and the expected( netsalvage of the spoilage should be debited $Fisposal value ofdefective wor"%. ? loss account $e.g.( Loss from abnormalspoilage% should be debited to balance the transaction.

5roblems

3. aw aterial 6nventory D/0(000?ccounts 5ayable D/0(000

4or" in 5rocess 6nventory 3D0(000aw aterial 6nventory 3D0(000

anufacturing


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Chapter 5

7ash 1(B-(000 Sales 1(B-(000

=. a. ,>-(000 K >(000 FL G ,10.-3 per FL

b. Firect aterial 6nventory /0(000?ccounts 5ayable /0(000

4or" in 5rocess 6nventory D3(=007ash D3(=00

anufacturing -(000Marious accounts >-(000

4or" in 5rocess 6nventory >-(000

anufacturing -(000

4or" in 5rocess 6nventory >>(300Firect aterial 6nventory >>(300

$,-(000 E ,/0(000 C ,(300%

8inished 9oods 6nventory -B>(>304or" in 5rocess 6nventory -B>(>30

79 G H465 E F E FL E >(300 E ,D3(=00E

,>-(000 I,D(D30 G ,-B>(>30

?ccounts eceivable 30(B00Sales 30(B00

7ost of 9oods Sold -B(D008inished 9oods 6nventory -B(D00

c. Heginning 89 , =(300

79 -B>(>3079S $-B(D00%&nding 89 , 11(=30

D. a. /V1 aw aterial 6nventory 1(/B0(000?ccounts 5ayable 1(/B0(000

/VB 4or" in 5rocess 6nventory 1(>B=(>00

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Chapter 5

anufacturing /(=00* 2D>( ,-3-(=00* 2>-( ,//-(-00* 2>=(

,1-(B00

/V13 4or" in 5rocess 6nventory ==3(=00anufacturing B(=00* 2D>( ,-=D(-00* 2>-( ,-0(000*2>=( ,110(>00

/V13 4or" in 5rocess 6nventory >-(000anufacturing -(000

( ,-/(000* 2>-( ,-3(D30*2>=( ,1->(300.

/V13 8inished 9oods 6nventory 1(0>1(304or" in 5rocess 6nventory 1(0>1(30

$,3>=(B00 E ,->/(=00 E ,>B(=00 E ,1-0(D30%

?ccounts eceivable 1(B03(D33Sales 1(B03(D33

$,1(0>1(30 x 1.%

7ost of 9oods Sold 1(0>1(308inished 9oods 6nventory 1(0>1(30

/V-0 anufacturing 00

7ash 0D(000

/V-B aw aterial 6nventory =-B(000?ccounts 5ayable =-B(000

/V-3 4or" in 5rocess 6nventory D1=(B00anufacturing 00aw aterial 6nventory

DD-(-006ssuances made to #obs as follows:2D>( ,13B(>00* 2>-( ,-1-(=00* 2>=( ,B/(000

/V0 anufacturing 00?ccumulated Fepreciation >0/(0005repaid 6nsurance 1=3(B00Taxes O Licenses 5ayable --(B00

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Chapter 5

/V0 4or" in 5rocess 6nventory =B/(B00 anufacturing ( ,1DD(B00* 2>-( ,-->(B00* 2>=( ,-B(=00

/V0 4or" in 5rocess 6nventory B0D(1-3anufacturing ( ,111(D30* 2>-( ,1D0(=-3* 2>=( ,1-B(D30

b. aw aterial 6nventoryWWWWWHal. -(B00 /VB 1(/00(000/V1 1(/B0(000 /V-3 DD-(-00

/V-B =-B(000

Hal. --B(-00

4or" in 5rocessHal. 1(31-(=00 /V13 1(0>1(30/VB 1(>B=(>00/V13 ==3(=00/V13 >-(000/V-3 D1=(B00/V0 =B/(B00

/V0 B0D(1-3Hal. 3(3B>(3D3 7ost of 9oods SoldWWWWWWWWHal. B(>=B(0002D3 1(0>1(30

Hal. 3(/B3(30

;ob 2D3 ;ob 2D>

Hal. 3>=(B00 1(0>1(30 Hal. -==(=00F ->/(=00 F -3-(=00

FL >B(=00 FL -=D(-00


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Chapter 5

;ob 2>- ;ob 2>=Hal. =3/(=00 F 1-(B00F //-(-00 FL 110(>00FL -0(000 (300(B00 - -(D-0(1D3;ob 2>= 1(-=/(030Total ,3(3B>(3D3

d. ?ctual overhead for September/VB , 3(-00/V13 /1(B00/V-0 110(-00/V-3 33(>00/V0 1(-0=(>00/V0 =3(000 ,1(3>-(B00

?pplied overhead for September/V13 , >-(000/V0 B0D(1-3 $1(-/(1-3%

Jnderapplied overhead , B(-D3

>. a. aw aterial 6nventory 3B-(000 7ash

3B-(000

anufacturing


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Chapter 5

aw aterial 6nventory 3B-(B00To record F for #obs $;ob 2-BD( ,1-(B00* 2-31( ,=(-00*2-3( ,1=(>00* 2-3B( ,103(-00* 2-33( ,11/(>00*2-3=( ,D-(>00* and 2-3D( ,1(-00%

anufacturing (>00 , B(3-0 , -B1(/-0-31 1>-(>00 -1>(=00 >D(BB0 B>>(>B0-3 1=-(-00 1/0(=00 D=(-B0 B-/(0B0-3B 103(-00 1=(=00 3B(=B0 -/=(BB0-33 11/(>00 1B3(000 3>(000 --(>00Totals ,=3/(=00 ,D//(=00 ,1/(>B0 ,1(DD/(0B0

b. ;ob Firect aterialFirect Labor ?pplied 00 , /B(=00 ,D(>B0 ,-03(-B0-3D 1(-00 1D/(B00 D1(D=0 >B(=0

Totals ,-0=(000 ,-DB(000 ,10/(=00 ,3>/(=00

c. ?ctual overhead , -BB(B00?pplied overhead -B1(1-0Jnderapplied overhead , (->0Jnad#usted cost of #obs completed 1(DD/(0B0?d#usted cost of #obs completed ,1(D>-(-0

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Chapter 5

/. a. ?luminum Steel (00 ,1-(>00 , 3(>00 , -=(/005urchases />(00 -=(300 -(330 1B>(30?vailable ,10=(=00 ,/(00 ,-/(30 ,1D3(-306ssuances $3>(D00% $B(-00% $-3(/00% $11>(>00%

&6 , BD(/00 , 3(100 , (B30 , 3=(B30

b. Firect material , =-0Firect labor $> x ,13% 1-00Total ,1(--0

c. 465 I beginningX , =(-0Firect material $total issuances% 11>(>00Firect labor $=>0 N ,13% 10(-00007ost of goods available for sale ,1/(>1089 C ending $0%7ost of goods sold ,1/(>10

X;ob 2 aterial Labor B0 G 1.13.

b. Firect material ,-3(>00Firect labor D(-00

?pplied overhead >(->0Total ,B1(->0

c. Total direct material ,31(>BLess direct material in H6 $-3(>00%,B>>(0B

Total direct labor , /(D-0

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Chapter 5

Less direct labor in H6 $D(-00% >=(3-0Total direct cost added during ay ,3DB(33B

d. 4or" in process C beginning , B1(->07osts added during ay:

Firect material ,B>>(0BFirect labor >=(3-0?pplied overhead $,>=(3-0 x 1.13% //(B/> =DB(03-

,D13(-4or" in process C ending $,0>(B0 E ,3D(000 E $,3D(000 N 1.13% $B0(/>0%7ost of goods manufactured ,->B(3-

B1. a. 8abrication: ,1(3=0(000 K 10B(000 Ls G ,13 per ?ssembly: ,1(D=0(000 K -0(000 FLs G ,3.30 per FL

b. ;ob 2--/=: 8abrication $/00 hours Y ,1-% ,10(>00?ssembly $>30 hours Y ,10% >(300Total FL ,1/(00

;ob 2--/D: 8abrication $B=0 hours Y ,1-% ,3(3-0?ssembly $B00 hours Y ,10% B(000Total FL ,/(3-0

c. ;ob 2--/=: 8abrication $1(>00 hours Y ,13%,-D(000

?ssembly $>30 hours Y ,3.30% B(=D3

Total (000%

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Chapter 5

-(000?ctual $1(D/0(000%Jnderapplied , >(000

The company has overapplied overhead of ,1-(000 for theyear.

B-. a. ;ob 7ost Sheet C ;ob 2313

7ustomer Aame and ?ddress: Fescription of ;ob: 5reparesite(

7ity of 9ulf Shores build and install a pedestrian9ulf Shores( ?labama overpass in 9ulf Shores: see

bid

specications for details

7ontract ?greement Fate: 3V10Scheduled Starting Fate: DV10?greed Jpon 7ompletion Fate: 1-V13V107ontract 5rice: ,(00(000?ctual 7ompletion Fate: WWWWWWWWWWWWWWWWSpecial 6nstructions: Aone

Firect aterial $&st. ,1(-B0(000%Fate Source 7ost

-010;uly 1 Summary of material re+. ,1-1(>00

Firect Labor $&st. ,=D0(000%


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Chapter 5

?ctual HudgetJnder$00 ,1(-B0(000Firect labor 1D3(0B0 =D0(000=B ,-(1-(000

b. 4or" in 5rocess C ;ob 2313 1-1(>004or" in 5rocess I other #obs B3D(300

Firect aterial 6nventory 3D/(00

4or" in 5rocess C ;ob 2313 1D3(0B04or" in 5rocess C other #obs B0>(/=0anufacturing 00Salaries and 4ages &xpense /(=00

Salaries and 4ages 5ayable =D/(B00

anufacturing 00

?ccumulated Fepr. C 7onst. ?ssets -=(B00?ccumulated Fepr. C 00

Sales 5romotion &xpense 11(100?ccounts 5ayable 11(100

?dvertising &xpense =(=007ash =(=00

anufacturing (=00Supplies 6nventory 1>(=00

iscellaneous &xpense 10(-00?ccounts 5ayable 10(-00

Jtilities &xpense 1(>00anufacturing


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Chapter 5

8inished 9oods 6nventory >-/(000 4or" in 5rocess 6nventory

>-/(000

7ost of 9oods Sold >-/(000

8inished 9oods 6nventory >-/(000

c. 4or" in 5rocess C beginning , >D1(>005roduction costs:

Firect material,3D/(00

Firect labor 3>B(000 ?pplied overhead30(B00 1(31(D00 ,-(>3(300

4or" in process I ending $1(33=(300%

7ost of goodsmanufactured , >-/(000

d. Hirmingham 7ontractors6ncome Statement

8or the onth &nded ;uly 1( -010

evenues from completed pro#ects ,1(--B(000Less 7ost of 9oods Sold $>-/(000%9ross argin on 7ompleted ;obs , /3(000AonC5roduction &xpenses:

Salaries and 4ages &xpense ,/(=00Fepreciation &xpense D(>00Jtilities &xpense 1(>00Sales 5romotion &xpense 11(100?dvertising &xpense =(=00iscellaneous &xpense 10(-00 $DD(100%

6ncome Hefore 6ncome Taxes ,1D(/006ncome Taxes $B0% $1-D(1=0%Aet 6ncome ,1/0(DB0

B. a. ;ob 2-01/:

Fesign $,>1(=00 N 0% ,-B(B>05roduction $D-0 N ,13% 10(>006nstallation $,10(0>0 N /0% /(0D-

Total overhead applied ,BB(3-

;ob 2-0-0:Fesign $,=/(=0 N 0% ,-0(>0>5roduction $-(B00 N ,13% =(000

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Chapter 5

6nstallation $,11(3-0 N /0% 10(=> Total overhead applied ,=D(1D=

;ob 2-0-1:Fesign $,D(BB0 N 0% ,--(0-5roduction $/=0 N ,13% 1B(B006nstallation $,13(-00 N /0% 1(=>0

Total overhead applied ,30(11-

Fesign 5roduction6nstallation

?ctual ,103(=00 ,=0(000 ,1(-00?pplied $=D(-0% $=1(-00% $(1-0%$(->0 , $1(-00% , $1(/-0%

?ctual 00?pplied 1(=00

4or" in 5rocess $Fesign% I ;ob 2-0-0 =/(=04or" in 5rocess $Fesign% I ;ob 2-0-1 D(BB0

4ages 5ayable --B(B00

4or" in 5rocess $Fesign% I ;ob 2-01/ -B(B>04or" in 5rocess $Fesign% I ;ob 2-0-0 -0(>0>4or" in 5rocess $Fesign% I ;ob 2-0-1 --(0-

anufacturing (>00

4or" in 5rocess $5rod.% I ;ob 2-0-1 --(000aw aterial 6nventory =1D(-00

4or" in 5rocess $5rod.% I ;ob 2-01/ B(0004or" in 5rocess $5rod.% I ;ob 2-0-0 3/(=004or" in 5rocess $5rod.% I ;ob 2-0-1 -1(=00

4ages 5ayable 113(-00

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Chapter 5

4or" in 5rocess $5rod.% I ;ob 2-01/ 10(>004or" in 5rocess $5rod.% I ;ob 2-0-0 =(0004or" in 5rocess $5rod.% I ;ob 2-0-1 1B(B00

anufacturing 004or" in 5rocess $6nst.% I ;ob 2-0-1 10(B00

aw aterial 6nventory 3D(=00

4or" in 5rocess $6nst.% I ;ob 2-01/ 10(0>04or" in 5rocess $6nst.% I ;ob 2-0-0 11(3-04or" in 5rocess $6nst.% I ;ob 2-0-1 13(-00

4ages 5ayable =(>00

4or" in 5rocess $6nst.% I ;ob 2-01/ /(0D-4or" in 5rocess $6nst.% I ;ob 2-0-0 10(=>4or" in 5rocess $6nst.% I ;ob 2-0-1 1(=>0

anufacturing 000Firect labor 1B0(B>0


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Chapter 5

eliant Fumas 00 ,1B(-00 , 1/(>00Firect labor 3(3>0 1>(000 ->(30B(=/0

b. eliant: ,-0(3D- K G ,=(>3D per adFumas: ,33(B00 K 10 G ,3(3B0 per adB(=/0 K > G ,10(3>= per ad

c. Sales $-1 ads Z ,>(=00% ,1>0(=007osts:

Firect material ,B1(>00Firect labor 31(/0?pplied overhead ==(/-

D0

d. Sales: eliant $,-0(3D- x 1.%,-=(DB.=0Fumas $,33(B00 x 1.% D-(0-0.00

B(=/0 x 1.% 110(0/D .00 ,-0>(>=0.=07osts:

Firect material ,B1(>00.00Firect labor 31(/0.00?pplied overhead ==(/-.00(=00 per ad( Fumas would be paying,D(-0-. (/13 and ,1(D=-(respectively.

?ds shouldnt be billed at a Rat rate because some may ta"e

much longer to develop than others. The > ads for


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Chapter 5

their minds after the ad development process begins.

B3. a.


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Chapter 5

7ash 3(000

B 4or" in 5rocess C 5 >-3(000anufacturing anufacturing 30?ccumulated Fepr. I 5 13(-00

0 anufacturing 304or" in 5rocess I 7 1B(00

7ash 13/(>00?ccumulated Fepr. C 7 1>(30

0 4or" in 5rocess I 5 />(D30anufacturing (D30

$(/30 x ,-3%

0 4or" in 5rocess I 7 --1(3/3anufacturing -(>B0 4or" in 5rocess C 5 1(>>(D30 4or" in 5rocess C 7 3//(0/0

0 ?ccounts eceivable (B30(000 7onstruction evenue (B30(000

0 7ost of 7ontracts Sold -(B>-(>B0

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Chapter 5

7ompleted 5ro#ects 6nventory -(B>-(>B0

b. 5recast 7onstruction aw aterial 3(000 1(000(000 3(000 />(D30 =0(000--1(3/3 B-3(000 =(-0 1>(=30 1D3(000 3(000 3(000 --3(000 3B(030 B(>30

bal =0(000 bal 3-=(=-0 bal 1-/(010

465 I 5recast 465 C 7onstruction

=30(000 1(>>(D30 1=(00 3//(0/0 B3(000 -=(>/3 130(000 -00(000 >-3(000 1B(00 113(000 --1(3/3 />(D30

bal 0 bal 0

7ompleted 5ro#ects 6nv. 7ost of 7ontracts Sold

-(B>-(>B0 -(B>-(>B0 -(B>-(>B0

bal 0 bal -(B>-(>B0

c. $bottom section of #ob cost sheet%

5recast Fepartment

F $&st. ,1(330(000% FL $&st. ,--0(000%


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Chapter 5

?mount(D30

7onstruction Fepartment

F $&st. ,30(000% FL $&st. ,10(000% D(000Firect labor -00(300


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Chapter 5

89 inventory( 3V1 1(B00

Since 5ip S+uea"s uses the 868< inventory method( all unitsremaining in 89 inventory were completed in ay.

4or" in process inventory( BV0 ,B-0(000ay additions: aw material , (000 5urchased parts 10(>00 Firect labor B(-00 -Less: Firect labor ,=(B00

?pplied (>00% -=(B00$=-(>00%

7ost of direct material used , >(0-7ost of indirect material issued 11(=00

Total cost of raw material used , B/(=-

c. Heginning raw material , /(=00aw material purchased 3=(000Total raw material available ,=3(=00aw material issued $B/(=-%&nding raw material ,13(/=>

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Chapter 5

d. (>00% , -=(B00?ctual overhead charges:

6ndirect labor ,10(>006ndirect material 11(=00

?ll other 3(000 $-D(B00%

Jnderapplied overhead in ?pril , 1(000

e. Heginning nished goods , 1=(>00?dd cost of goods manufactured /=(0007ost of goods available ,11-(>00Less ending nished goods $1(-00%7ost of goods sold , //(=00

B>. a. ?ctual F cost ,11(=00(000Standard F cost $,3=(000 N -00% $11(-00(000%aterial 5rice Mariance , B00(000 J

?ctual FL cost ,=(/3D(=00Standard FL cost $,B(B00 N -00% $=(>>0(000%Firect Labor ate Mariance , DD(=00 J

?ctual 00(000Standard 00(000 J +uantity variance

The primary cause of the unfavorable material variance isbecause of excess usage.

B/. a. F cost ,1>.00FL cost $,-0 x $1- K =0%% B .00Total standard prime costs ,-- .00

b. ;ob 2/1> F cost $,1> x 1(-00% ,-1(=00 FL cost $,B x 1(-00% B(>00 Total standard direct cost ,-=(B00

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Chapter 5

;ob 2-00-F cost $,1> x -(000% , =(000FL cost $,B x -(000% >(000Total standard direct cost ,BB(000

c. ;ob 2/1> Standard ?ctual Mariance F , -1(=00 ,-(3-3 ,1(/-3 J FL B(>00 B(>B0 B0 J Total ,-=(B00 ,->(=3 ,1(/=3 J

;ob 2-00- F ,=(000 ,D(BB0 ,1(BB0 J FL >(000 D(>30 130 8 Total ,BB(000 ,B3(-/0 ,1(-/0 J

d. Hy computing variances for each #ob( managers become

aware of any trends in costs. 6f costs are aggregated across#obs( any trends may be obscured.

30. a. 5rot on the xedCprice contracts is constrained by thecontract price. 5rot can only be increased if ways are found

to reduce costs.


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Chapter 5

31. a. &ach student will have a di'erent answer.

b. The company is utili)ing the benets of automation to reducethe costs of handling so many parts. Hy standardi)ingprocesses( the company can assemble a messenger bag with

a diverse set of parts in an amount of time that is similar tothat re+uired for massCproduced ones. ?ccordingly( althoughthe company is probably paying( on average( more for partson custom messenger bags than massCproduced ones* it isholding the line on direct labor and production overhead. Hyholding costs down for labor and overhead( the total cost ofthe custom produced messenger bags is not signicantlyhigher than that of the mass produced messenger bags.

c. @uality as viewed from the perspective of the consumershould be much higher with the customCmade messenger

bags because customers are able to specify the various partsthey want included. Hy getting the exact combination of partsthe customers desire( they will perceive the +uality of theproduct to be very high relative to the premium in price theypay over the massCproduced messenger bags.

d. The answer is mostly revealed in part $c%. Hy containing coststo levels close to those of massCproduced messenger bags(but allowing the customer to choose the parts they desire( asubstantial gross prot can be achieved. The higher grossprot reRects the customers willingness to pay a premium for

the exact combination of parts desired( even though thecompanys costs are not signicantly greater than thoseincurred to mass produce messenger bags.

3-. a. 6t is li"ely that the least popular thoughts and opinions wouldnot be heard on campus. Students would naturally supportthose ideas and positions that were consistent with their ownethics( philosophies( and self interests. ?s a conse+uence( theoverall diversity of ideas would probably decline.

b. ?ssuming diversity of opinions ultimately benets allstudents( the Jniversity of 4isconsin is possibly supporting

diversity with the only means available[student dollars.owever( this approach may not be ethical because it forcesstudents to support opinions( beliefs( and ideas that mayviolate their personal ethics. ?lthough the Supreme 7ourt ofthe Jnited States will ultimately determine whether this is alegal practice( each individual student can reach hisVher ownconclusion as to whether the practice is ethical.

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Chapter 5

3. a.

Kinney 2edCh05

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