Midterm Exam Cost Accounting
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Midterm Exam
Cost Accounting
Points
–
2
0
Problem 1
–
Financial Statements
Morton Buildings is a manufacturer of steel buildings. They close their books at the end of the month
and prepare financial statements. The statement of cost of goods sold for April is below:
Morton Buildings
Statement of Cost of Goods Sold
For the Month Ending April 30, 2016
($000 omitted)
Inventory of
F
inished
G
oods, March 31
$
50
Cost of Goods Manufactured
$790
Cost of Goods Available for Sale
$840
Less Inventory of Finished Goods, April 30
$247
Cos
t of Goods Sold
$593
Of the utilities, 80% is for the manufacturing plant; the remaining 20% is for the
sales and
administrative building.
All rent is for the office building.
Property taxes are assessed on the manufacturing plant.
Of the insurance, 60
% is related to manufacturing the steel; the remaining 40% is related to the
sales and administrative functions.
Depreciation expense includes the following:
Manufacturing plant
$20,000
Manufacturing equipment
$30,000
Office equipment
$ 4,000
Total
$
54,000
The company manufactured 7,825 tons of steel during May.
The inventory balances at May 31, follow:
Direct materials inventory $23,000
Work
-
in
-
process inventory $220,000
Finished goods inventory $175,000
Morton Buildings
Account Balances, May 31,
2016
($000 omitted)
Direct materials inventory (April 30)
28
Work
-
in
-
process inventory (April 30)
150
Finished goods inventory (April 30)
247
Sales
1,488
Midterm Exam
Cost Accounting
Sales discounts
20
Other revenue
2
Purchases of direct materials
510
Direct labor
260
Indirect
factory labor
90
Office salaries
122
Sales salaries
42
Utilities
135
Rent
9
Property taxes
60
Insurance
20
Depreciation
54
Interest expense
6
Freight
-
in for materials purchases
15
1.
Prepare a
s
tatement of cost of goods manufactured for
Morton Buildings for May.
2.
Prepare an
i
ncome statement for Morton Buildings for May.
Midterm Exam
Cost Accounting
Points
-
2
0
Problem 2
–
Job Costing System
Acme
Company uses a job costing system, and factory overhead is applied on the basis of machine
hours. At the beginning of the
year, management estimated that the company would incur $1,050,000
of factory overhead costs and use 70,000 machine hours.
Acme
Company recorded the following events during the month of March.
(a) Purchased 200,000 pounds of materials on account. The
cost was $4.00 per pound.
(b) Issued 150,000 pounds of materials to production, of which 20,000 pounds were used as indirect
materials. Assume all materials are at $4 per pound.
(c) Incurred $250,000 of direct labor costs and $50,000 of indirect labor c
osts.
(d) Recorded depreciation on equipment for the month, $18,000.
(e) Recorded $4,000 of insurance costs for the manufacturing property.
(f) Paid $8,000 cash for utilities and other miscellaneous items for the manufacturing plant.
(g) Completed job
M11 costing $17,000 and job M12 costing $80,000 during the month and transferred
them to Finished Goods inventory account.
(h) Shipped job M12 to the customer during the month. The job was invoiced at 40 percent above cost.
(i) Used 10,000 machine hours
during March.
Required:
(1) Compute
Acme
Company's predetermined overhead rate for the year.
(2) Prepare journal entries to record the events that occurred during March.
(3) Compute the amount of overapplied or underapplied
overhead and prepare a journal entry to close
overapplied or underapplied overhead into cost of goods sold on March 31.
Midterm Exam
Cost Accounting
Points
-
30
Problem 3
–
Activity
-
Based Costing
The O’Donnell Company uses volume
-
based costing system. They apply overhead
costs based
on direct labor hours at $250 per direct labor hour.
The company is considering adopting an activity
-
based costing system with the following data:
Activity Area
Cost Driver
Cost Driver Rate
Materials
handling
Number of parts
$1.20
Lathe work
Number of turns
0.30
Milling
Number of machine
hours
16.00
Grinding
Number of parts
1.25
Testing
Number of units tested
12.00
The two jobs processed in the month of June had the following characteristics:
Job A
Job B
Direct materials
costs
$10,000
$50,000
Direct labor costs
$1,000
$10,000
Number of direct labor hours
40
400
Number of parts
500
2,000
Number of turns
25,000
50,000
Number of machine hours
140
1,000
Number of units in each job
(all tested)
15
200
Midterm Exam
Cost Accounting
Required:
1. Compute the unit manufacturing cost of each job under the firm's current volume
-
based
costing system.
2. Compute the unit manufacturing cost of each job under the activity
-
based costing system.
3. Compare the unit manufacturing cost for Jobs A and B
computed in requirements 1 and 2.
(a) Why do the two cost systems differ in their total cost for each job?
(b) Why might these differences be important to the Company?
Points
-
30
Problem
4
–
Process Costing
Williams Co. manufactures a
single product that goes through two processes
—
mixing and cooking. The
following data pertains to the Mixing Department for September.
Work
-
in
-
process inventory, September 1
38,000
units
Conversion
—
60% completed
Work
-
in
-
process inventory,
September 30
24,000
units
Conversion
—
40% completed
Units started into production
86,000
units
Units completed and transferred out
?
units
Costs:
Work
-
in
-
process inventory, September 1
Material R
$122,300
Material S
143,780
Conversion
194,550
Costs added during September:
Material R
409,660
Material S
246,820
Conversion
526,618
Midterm Exam
Cost Accounting
Material R is added at the beginning of work in the Mixing Department. Material S is also added
in the
Mixing Department, but not until units of product are thirty percent completed with regard to
conversion. Conversion costs are incurred uniformly during the process.
Required:
(1) Calculate the equivalent units for Material R using the weighted
-
average method.
(2) Calculate the equivalent units for Material S using the weighted
-
average method.
(3) Calculate the equivalent units for conversion using the weighted
-
average method
.
(4) Calculate the unit costs using the weighted
-
average method.
(5) Calculate the cost of units completed and transferred out using the weighted
-
average method.
(6) Calculate the cost of ending work in process using the weighted
-
average method.
30
P
oints
Problem 5
-
Cost Allocation
The Thompson Manufacturing Company has two service departments
—
manufacturing support and
facilities management, and two production departments
—
assembly and packing/shipping. The
distribution of each service departme
nt's efforts to the other departments is shown below:
FROM
TO
Support
Facilities
Assembly
Pack/Ship
Support
0%
45%
25%
30%
Facilities
30%
0%
30%
40%
The direct operating costs of the departments (including both variable and fixed costs) were as follows:
Manufacturing Support
$240,000
Facilities Management
450,000
Assembly
1,200,000
Pack/Ship
225,000
Midterm Exam
Cost Accounting
Required:
(Calculate all ratios and
percentages to 4 decimal places, for example 33.3333%, and round all dollar
amounts to the nearest whole dollar.):
(1) Allocate the service department costs to the production departments using the direct method.
(2) Allocate the service department cost
s to the production departments using the step method with
the support department going first.
(3) Allocate the service department costs to the production departments using the reciprocal method.
10
Points
P
roblem 6
-
Learning Curve Analysis
Williams
Equipment Inc. produced a pilot run of 20 units of a recently developed motor used in the
finished products. The pilot run required an average of 12 direct labor hours per motor.
Williams
has an
80%
learning curve on the direct labor hours needed to produ
ce new motors.
Required:
Calculate the average direct labor hours per unit for the first 640 motors (including the pilot run)
produced.
10
Points
Problem 7
-
Cost
Behavior
Caboose
Co
mpany
manufactures locomotive engines
.
The company
is attempting to predict its
maintenance costs more accurately. Maintenance costs are a mixed cost. Maintenance costs and
machine hours for the first
4
months of
2016
are as follows:
Month
Maintenance
Costs
Machine
Hours
January
$50,320
1,340
Februar
y
60,210
1,580
March
58,005
1,450
April
62,370
1,840
Required:
Using the high
-
low method, calculate unit variable cost and monthly fixe
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