Compute the cost of the company’s year-end work-in-process inventory. Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to theAssembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, theAssembly Department performs a number of manual-assembly activities. The company applies manufacturing overheadusing machine hours in the Machining Department and direct-labor cost in the Assembly Department. The followinginformation relates to the year just ended:ItemsBudgeted manufacturing overheadActual manufacturing overheadBudgeted direct-labor cost (based on practical capacity)Actual direct-labor costBudgeted machine hours (based on practical capacity)Actual machine hoursThe data that follow pertain to job number 775, the only job in production at year-end.AssemblyDepartment$ 6,700$58,500150MachiningDepartment$ 25,500$ 27,800370Selling and administrative expense amounted to $2,500,000.MachiningDepartment$ 4,000,0004,280,0001,500,0001,450,000ItemsDirect materialDirect laborMachine hours400,000425,000AssemblyDepartment$ 3,080,0003,040,0005,600,0005,780,000100,000110,000

Predetermined Overhead Rates are set in advance to allocate indirect manufacturing costs, such as…

Answered: Compute the cost of the company’s…

Business

Accounting

Compute the cost of the company’s year-end work-in-process inventory.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter2: Accounting For Materials

Section: Chapter Questions

Problem 15E: Kenkel, Ltd. uses backflush costing to account for its manufacturing costs. The trigger points are...

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Kenkel, Ltd. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 80,000. b. Requisitioned raw materials to production, 80,000. c. Distributed direct labor costs, 10,000. d. Factory overhead costs incurred, 60,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 225,000, on account.
Gerken Fabrication Inc. uses the job order cost system of accounting. The following information was taken from the companys books after all posting had been completed at the end of March: a. Compute the total production cost of each job. b. Prepare the journal entries to charge the costs of materials, labor, and factory overhead to Work in Process. c. Prepare the journal entry to transfer the cost of jobs completed to Finished Goods. d. Compute the unit cost of each job. e. Compute the selling price per unit for each job, assuming a mark-on percentage of 50%.
Sonoma Products Inc. manufactures a liquid product in one department. Due to the nature of the product and the process, units are regularly lost during production. Materials and conversion costs are added evenly throughout the process. The following summaries were prepared for March: Calculate the unit cost for materials, labor, and factory overhead for March and show the costs of units transferred to finished goods and to ending work in process inventory.
Geneva, Inc., makes two products, X and Y, that require allocation of indirect manufacturing costs. The following data were compiled by the accountants before making any allocations: The total cost of purchasing and receiving parts used in manufacturing is 60,000. The company uses a job-costing system with a single indirect cost rate. Under this system, allocated costs were 48,000 and 12,000 for X and Y, respectively. If an activity-based system is used, what would be the allocated costs for each product?
Yellowstone Fabricators uses a process cost system and applies actual factory overhead to work in process at the end of the month. The following data came from the records for March: There were no beginning inventories and no ending work in process inventory. From the information presented, compute the following: 1. Unit cost of production under absorption costing and variable costing. 2. Cost of the ending inventory under absorption costing and variable costing.
Davis Co. uses backflush costing to account for its manufacturing costs. The trigger points are the purchase of materials, the completion of goods, and the sale of goods. Prepare journal entries to account for the following: a. Purchased raw materials, on account, 70,000. b. Requisitioned raw materials to production, 70,000. c. Distributed direct labor costs, 15,000. d. Factory overhead costs incurred, 45,000. (Use Various Credits for the account in the credit part of the entry.) e. Completed all of the production started. f. Sold the completed production for 195,000, on account. (Hint: Use a single account for raw materials and work in process.)
San Mateo Optics, Inc., specializes in manufacturing lenses for large telescopes and cameras used in space exploration. As the specifications for the lenses are determined by the customer and vary considerably, the company uses a job-order costing system. Manufacturing overhead is applied to jobs on the basis of direct labor hours, utilizing the absorption- or full-costing method. San Mateos predetermined overhead rates for 20x1 and 20x2 were based on the following estimates. Jim Cimino, San Mateos controller, would like to use variable (direct) costing for internal reporting purposes as he believes statements prepared using variable costing are more appropriate for making product decisions. In order to explain the benefits of variable costing to the other members of San Mateos management team, Cimino plans to convert the companys income statement from absorption costing to variable costing. He has gathered the following information for this purpose, along with a copy of San Mateos 20x1 and 20x2 comparative income statement. San Mateo Optics, Inc. Comparative Income Statement For the Years 20x1 and 20x2 San Mateos actual manufacturing data for the two years are as follows: The companys actual inventory balances were as follows: For both years, all administrative expenses were fixed, while a portion of the selling expenses resulting from an 8 percent commission on net sales was variable. San Mateo reports any over-or underapplied overhead as an adjustment to the cost of goods sold. Required: 1. For the year ended December 31, 20x2, prepare the revised income statement for San Mateo Optics, Inc., utilizing the variable-costing method. Be sure to include the contribution margin on the revised income statement. 2. Describe two advantages of using variable costing rather than absorption costing. (CMA adapted)
A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the service departments. The production departments are Grinding and Polishing. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The human resources department services all departments of the company, and its costs are allocated using the numbers of employees within each department, while machine repair costs are allocable to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
Shorts Company has three process departments: Mixing, Encapsulating, and Bottling. At the beginning of the year, there were no work-in-process or finished goods inventories. The following data are available for the month of July: Includes only the direct materials, direct labor, and the overhead used to process the partially finished goods received from the prior department. The transferred-in cost is not included. Required: 1. Prepare journal entries that show the transfer of costs from one department to the next (including the entry to transfer the costs of the final department). 2. Prepare T-accounts for the entries made in Requirement 1. Use arrows to show the flow of costs.
The general ledger of Lawson Lumber Co. contains the following control account: If the materials charged to the one uncompleted job still in process amounted to $3,400, what amount of labor and factory overhead must have been charged to the job if the factory overhead rate is 100% of direct labor cost? (Hint: First determine the balance in Work in Process.)
Chrome Solutions Company manufactures special chromed parts made to the order and specifications of the customer. It has two production departments, Stamping and Plating, and two service departments, Power and Maintenance. In any production department, the job in process is wholly completed before the next job is started. The company operates on a fiscal year, which ends September 30. Following is the post-closing trial balance as of September 30: Additional information: The balance of the materials account represents the following: The company uses the FIFO method of accounting for all inventories. Material A is used in the Stamping Department, and materials B and C are used in the Plating Department. The balance of the work in process account represents the following costs that are applicable to Job 905. (The customer’s order is for 1,000 units of the finished product.) The finished goods account reflects the cost of Job 803, which was finished at the end of the preceding month and is awaiting delivery orders from the customer. At the beginning of the year, factory overhead application rates were based on the following data: In October, the following transactions were recorded: Purchased the following materials and supplies on account: The following materials were issued to the factory: Customers’ orders covered by Jobs 1001 and 1002 are for 1,000 and 500 units of finished product, respectively. Factory wages and office, sales, and administrative salaries are paid at the end of each month. (Assume FICA and federal income tax rates of 8% and 10%, respectively.) Record the company’s liability for state and federal unemployment taxes. (Assume rates of 4% and 1%, respectively, and that none of the employees had reached the $8,000 limit.) Record the payroll distribution for October. Wages of the supervisors, custodial personnel, etc., totaled $9,500; administrative salaries were $18,300. Miscellaneous factory overhead incurred during October totaled $4,230. Miscellaneous selling and administrative expenses were $1,500. These items as well as the FICA tax and federal income tax withheld for September were paid. (See account balances on the post-closing trial balance for September 30.) Annual depreciation on plant assets is calculated using the following rates (round to nearest dollar): Factory buildings–5% Machinery and equipment–20% Office equipment–20% The balance of the prepaid insurance account represents a three-year premium for a fire insurance policy covering the factory building and machinery. It was paid on the last day of the preceding month and became effective on October 1. The summary of factory overhead prepared from the factory overhead ledger is reproduced here: The total expenses of the Maintenance Department are distributed on the basis of floor space occupied by the Power Department (8,820 sq ft), Stamping Department (19,500 sq ft), and Plating Department (7,875 sq ft). The power department expenses are then allocated equally to the Stamping and Plating departments. After the actual factory overhead expenses have been distributed to the departmental accounts and the applied factory overhead has been recorded and posted, any balances in the departmental accounts are transferred to Under- and Overapplied Overhead. Jobs 905 and 1001 were finished during the month. Job 1002 is still in process at the end of the month. During the month, Jobs 803 and 905 were sold with a mark-on percentage of 50% on cost. Received $55,500 from customers in payment of their accounts. Checks were issued in the amount of $43,706 for payment of the payroll. Required: Set up the beginning trial balance in T-accounts. Prepare materials inventory ledger cards and enter October 1 balances. Prepare a Payroll Summary and Schedule of Earnings and Payroll Taxes for the month of October. Set up job cost sheets as needed. Record all transactions and related entries for October and post to T-accounts. Prepare a service department expense distribution worksheet for October. At the end of the month: Analyze the balance in the materials account, the work in process account, and the finished goods account. Prepare the statement of cost of goods manufactured for the month ended October 31.