Concept explainers
Cost of Raw Material: The cost of the material which is not used for the work in process till yet is considered as the cost of raw material.
To Calculate: The cost of raw material, work in process and finished goods.
Cost of Work in
To Calculate: The work in process.
Cost of Finished Goods: The cost of the material which has been converted into finished goods or the goods ready to sell in the open market is known as the cost of finished goods.
To Compute: The ending balance of finished goods inventory.
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Managerial Accounting: Tools for Business Decision Making
- The following is a list of costs incurred by several manufacturing companies: a. Annual picnic for plant employees and their families b. Cost of fabric used by clothing manufacturer c. Cost of plastic for a toy manufacturer d. Cost of sewing machine needles used by a shirt manufacturer e. Cost of television commercials f. Depreciation of copying machines used by the Marketing Department g. Depreciation of microcomputers used in the factory to coordinate and monitor the production schedules h. Depreciation of office building i. Depreciation of robotic equipment used to assemble a product j. Electricity used to operate factory machinery k. Factory janitorial supplies I. Fees charged by collection agency on past-due customer accounts m. Fees paid to lawn service for office grounds n. Maintenance costs for factory equipment o. Oil lubricants for factory plant and equipment p. Pens, paper, and other supplies used by the Accounting Department q. Repair costs for factory equipment r. Rent for a warehouse used to store work in process and finished products s. Salary of a physical therapist who treats plant employees t. Salary of the manager of a manufacturing plant u. Telephone charges by corporate office v. Travel costs of marketing executives to annual sales meeting w. Wages of a machine operator on the production line x. Wages of production quality control personnel Instructions Classify each of the preceding costs as a product cost or period cost. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense. Use the following tabular headings for preparing your answer, placing an X in the appropriate column:arrow_forwardSmooth Sounds manufactures and sells a new line of MP3 players. Unfortunately, Smooth Sounds suffered serious fire damage at its home office. As a result, the accounting records for October were partially destroyed-and completely jumbled. Smooth Sounds has hired you to help figure out the missing pieces of the accounting puzzle. Assume that Smooth Sounds' raw materials inventory contains only direct materials. Work in process inventory, October 31 $1,500 Finished goods inventory, October 1 4,300 Direct labor in October 3,000 Purchases of direct materials in October 9,000 Work in process inventory, October 1 0 Revenues in October 27,000 Gross profit in October 12,000 Direct materials used in October 8,000 Raw materials inventory, October 31 3,000 Manufacturing overhead in October 6,300 Manufacturing costs Cost of goods manufactured in October Cost of goods sold in October Beginning direct materials inventory Ending…arrow_forwardThe Star Paper Division of Royal Industries is located near Los Angeles. A major expansion of the division’s only plant was completed in April 2007. The expansion consisted of an addition to the existing building, additions to the production-line machinery, and the replacement of obsolete and fully depreciated equipment that was no longer efficient or cost effective.On May 1, 2007, George Harris became manager of Star. Harris had a meeting with Marie Fortner, vice president of operations for Royal, who explained to Harris that the company measured the performance of divisions and division managers on the basis of return on gross assets (ROA). When Harris asked if othermeasures were used in conjunction with ROA, Fortner replied, ‘‘Royal’s top management prefers to use a single performance measure. Star should do well this year now that it has expanded and replaced all of that old equipment. You should have no problem exceeding the division’s historical rate. I’ll check with you at the…arrow_forward
- The Chronicle Fabrication Plant had a fire at the beginning of 2019 and most of the records for the year 2018 were lost. Some data for the year 2018 were located by the accountants and are shown below. Total manufacturing overhead estimated at the beginning of the year: $105,840 Total direct labor costs estimated at the beginning of the year. Total direct labor hours (DLH) estimated at the beginning of the year. 3,600 DLH Actual manufacturing overhead costs for the year. Actual direct labor costs for the year: Actual direct labor hours (DLH) for the year. $186,000 $99,760 $142,000 2,950 DLH The company bases its manufacturing overhead allocated to production in 2016? ocation on direct labor hours. How much manufacturing overhead was a. $81,745 O b. $86,730 O. $99,769 O d. $105,816arrow_forwardThe Chronicle Fabrication Plant had a fire at the beginning of 2019 and most of the records for the year 2018 were lost. Some data for the year 2018 were located by the accountants and are shown below. Total manufacturing overhead estimated at the beginning of the year. $105,840 Total direct labor costs estimated at the beginning of the year. Total direct labor hours (DLH) estimated at the beginning of the year: 3,600 DLH| Actual manufacturing overhead costs for the year. Actual direct labor costs for the year: Actual direct labor hours (DLH) for the year. $186,000 $99,760 $142,000 2,950 DLH Using direct labour hours as the cost driver, the journal entry to dispose of the manufacturing overhead variance is: O a. Dr. Manufacturing Overhead $13,030 and Cr. COGS $13,030 O b. Dr. Manufacturing overhead $6,080 and Cr. COGS $6,080 O c. Dr. WIP $1,0800 and Cr. Manufacturing Overhead $6,080 O d. Dr. COGS $13,030 and Cr. Manufacturing Overhead $13,030arrow_forwardA distraught employee, Fang W. Arson, put a torch to manufacturing plant on a blustery February 26. The resulting blaze destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building. They reveal the following for the period from January 1, 2017 to February 26, 2017. 6,00,000 Direct materials 26/2/2017 Revenues Indirect manufacturing costs 60 % of conversion costs 56,000 320,000 Work in process 1/1/2017 25% Finished goods 1/1/2017 34,000 40,000 Prime costs Gross margin percentage based on revenues 120,000 Direct materials 1/1/2017 4,60,000 Direct materials consumed 20,000 Cost of goods available for sale Required: Prepare the statement of cost of goods sold.arrow_forward
- On November 30, 2022, there was a fire in the factory of Able Manufacturing Limited, where you work as the controller. The work in process inventory was completely destroyed, but both the materials and finished goods inventories were undamaged. Able uses normal job-order costing and its fiscal year end is December 31. Selected information for the periods ended October 31, 2022, and November 30, 2022, follows: October 31, 2022 November 30, 2022 Supplies (including both direct and indirect materials) $ 79,250 $ 73,250 Work in process inventory 58,875 ? Finished goods inventory 60,000 63,000 Cost of goods sold (year to date) 576,000 656,000 Accounts payable (relates to materials purchased only) 17,960 53,540 Manufacturing overhead incurred (year to date) 129,500 163,300 Manufacturing overhead applied 128,700 ? Other information for November 2022: Cash payments to…arrow_forwardOn April 12, after the close of business, Singh & Sons had a devastating fire that destroyed the company’s work-in-process and finished-goods inventories. Fortunately, all raw materials escaped damage becausematerials owned by the firm were stored in another warehouse. The following information is available: The firm’s accountants determined that the cost of direct materials used normally averages 25 percent of prime costs (i.e., direct material + direct labor). In addition, manufacturing overhead is 50 percent of the firm’s total production costs.Required: Singh & Sons is in the process of negotiating a settlement with its insurance company. Prepare an estimate of the cost of work-in-process and finished-goods inventories that were destroyed by the fire.arrow_forwardXYZ Ltd manufactures furniture. Due to a fire in the administrative offices, the accounting records for November of the current year were partially destroyed. You have been able to piece together the following information from the ledger. By examining various source documents and interviewing several employees, you are able to gather the following additional information: • The budgeted overhead for the current year is $492,000 • The accounts payable (A/P) balance on 30 November is 40 percent of A/P beginning balance. Only purchases of raw material are credited to accounts payable. A payment of $85 000 was made on 20 November. • The actual manufacturing overhead for November is $65 000. • November’s cost of goods sold (CGS) amounts to $165 000. • The 30 November balance in finished goods inventory is $7 000. • Budgeted direct labour cost for the current year is $820 000. The direct labour rate is $25 per hour. • Collection of accounts receivable during November 95% of credit sales. •…arrow_forward
- A distraught employee, Fang W. Arson, put a torch to manufacturing plant on a blustery February 26. The resultingblaze destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building. Theyreveal the following for the period from January 1, 2017 to February 26, 2017.Revenues 6,00,000 Direct materials 26/2/2017 56,000Indirect manufacturing costs 60 % of conversion costsPrime costs 320,000 Work in process 1/1/2017 34,000Gross margin percentage based onrevenues 25% Finished goods 1/1/2017 40,000Direct materials consumed 120,000 Direct materials 1/1/2017 20,000Cost of goods available for sale 4,60,000Required: Prepare the statement of cost of goods sold.arrow_forwardOn September 25, 2020, a hurricane destroyed the work in process inventory of Biloxi Corporation. At that time, the company was in the process of manufacturing two custom jobs (B325 and Q428). Although all of Biloxi's on-site accounting records were destroyed, the following information is available from some backup off -site records: cements 55 Biloxi Corp. applies overhead at the rate of 85 percent of direct labor cost. The cost of goods sold for the company averages 75 percent of selling price. Sales from January 1 to the date of the hurricane totaled P1,598,000. The company's wage rate for production employees is P12.90 per hour. A total of 25,760 direct labor hours were recorded from January 1 through September 25. • As of September 25, P21,980 of direct material and 128 hours of direct labor had been recorded for Job B325. Also at that time, P14,700 of direct material and 240 hours of direct labor had been recorded for Job Q428. January 1, 2020, inventories were as follows:…arrow_forwardArollaLtd. is a manufacturing company. In 2020, Arolla implemented a new accounting system to account for its raw materials. Unfortunately, the new system hasn’t worked very well in some areas and, in particular, the accounting for Material XY has been a mess. The controller has asked you to have a look at the information available for Material XY and come up with the ending inventory for the fourth quarter of the year. After several days of hard work,you have obtained the following information:a)Arollauses average cost to account for its raw material inventory. Each material category is accounted for separately. The company accounts for inventory costs using a periodic accounting system and the inventory is counted near the end of each quarter. Inventory is accounted for FOB destination point; b)At the end of the third quarter there were10,000 kilograms of Material XY on hand with a carrying amount of $75,000; c) During the fourth quarter Arolla made three purchasesofMaterial XY, as…arrow_forward
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