Managerial Accounting
Managerial Accounting
3rd Edition
ISBN: 9780077826482
Author: Stacey M Whitecotton Associate Professor, Robert Libby, Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
bartleby

Concept explainers

bartleby

Videos

Textbook Question
Book Icon
Chapter 2, Problem 5.1GBP

Recording Manufacturing Costs and Analyzing Manufacturing Overhead
Hamilton Custom Cabinet Company uses a job order cost system with overhead applied as a percentage of direct labor costs. Inventory balance at the beginning of 2016 follow:
Chapter 2, Problem 5.1GBP, Recording Manufacturing Costs and Analyzing Manufacturing Overhead Hamilton Custom Cabinet Company
The following transactions occurred during January:
a. Purchased materials on account for $42,000.
b. Issued materials to production totaling $45,000, 85 percent of which was traced to specific jobs and the remainder of which was treated as indirect materials.
c. Payroll costs totaling $30,000 were recorded as follows:
$17,300 for assembly workers
8,400 for factory supervision
2,500 for administrative personnel
1,800 for sales commissions
d. Recorded depreciation: $9,000 for machines and $25,000 for the copier used in the administrative Office.
e. Recorded $9,000 of expired insurance. Sixty percent was insurance on the manufacturing facility, with the remainder classified as an administrative expense.
f. Paid $7,900 in other factory costs in cash.
g. Applied manufacturing overhead at a rate of 200 percent of direct labor cost.
h. Completed all jobs but one; the job cost sheet for this job shows $18,000 for direct materials.
$7,000 for direct labor, and $14,000 for applied overhead.
i. Solid jobs costing $40,000 during the period; the company adds a 25 percent markup on cost to determine the sales price.
Set up T-accounts, record the beginning balances, post the January transactions, and compute the final balance for the following accounts:
a. Raw Materials Inventory.
b. Work in process Inventory.
c. Finished Goods Inventory.
d. Cost of Goods Sold.
e. Manufacturing Overhead.
f. Selling, General, and Administrative Expenses.
g. Sales Revenue.
h. Other accounts (Cash, Payables, etc.).

Expert Solution
Check Mark
To determine

(a)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources

To record:

The transactions in relation to Raw Materials Inventory for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Raw Materials Inventory for the month of January 2016 of H.C.C. Co. are as follows-

Dr Raw Materials Inventory Cr
Particulars Amount ($) Particulars Amount ($)
To Opening Balance 15,600 By Work in Process Inventory (Direct Materials Issued) 38,250
To Purchase Payables 42,000 By Manufacturing Overhead (Indirect Materials Issued) 6,750
By Closing Balance 12,600
Total 57,600 Total 57,600

The direct materials issued will be transferred to work in process inventory while indirect materials consumed will be considered as a manufacturing overhead respectively.

Expert Solution
Check Mark
To determine

(b)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources

To record:

The transactions in relation to Work in Process Inventory for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Work in Process Inventory for the month of January 2016 of H.C.C. Co. are as follows-

Dr Work in Process Inventory Cr
Particulars Amount ($) Particulars Amount ($)
To Opening Balance 33,500
To Raw Materials Inventory 38,250
To Wages Payables (Direct Labor) 17,300
To Manufacturing Overhead 34,600
By Finished Goods 84,650
By Closing Balance 39,000
Total 123,650 Total 123,650

All such direct costs and applied manufacturing overhead involved in the processing of materials are considered under work in process inventory. As all the jobs are not completed, the total of direct materials, direct labor and applied overhead pertaining to work in process amounts to $39,000 is considered as closing balance for such period.

Expert Solution
Check Mark
To determine

(c)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources

To record:

The transactions in relation to Finished Goods Inventory for the month of January 2016.

Answer to Problem 5.1GBP

The transactions recorded in T-account of Finished Goods Inventory for the month of January 2016 of H.C.C. Co. are as follows-

Dr Finished Goods Inventory Cr
Particulars Amount ($) Particulars Amount ($)
To Opening Balance 42,300
To Work in Process Inventory 84,650
By Cost of Goods Sold 40,000
By Closing Balance 86,950
Total 126,950 Total 126,950

Explanation of Solution

The goods which are completed would be transferred to finished goods inventory. However, the total costs of such jobs which are sold during such period would be transferred as cost of such goods sold respectively.

Expert Solution
Check Mark
To determine

(d)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources

To record:

The transactions in relation to Cost of Goods Sold for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Cost of Goods Sold for the month of January 2016 of H.C.C. Co. are as follows-

Dr Cost of Goods Sold Cr
Particulars Amount ($) Particulars Amount ($)
By Sales Revenue 40,000
To Finished Goods 40,000
Total 40,000 Total 40,000

It represents the total cost of such goods sold during the period.

Expert Solution
Check Mark
To determine

(e)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources

To record:

The transactions in relation to Manufacturing Overhead for the month of January 2016.

Answer to Problem 5.1GBP

The transactions recorded in T-account of Manufacturing Overhead for the month of January 2016 of H.C.C. Co. are as follows-

Dr Manufacturing Overhead Cr
Particulars Amount ($) Particulars Amount ($)
To Raw Materials Inventory 6,750 By Work in Process Inventory (Applied Manufacturing Overhead) 34,600
To Wages Payables (Indirect Labor) 8,400 By Under-Applied Overhead c/f 2,850
To Accumulated Depreciation 9,000
To Prepaid Insurance 5,400
To Cash (Other Factory Costs) 7,900
Total 37,450 Total 37,450

Explanation of Solution

The manufacturing overhead is the factory cost component in such production process. They are applied to work in process inventory as a result of predetermined overhead rate.The assembly workers payroll costs considered as direct labor cost. It is incurred in the manufacturing unit and directly related to such production process respectively. Thus, applied manufacturing overheads are charged at 200% of direct labor costs which is $34,600 ($17,300 * 200%).

Expert Solution
Check Mark
To determine

(f)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources

To record:

The transactions in relation to Selling, General and Administrative Expenses for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Selling, General and Administrative Expenses for the month of January 2016 of H.C.C. Co. are as follows-

Dr. Selling, General and Administrative Expenses Cr
Particulars Amount ($) Particulars Amount ($)
To Salary Payable for Administrative Personnel 2,500
To Sales Commissions Payable 1,800
To Accumulated Depreciation 25,000
To Prepaid Insurance 3,600
By Closing Balance 32,900
Total 32,900 Total 32,900

All such costs in relation to administration, selling and distribution of goods during the period are recorded under Selling, General and Administrative Expenses.

Expert Solution
Check Mark
To determine

(g)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources

To record:

The transactions in relation to Sales Revenue for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Sales Revenue for the month of January 2016 of H.C.C. Co. are as follows-

Dr Sales Revenue Cr
Particulars Amount ($) Particulars Amount ($)
To Cost of Goods Sold 40,000 By Cash 50,000
To Gross Profit 10,000
Total 50,000 Total 50,000

The company determines its sales price by adding 25% markup on cost of such job. The jobs costing $40,000 has been sold during such period. Thus, the sales value is $50,000 ($40,000 * 125%) for the period.The excess of sales value over the cost of such goods sold represent the gross profit for the period.

Expert Solution
Check Mark
To determine

(h)

Recording Manufacturing Costs:

In cost accounting, various production stages of manufacturing a product are identified. Thus, manufacturing costs are recorded at such production processes to reflect appropriate apportionment of costs.

Analyzing Manufacturing Overhead:

The manufacturing overhead costs are incurred in a factory and it is related to the production process. It is attributed to the goods produced at such predetermined rate which is budgeted at the beginning of the period. Therefore, we can analyze such predetermined budgets and actual level of activity to calculate under, over or optimum utilization of the resources

To record:

The transactions related to other accounts for the month of January 2016.

Explanation of Solution

The transactions recorded in T-account of Cash for the month of January 2016 of H.C.C. Co. are as follows-

Dr Cash Cr
Particulars Amount ($) Particulars Amount ($)
To Sales Revenue 50,000 By Manufacturing Overhead 7,900
By Closing Balance 42,100
Total 50,000 Total 50,000

The cash transactions during the period have been recorded to determine the cash balance.

The transactions recorded in T-account of Purchase Payables for the month of January 2016 of H.C.C. Co. are as follows-

Dr Purchase Payables Cr
Particulars Amount ($) Particulars Amount ($)
By Raw Materials Inventory 42,000
To Closing Balance 42,000
Total 42,000 Total 42,000

It is a payables account for raw materials acquired on credit terms.

The transactions recorded in T-account of Wages Payables for the month of January 2016 of H.C.C. Co. are as follows-

Dr Wages Payables Cr
Particulars Amount ($) Particulars Amount ($)
By Work in Process Inventory (Direct Labor) 17,300
By Manufacturing Overhead (Indirect Labor) 8,400
To Closing Balance 25,700
Total 25,700 Total 25,700

The direct as well as indirect labor incurred have been recorded as wages payables.

The transactions recorded in T-account of Salary Payable for the month of January 2016 of H.C.C. Co. are as follows-

Dr Salary Payable Cr
Particulars Amount ($) Particulars Amount ($)
By Selling, General and Administrative Expenses 2,500
To Closing Balance 2,500
Total 2,500 Total 2,500

As the salary to administrative personnel is incurred but not paid, the same is represented as salary payable at the end of such period.

The transactions recorded in T-account of Sales Commissions Payable for the month of January 2016 of H.C.C. Co.are as follows-

Dr Sales Commissions Payable Cr
Particulars Amount ($) Particulars Amount ($)
By Selling, General and Administrative Expenses 1,800
To Closing Balance 1,800
Total 1,800 Total 1,800

The sales commissions are payable at the end of such period.

The transactions recorded in T-account of Accumulated Depreciation for the month of January 2016 of H.C.C. Co.are as follows-

Dr Accumulated Depreciation Cr
Particulars Amount ($) Particulars Amount ($)
By Manufacturing Overhead 9,000
By Selling, General and Administrative Expenses 25,000
To Closing Balance 34,000
Total 34,000 Total 34,000

The depreciation expense for the period is recorded in respective heads.

The transactions recorded in T-account of Prepaid Insurance for the month of January 2016 of H.C.C. Co.are as follows-

Dr Prepaid Insurance Cr
Particulars Amount ($) Particulars Amount ($)
To Opening Balance 9,000 By Manufacturing Overhead 5,400
By Selling, General and Administrative Expenses 3,600
Total 9,000 Total 9,000

The prepaid insurance which has lapsed during the current period, has been transferred as an expense to respective heads.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 2 Solutions

Managerial Accounting

Ch. 2 - Prob. 11QCh. 2 - Prob. 12QCh. 2 - Prob. 13QCh. 2 - Prob. 14QCh. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - Prob. 17QCh. 2 - Prob. 18QCh. 2 - Prob. 19QCh. 2 - Prob. 20QCh. 2 - Prob. 21QCh. 2 - Prob. 1MCCh. 2 - Prob. 2MCCh. 2 - Prob. 3MCCh. 2 - Prob. 4MCCh. 2 - Prob. 5MCCh. 2 - Prob. 6MCCh. 2 - Prob. 7MCCh. 2 - Applied overhead costs are recorded a. On the left...Ch. 2 - Prob. 9MCCh. 2 - Prob. 10MCCh. 2 - Identifying Companies That Use Job Order versus...Ch. 2 - Prob. 2MECh. 2 - Prob. 3MECh. 2 - Prob. 4MECh. 2 - Prob. 5MECh. 2 - Prob. 6MECh. 2 - Prob. 7MECh. 2 - Prob. 8MECh. 2 - Prob. 9MECh. 2 - Prob. 10MECh. 2 - Prob. 11MECh. 2 - Calculating Over- or Underapplied Overhead Costs...Ch. 2 - Prob. 13MECh. 2 - Prob. 14MECh. 2 - Prob. 15MECh. 2 - Calculating Direct Materials Used in Production...Ch. 2 - Calculating Missing Amounts and Cost or Goods...Ch. 2 - Prob. 19MECh. 2 - Prob. 1ECh. 2 - Preparing Journal Entries Refer to the information...Ch. 2 - Prob. 3ECh. 2 - Preparing Journal Entries Refer to the information...Ch. 2 - Prob. 5ECh. 2 - Finding Unknown Values in the Cost of Goods...Ch. 2 - Prob. 7ECh. 2 - Prob. 8ECh. 2 - Prob. 9ECh. 2 - Prob. 10ECh. 2 - Calculating the Cost of Finished and Unfinished...Ch. 2 - Computing Overhead Rate and Billing Rate for...Ch. 2 - Prob. 13ECh. 2 - Prob. 14ECh. 2 - Prob. 15ECh. 2 - Prob. 16ECh. 2 - Prob. 17ECh. 2 - Prob. 18ECh. 2 - Prob. 19ECh. 2 - Prob. 20ECh. 2 - Prob. 21ECh. 2 - Preparing Journal Entries Floyds Auto Repair Shop...Ch. 2 - Applying Job Order Costing in a Service Setting...Ch. 2 - Prob. 24ECh. 2 - Prob. 1.1GAPCh. 2 - Prob. 1.2GAPCh. 2 - Prob. 1.3GAPCh. 2 - Prob. 1.4GAPCh. 2 - Prob. 1.5GAPCh. 2 - Preparing Journal Entries Refer to the information...Ch. 2 - Prob. 3.1GAPCh. 2 - Prob. 3.2GAPCh. 2 - Prob. 3.3GAPCh. 2 - Prob. 3.4GAPCh. 2 - Prob. 3.5GAPCh. 2 - Prob. 4.1GAPCh. 2 - Prob. 4.2GAPCh. 2 - Prob. 4.3GAPCh. 2 - Prob. 5.1GAPCh. 2 - Prob. 5.2GAPCh. 2 - Recording Manufacturing Costs and Analyzing...Ch. 2 - Prob. 5.4GAPCh. 2 - Prob. 6GAPCh. 2 - Prob. 7.1GAPCh. 2 - Prob. 7.2GAPCh. 2 - Prob. 7.3GAPCh. 2 - Prob. 7.4GAPCh. 2 - Prob. 7.5GAPCh. 2 - Prob. 8.1GAPCh. 2 - Prob. 8.2GAPCh. 2 - Prob. 8.3GAPCh. 2 - Prob. 8.4GAPCh. 2 - Prob. 8.5GAPCh. 2 - Prob. 1.1GBPCh. 2 - Prob. 1.2GBPCh. 2 - Prob. 1.3GBPCh. 2 - Prob. 1.4GBPCh. 2 - Prob. 1.5GBPCh. 2 - Prob. 2GBPCh. 2 - Prob. 3.1GBPCh. 2 - Prob. 3.2GBPCh. 2 - Prob. 3.3GBPCh. 2 - Prob. 3.4GBPCh. 2 - Prob. 3.5GBPCh. 2 - Prob. 4.1GBPCh. 2 - Prob. 4.2GBPCh. 2 - Prob. 4.3GBPCh. 2 - Recording Manufacturing Costs and Analyzing...Ch. 2 - Recording Manufacturing Costs and Analyzing...Ch. 2 - Recording Manufacturing Costs and Analyzing...Ch. 2 - Prob. 5.4GBPCh. 2 - Prob. 6GBPCh. 2 - Prob. 7.1GBPCh. 2 - Prob. 7.2GBPCh. 2 - Prob. 7.3GBPCh. 2 - Prob. 7.4GBPCh. 2 - Prob. 7.5GBPCh. 2 - Prob. 8.1GBPCh. 2 - Prob. 8.2GBPCh. 2 - Prob. 8.3GBPCh. 2 - Prob. 8.4GBPCh. 2 - Prob. 8.5GBP
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Text book image
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Text book image
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Text book image
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Text book image
College Accounting, Chapters 1-27 (New in Account...
Accounting
ISBN:9781305666160
Author:James A. Heintz, Robert W. Parry
Publisher:Cengage Learning
Text book image
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY