cost accounting unit 4
accountingdue sunday
After reading information on the fundamentals of product and service costing in Chapter 6 of the Fundamentals of Cost
Account
ing text, complete the problems shown below. In the first problem you will apply your knowledge of the operation of a two-stage allocation system for product costing, and in the second problem you will apply operations costing to assign conversion costs based on the number of units assembled.
Complete the following learning problems:
· Problem 6-49, “Two-Stage Allocation and Product Costing,” page 234.
· Problem 6-51, “Operations Costing,” page 235.
-49. Two-Stage Allocation and Product Costing
(
LO 6-5
)
Donovan & Parents produces soccer shorts and jerseys for youth leagues. Most of the production is done by machine. Data on operations and costs for March follow:
Jerseys |
Shorts |
Total |
||
Units produced |
32,000 |
16,000 |
48,000 |
|
Machine-hours used |
6,000 |
4,800 |
10,800 |
|
Direct labor -hours |
1,200 |
720 |
1,920 |
|
Direct materials costs |
$96,000 |
$64,000 |
$160,000 |
|
Direct labor costs |
$32,800 |
$19,200 |
$ 52,000 |
|
Manufacturing overhead costs |
$266,400 |
Management asks the firm’s cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine-hours. The analysis of overhead accounts by the cost accountant follows:
Account |
Amount |
Related to: |
||||
Utilities |
$48,000 |
Machine-hours | ||||
Supplies |
33,600 |
Materials |
||||
Machine depreciation and maintenance |
105,600 |
|||||
Purchasing and storing materials |
38,400 |
|||||
Miscellaneous |
40,800 |
Required
a. Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs.
b. Compute the total costs of production and the cost per unit for each of the two products for March.
6-51. Operations Costing
Vermont Instruments manufactures two models of calculators. The finance model is the
Fin-X
and the scientific model is the
Sci-X
. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is in the cost of the parts. The following data are available for June:
Fin-X | Sci-X |
Total |
|
Number of units |
10,000 |
40,000 |
50,000 |
Parts cost per unit |
$25 |
$30 |
|
Other costs: |
|||
Direct labor |
$ 62,000 |
||
Indirect materials |
1 7,500 |
||
Overhead |
70,500 |
||
Total |
$ 150,000 |
Required
Vermont Instruments uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost per unit of the Fin-X and Sci-X models for June.
After reading information on job costing in Chapter 6 of the Fundamentals of Cost Accounting text, complete the problems shown below. This assignment will help pull together two important concepts associated with job costing. The first problem will apply your knowledge of analyzing overhead using a predetermined rate, while the second problem will apply job costing to service companies.
Complete the following learning problems:
· Problem 7-45, “Analysis of Overhead Using a Predetermined Rate,” page 270.
· Problem 7-49, “Job Costs: Service Company,” page 273.
7-45. Analysis of Overhead Using a Predetermined Rate
(
LO 7-3
)
Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows:
150,000 |
180,000 |
210,000 |
|
Variable overhead costs |
$1,050,000 |
$1,260,000 |
$1,470,000 |
Fixed overhead costs |
648,000 |
||
Total overhead |
$1,698,000 |
$1,908,000 |
$2,118,000 |
The expected volume is 180,000 direct labor-hours for the entire year. The following information is for March, when Jobs 6023 and 6024 were completed:
Inventories, March 1 |
||
Materials and supplies |
$ 31,500 |
|
Work in process ( Job 6023 ) |
$162,000 |
|
Finished goods |
$337,500 |
|
Purchases of materials and supplies |
||
$405,000 |
||
$ 45,000 |
||
Materials and supplies requisitioned for production |
||
Job 6023 |
$135,000 |
|
Job 6024 |
112,500 |
|
Job 6025 |
76,500 |
|
18,000 |
||
$342,000 |
||
Factory direct labor-hours (DLH) |
||
10,500 DLH |
||
9,000 DLH |
||
6,000 DLH |
||
Labor costs |
||
Direct labor wages (all hours @ $8) |
$204,000 |
|
Indirect labor wages ( 12,000 hours) |
51,000 |
|
Supervisory salaries |
108,000 |
|
Building occupancy costs (heat, light, depreciation, etc.) |
||
Factory facilities |
$ 19,500 |
|
Sales and administrative offices |
7,500 | |
Factory equipment costs |
||
Power |
12,000 | |
Repairs and maintenance |
4,500 |
|
Other |
7,500 |
|
$ 24,000 |
Required
Answer the following questions:
a. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year.
(Note: Regardless of your answer to requirement [a], assume that the predetermined overhead rate is $9 per direct labor-hour. Use this amount in answering requirements [b] through [e].)
b. Compute the total cost of Job 6023 when it is finished.
c. How much of factory overhead cost was applied to Job 6025 during March?
d. What total amount of overhead was applied to jobs during March?
e. Compute actual factory overhead incurred during March.
f. At the end of the year, Kansas Company had the following account balances:
Overapplied Overhead |
$ 3,000 |
|
Cost of Goods Sold |
2,940,000 |
|
114,000 |
||
Finished Goods Inventory |
246,000 |
How would you recommend treating the overapplied overhead, assuming that it is not material? Show the new account balances in the following table:
_________ |
|||
7-49. Job Costs: Service Company
(
LO 7-4
)
For the month of July, UP Payroll Services worked 3,000 hours for Dune Motors, 900 hours for Jake’s Charters, and 1,500 hours for Mission Hospital. UP bills clients at $128 an hour; its labor costs are $48 an hour. A total of 6,000 hours were worked in January with 600 hours not billable to clients. Overhead costs of $72,000 were incurred and were assigned to clients on the basis of direct labor-hours. Because 600 hours were not billable, some overhead was not assigned to jobs. UP had $48,000 in marketing and administrative costs. All transactions were on account.
Required
a. What are the revenue and cost per client?
b. Prepare an income statement for July.