Sie sind auf Seite 1von 38

ACG 2071 Managerial Accounting

Product Costing and Cost Flows - Sample Problems for Chs 28-34
Answers appear in red.

DRAFT
Problem 1 - The balance sheet dated December 31, 2003, has a balance in
the Finished Goods Inventory account of $26,200. The December 31, 2004,
balance sheet has a balance in the Finished Goods Inventory account of
$24,000. Work in Process Inventory account has a beginning balance of
$20,000 and an ending balance of $30,000. If the cost of goods
manufactured is $340,000, how much is cost of goods sold?
Beginning FG inventory
+ CGM
= Available
- Ending FG inventory
= Cost of goods sold

$ 26,200
340,000
366,200
(24,000)
$342,200

Problem 2 -Alex Companys Work in Process Inventory account has a


beginning balance of $60,000 and an ending balance of $50,000. Current
manufacturing costs total $200,000. How much is cost of goods
manufactured?
$60,000 + $200,000 - $50,000 = $210,000
Problem 3 Hernandez, Inc. manufactures calculators. The company employs
an actual costing system. During May, Hernandezs transactions included the
following:
Direct labor cost incurred
Total manufacturing overhead cost
Direct materials purchased
Raw materials inventory, beginning
Raw materials inventory, ending
Sales
Selling expenses
Work in process inventory,
beginning
Work in process inventory, ending

$5,400
6,650
11,500
160
280
23,000
2,100
220
250

A. Briefly list any additional information you need to calculate cost of goods sold for
this company. (Be specific.)

Beginning finished goods inventory and ending finished goods inventory (You have
enough information to calculate cost of goods manufactured so you don't need to be
told that amount.)
B. How much is the cost of direct materials issued to production during May?
Raw materials inventory,
$ 160
beginning
Direct materials purchased
11,500
Less Raw materials inventory,
ending
(280)
Cost of direct materials issued to
$11,380
production
C. How much is cost of goods manufactured for May?
Materials issued to production
$11,38
0
Direct labor cost incurred
5,400
Manufacturing overhead cost
6,650
Total manufacturing costs
22,430
Add: Work in process inventory,
220
beginning
Less: Work in process inventory,
(250)
ending
Cost of Goods Manufacturing
$23,40
0
Problem 4 Culvyhouse Company uses an actual product costing system. It reported the
following amounts for 2003:
Raw materials purchased
Direct materials used
Indirect materials used
Direct labor used
Indirect direct labor used

$72,000
70,000
4,000
66,000
7,000

A. Calculate the cost of goods manufactured.


Cost of direct materials used
Cost of direct labor used
Cost of MOH: $18,000 + $4,000 + $7,000
Total manufacturing costs
Add beginning WIP
Less ending WIP
Cost of goods manufactured
B. Calculate cost of goods sold.
Beginning FG inventory
Add CGM (part A)
Less ending FG inventory

Beginning work-in-process inventory


Ending work-in-process inventory
Selling and administrative expenses incurred
Other manufacturing overhead costs incurred
Beginning finished goods inventory
Ending finished goods inventory

$70,000
66,000
29,000
$165,000
21,000
(16,000)
$170,000
$6,000
170,000
(9,000)

= Cost of goods sold

$167,000

Problem 5 - Listed below are selected changes due to various transactions in the
manufacturing process using an actual costing system. Identify which account is
changed as a result of each action listed in items 1 through 10 below by printing the
code of the account(s) in the space provided. Some changes may have more than one
answer.
Accounts
RM - Raw Materials Inventory
FG - Finished Goods Inventory
WIP - Work-in-Process Inventory
MOH - Manufacturing Overhead
CGS - Cost of Goods Sold
Answers
WIP
WIP
RM
RM
WIP
FG
WIP
WIP
FG
CGS

Changes
1. Increases when manufacturing overhead is incurred
2. Increases when indirect materials are transferred to production
3. Increases when raw materials are purchased on account.
4. Decreases when direct materials are used in production
5. Increases when direct labor costs are incurred
6. Increases when goods are finished.
7. Decreases when goods are finished.
8. Increases when indirect labor costs are incurred
9. Decreases when goods are sold.
10. Increases when goods are sold.

Problem 6 - Norris, Inc. manufactures calculators. Norris uses an actual costing


system. During June, Norriss transactions and accounts included the following:
Work in process inventory, beginning
Work in process inventory, ending
Indirect materials issued from Supplies
Raw materials inventory, beginning
Raw materials inventory, ending
Total manufacturing overhead incurred

$8,800
7,500
3,600
4,600
5,800
49,600

Sales
Direct labor cost (3,100 hours)
Raw materials purchased
Finished goods inventory, beginnin
Finished goods inventory, ending
.

A. How much is the cost of direct materials issued to production during June?
Beginning inventory
$ 4,600
+ Raw material purchases
143,500
= Available
148,100
Less ending raw materials
(5,800)
= Cost of materials used
$142,300
B. Calculate the cost of goods manufactured.
MATERIALS:

Beginning inventory
+ Raw material purchases
=Available
Less ending raw materials
= Cost of materials used
LABOR
OVERHEAD INCURRED
MANUFACTURING COSTS
Add beginning WIP
Less ending work in process
Cost of goods manufactured

4,600
143,500
148,100
(5,800)
$142,300
55,000
49,600
246,900
8,800
(7,500)
$248,200

C. How much is the cost of inventory on the May 31st balance sheet?
Raw
materials
$ 4,600
Work in
process
8,800
Finished
goods
12,300
Total
inventory
at May
31st
$25,700
Problem 7 - Heath Company uses an actual product costing system. The company reported
the following amounts for 2003:
Raw materials purchased
Beginning raw materials
inventory
Ending raw materials inventory
Beginning finished goods
inventory
Ending finished goods inventory

$120,000

Direct labor used


Manufacturing overhead
costs incurred
Selling and administrative expenses

36,000

11,000

Beginning work-in-process inventory

17,000

8,000

Ending work-in-process inventory

16,000

16,000
5,000

A. Calculate the cost of materials used in production.


Beginning raw materials inventory
Raw materials purchased
= Materials available for use
Less ending raw materials inventory
= Materials used in production
B. Calculate the cost of goods manufactured.
Materials used in production (part A)
Direct labor used
Manufacturing overhead costs incurred

$ 16,000
120,000
$136,000
5,000
$131,000
$131,000
44,000
36,000

$44,000

21,000

Total manufacturing costs


Add beginning work in process
Less ending work in process
Cost of goods manufactured

$211,000
17,000
(16,000)
$212,000

Problem 8 - Peters, Inc. manufactures homework machines. It uses an actual costing


system. Peter's keeps a 'Supplies' account for it's indirect materials. During June,
Peters transactions and accounts included the following:
Finished goods inventory, ending
Finished goods inventory, beginning
Indirect materials issued to production
General administrative expenses
Raw materials inventory, ending
Raw materials inventory, beginning

A. How much is cost of goods manufactured?


Beginning raw materials inventory
Raw materials purchased
= Materials available for use
Less ending raw materials inventory
= Materials used in production
Direct labor used
Manufacturing overhead costs incurred
Total manufacturing costs
Add beginning work in process
Less ending work in process
Cost of goods manufactured
B. Calculate the cost of goods sold
Beginning finished goods
Cost of goods manufactured
Less ending finished goods inventory
= Cost of goods sold

$11,600
12,300
3,200
9,400
7,700
5,100

Sales
Direct labor cost
Direct materials purchased
Work in process inventory, ending
Work in process inventory, beginning
Total manufacturing overhead incurred

$5,100
178,000
$183,100
(7,700)
$175,400
72,400
56,100
$303,900
10,500
(12,800)
$301,600
$12,300
301,600
(11.600)
$302,300

C. How much will the company report as product costs on the June 30th balance
sheet?
Raw materials
$11,600
Work in process
12,800
Finished goods
7,700
= Total inventory at 6-30-03
$32,100
Problem 9 - The manufacturing operations of Honcho, Inc. had the following balances
for the month of March:
Inventories
3/1/03
3/31/03
Raw Materials
10,000
12,000

Work in process
6,000
7,000
Finished goods
30,000
22,000
f Honcho transferred $38,000 of completed goods out of work in process during March,
how much was the amount of the cost of goods sold?
Amounts transferred out of work in process are moved into finished goods as 'cost of
goods manufactured'. Beginning finished goods plus cost of goods manufactured less
ending finished goods = cost of goods sold
$30,000 + $38,000 - $22,000 = $46,000
Problem 10 - Saman, Inc. manufactures coasters and uses an actual costing system.
During August, Samans accounts included the following balances and
transactions:
Work in process, beginning
$25,200
Work in process, ending
27,600
Finished goods beginning
7,300
Finished goods, ending
6,800
Administrative expenses
12,000
Direct labor cost incurred
20,400
Materials purchased
78,000
Raw materials, beginning
3,300
Direct materials used
76,400
Manufacturing overhead cost incurred
20,100
Sales
167,000
Marketing expenses
11,000
A. How much is ending raw materials at August 31
Beginning inventory
$ 3,300
+ Material purchases
78,000
- Direct materials used
(76,400)
= Ending raw materials
$4,900
B. How much is cost of goods manufactured?
Direct materials
$76,400
Direct labor
20,400
Manufacturing overhead
20,100
Total manufacturing costs
116,900
Add beginning WIP
25,200
Less ending WIP
(27,600)
Cost of goods manufactured
$114,500
C. How much is cost of goods sold?
Beginning FG inventory
$7,300
Add CGM (part B)
114,500
Less ending FG inventory
(6,800)
= Cost of goods sold
$115,000

Problem 11 Deegan, Inc. manufactures weather machines and uses an actual costing
system. During June, Deegans accounts included the following balances and
transactions:
Raw materials inventory,
beginning
Raw materials inventory, ending
Manufacturing overhead
cost incurred
Marketing expenses
Sales

$ 700

Direct materials purchased

$45,000

4,850
9,500

Direct labor cost incurred


Administrative expenses

11,00
0
98,00
0

Work in process inventory, beginning

7,800

Work in process inventory, ending

6,600

16,400
13,000

A.
A. How much is the cost of direct materials issued to production during June? $40,850
Raw materials inventory, beginning
$ 700
Direct materials purchased
45,000
Goods available
45,700
Less raw materials inventory, ending
(4,850)
Cost of direct materials issued to production
$40,850
B. How much is cost of goods manufactured? $67,950
Direct materials used in production (from part A)
Direct labor cost incurred
Manufacturing overhead cost incurred
Total manufacturing costs
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufactured

$40,850
16,400
9,500
66,750
7,800
(6,600)
$67,950

C. Briefly list any additional information you need to calculate cost of goods sold for
this company. (Be specific.)
Beginning finished goods inventory and ending finished goods inventory
Note that you already have cost of good manufactured from part B, so it should not be
listed here as an additional item needed.
Problem 12 Cost of goods manufactured equals $44,000 for 2006. Finished goods
inventory is $2,000 at the beginning of the year and $5,500 at the end of the year. Total
manufacturing overhead is $4,500. Beginning and ending work in process for 2006 are
$4,000 and $5,000 respectively. How much is cost of goods sold for the year?
Beginning FG + CGM - CGS = ending FG
$2,000 + $44,000 - x = $5,500
CGS = $40,500

Problem 13 Sound Company uses an actual costing system. It reported the following
amounts for May, 2006:
Raw materials purchased
Beginning raw materials inventory
Ending raw materials inventory
Beginning finished goods inventory
Ending finished goods inventory
Direct labor incurred
Selling and administrative expenses
Actual manufacturing overhead costs
Beginning work-in-process inventory
Ending work-in-process inventory
A. Calculate the cost of direct materials used in production.
Beginning raw materials inventory
Raw materials purchased
= Materials available for use
Less ending raw materials inventory
= Materials used in production
B. Calculate the cost of goods manufactured.
Beginning work in process
Raw materials used in production (part A)
Direct labor used
Manufacturing overhead costs
Total manufacturing costs added
Less ending work in process
Cost of goods manufactured

$254,000
12,000
7,900
7,400
8,000
51,000
22,300
36,800
15,100
12,000

$ 12,000
254,000
$266,000
(7,900)
$258,100
$15,100
$258,100
51,000
36,800

C. How much will Sound report as total inventories on its May 31 balance sheet?
Raw materials
$7,900
Work in process
12,000
Finished goods
8,000
Total inventory at May 31
$27,900
Problem 14 - Eng Manufacturing Company developed the following data:
Beginning work in process inventory
$ 10,000
Direct materials used
150,000
Actual manufacturing overhead
85,000
Cost of goods manufactured
295,000
Ending work in process
15,000
How much are total manufacturing costs for the period?
Total manufacturing costs for the period are the costs incurred that are added during
the current period:

$346,100
(12,000)
$349,200

Beginning work in process (given)


Total current manufacturing costs
Less ending work in process (given)
Cost of goods manufactured (given)
Since the beginning and ending WIP amounts and CGM is known, work backwards to
determine how much the total current period manufacturing costs are: $10,000 $15,000 - $295,000 = $300,000. Note that DM, DL, and MOH are added together to
get total current manufacturing costs for the period.

$ 10,000
??
(15,000)
$295,000

Problem 15 - The accounting records of Cinotti Manufacturing Company include the


following information:
Dec. 31,
Dec. 31,
2004
2003
Work in process inventory
$ 15,000
$ 12,000
Finished goods inventory
45,000
51,000
Materials purchased
331,000
Raw materials inventory
?
24,000
Direct materials used
325,000
Manufacturing overhead incurred
132,000
Direct labor
120,000
Selling expenses
70,000
Cinotti uses an actual cost system. Calculate the following:
1.

2.

Raw materials inventory at 12-31-04


Beginning raw materials inventory
Raw materials purchased
= Materials available for use
Less materials used in production
Ending raw materials inventory
Total manufacturing costs added to Work in Process Inventory during 2004
Materials used in production
Direct labor used
Manufacturing overhead costs
Total manufacturing costs added to WIP

3.

4.

$ 24,000
331,000
$355,000
(325,000)
$30,000

Cost of goods manufactured during 2004


Total manufacturing costs added (From part 2)
Add beginning work in process
Less ending work in process
Cost of goods manufactured

$325,000
120,000
132,000
$577,000
$577,000
12,000
(15,000)
$574,000

Total inventories on Cinottis December 31, 2004 balance sheet

Raw materials (from part 1)

$30,000

Work in process
Finished goods
Total inventory at 6-30-03
5.

15,000
45,000
$90,000

Assume CGM is $500,000. How much is cost of goods sold for 2004?
Beginning finished goods
$51,000
Cost of goods manufactured
500,000
Less ending finished goods inventory
(45,000)
Cost of goods sold
$506,000

Problem 16 - Earl, Inc. manufactures baseballs uses a normal costing system and
allocates overhead based on direct labor cost. During June, Earls accounts included
the following balances and transactions:
Manufacturing overhead cost incurred
Marketing expenses
Administrative expenses
Direct labor cost incurred
Cost of materials purchased
Direct materials used in production

$ 33,300
27,000
24,000
32,000
138,600
143,000

Raw materials, beginning


Finished goods beginning
Finished goods, ending
Work in process, beginning
Work in process, ending
Sales

A. How much is ending raw materials at June 30 $7,100


Raw materials inventory, beginning
Direct materials purchased
Goods available
Less cost of direct materials issued to production
Raw materials inventory, ending
B. How much is cost of goods manufactured for June? $210,900
Direct materials used in production
Direct labor cost incurred
Manufacturing overhead cost
Total manufacturing costs
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufactured
C. How much is cost of good sold?
Beginning finished goods
Cost of goods manufactured (part B)
Less ending finished goods inventory
Cost of goods sold

$ 11,500
8,400
9,600
21,500
18,900
285,000

$ 1
13
15
(143
$
$143,000
32,000
33,300
208,300
21,500
(18,900)
$210,900
$8,400
210,900
(9,600)
$209,700

Problem 17 - The manufacturing operations of Darden, Inc. had the following


balances for the month of March:

Inventories
3/1/03
3/31/03
Raw Materials
$10,000
$12,000
Work in process
6,000
7,000
Finished goods
30,000
22,000
If Darden reported cost of goods sold totaling $46,000 in March, how much did
it transfer out of workin process as completed goods?
Amounts transferred out of work in process are moved into finished goods as 'cost of
goods manufactured'. Beginning finished goods plus cost of goods manufactured less
ending finished goods = cost of goods sold
$30,000 + ? - $22,000 = $46,000 so CGM = $38,000
Problem 18 - Alderson Bucket Company incurred the following costs: $100 of plastic,
25 hours at $10 per hour, $50 of indirect materials, $50 of indirect labor, $200 for
advertising, and $75 to ship the buckets to the customers. How much are total product
costs?
$100 + (25 x $10) + $50 + $50 = $450; Advertising and shipping to customers
(delivery costs) are period costs since they do not relate to the production of the
products.
Problem 20 - Top of the Head Comb Company incurred the costs listed below during
May to manufacture combs. The company uses a JIT inventory system.
Plastic resin
$3,500
Factory machine blades (replaced
500
daily)
Cost to ship to customers
600
Production supervisors salary
2,100
Product advertising costs
1,200
Production labor 42 hours at $20 per hour
Calculate total product costs assuming 10,000 combs are produced.
Plastic resin
$3,500
Factory machine blades (replaced daily)
500
Production supervisors salary
2,100
Production labor -42 hours at $20 per hour
840
Total product costs
$6,940
Cost to ship to customers is delivery expense, a product cost. Product advertising
costs are period costs as well. Note that these costs are no part of the cost of getting
the products ready to sell.
How much is the cost per comb?
$6,940/10,000 = $0.694 each
Problem 21 Mitchell, Inc. manufactures calculators and employs an actual costing
system. During March, Mitchells transactions and accounts included the following:

Sales
Raw materials acquired (cash paid)
Raw materials received on account
Direct labor cost incurred
Cost to deliver products to customers
Total manufacturing overhead incurred

$320,000
135,000
30,000
42,000
800
72,000

A. How much is the cost of direct materials transferred to production during June?
Raw materials inventory, beginning
Raw materials purchased ($135,000 + $30,000)
Goods available
Less raw materials inventory, ending
Cost of direct materials issued to production
B. Calculate the cost of goods manufactured.
Direct materials used in production (from part A)
Direct labor cost incurred
Manufacturing overhead cost incurred
Total manufacturing costs
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufactured
Problem 22 - CT, Inc. reported $22,000 in work in process at June 1 and $21,300 at
June 30. Finished goods was $4,500 on June 1 and $5,100 on June 30. Direct material
used in June totaled $88,000. CT incurred $46,000 for Junes manufacturing overhead.
Cost of goods manufactured totaled $199,000. How much are total manufacturing
costs for June?
WIP
Beginnin
g
22,000
199,000
Mfg.
costs
Ending

CGM

X
21,300

Beginning WIP + Total manufacturing costs - CGM = Ending WIP


$22,000 + X - $199,000 = $21,300; so Total Mfg. Costs = $198,300
Problem 23 - Zimmerman, Inc. manufactures calculators and employs an actual
costing system. During June, Zimmermans transactions and accounts included the
following:
Raw materials acquired (cash paid)
$117,000

Raw
Raw
Finis
Finis
Work
Work

6
165
171
(5,8
$165

$165,
42,
72,
279,
18,
(19,7
$278,

Raw materials received on account


Direct labor cost incurred
Total manufacturing overhead incurred

12,000
52,000
72,800

Raw materials inventory, beginning


Raw materials inventory, ending
Finished goods inventory, beginning
Finished goods inventory, ending
Work in process inventory, beginning
Work in process inventory, ending

$6,500
5,800
11,200
12,400
26,000
22,000

A. How much is the cost of direct materials transferred to production during June?
Raw materials inventory, beginning
$ 6,500
Direct materials purchased ($117K + $12K)
129,000
Less Raw materials inventory, ending
(5,800)
Cost of direct materials issued to production
$129,700
B. Calculate the cost of goods manufactured.
Materials issued to production (part A)
Direct labor cost incurred
Manufacturing overhead cost
Total manufacturing costs
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufacturing

$129,700
52,000
72,800
254,500
26,000
(22,000)
$258,500

Problem 25 -The following information has been collected from Green Companys
accounting records for the month of April:
Direct materials added to Work in Process Inventory
Indirect materials added to Manufacturing Overhead
Direct labor added to Work in Process Inventory
Indirect labor added to Manufacturing Overhead
Manufacturing overhead added to Work in Process Inventory
Depreciation Expense included in Manufacturing Overhead
Beginning work in process inventory
Cost of goods manufactured

$ 160,000
40,000
150,000
65,000
100,000
50,000
22,000
415,000

How much is the balance of Work in Process inventory if Green uses a normal costing
method?
Direct materials added to Work in Process Inventory
$ 160,000
Direct labor added to Work in Process Inventory
150,000
Manufacturing overhead added to Work in Process Inventory
100,000
Total manufacturing costs added
$410,000
Add beginning work in process
22,000
Less CGM
(415,000
Ending work in process
$17,000

Problem 26 Hernandez, Inc. manufactures calculators. The company employs


a normal costing system. Any amount of over or underapplied overhead is
immaterial. During May, Hernandezs transactions included the following:
Direct labor cost incurred
Total manufacturing overhead cost applied
Total manufacturing overhead cost incurred
Direct materials purchased
Indirect materials issued to production
Raw materials inventory, beginning
Raw materials inventory, ending
Sales
Selling expenses
Work in process inventory, beginning
Work in process inventory, ending
A. How much is the cost of direct materials issued to production during May?
Raw materials inventory, beginning
Direct materials purchased
Indirect materials issued
Less Raw materials inventory, ending
Cost of direct materials issued to production
B. How much is cost of goods manufactured for May?
Materials issued to production
Direct labor cost incurred
Manufacturing overhead cost applied
Total manufacturing costs
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufacturing

$5,400
6,650
6,300
11,500
1,100
160
280
23,000
2,100
220
250
$ 160
11,500
(1,100)
(280)
$10,280
$10,280
5,400
6,650
21,330
220
(250)
$22,300

Note: Indirect materials issued to production are considered manufacturing overhead


costs and as such, are already included in the total manufacturing overhead cost
amount given.
Problem 27 Culvyhouse Company uses a normal product costing system. Any
amount of over or underapplied overhead is immaterial. It reported the following
amounts for 2003:
Raw materials purchased
Direct materials used
Indirect materials used
Direct labor used
Indirect direct labor used
Manufacturing overhead applied

$72,000
70,000
4,000
66,000
7,000
29,000

Beginning work-in-process inventory


Ending work-in-process inventory
Selling and administrative expenses incurred
Other manufacturing overhead costs incurred
Beginning finished goods inventory
Ending finished goods inventory

$21,00
16,000
23,000
17,000
6,000
9,000

A. Calculate the cost of goods manufactured.


Cost of direct materials used
$70,000
Cost of direct labor used
66,000
Cost of MOH applied
29,000
Manufacturing costs
$165,000
Add beginning WIP
21,000
Less ending WIP
(16,000)
Cost of goods manufactured
$170,000
B. Calculate cost of goods sold. Ignore any over or underapplied overhead.
Beginning FG inventory
$6,000
Add CGM (part A)
170,000
Less ending FG inventory
(9,000)
= Cost of goods sold
$167,00
0
Problem 28 - Listed below are selected changes due to various transactions in the
manufacturing process using a normal costing system. Identify which account is
changed as a result of each action listed in items 1 through 10 below by printing the
code of the account(s) in the space provided. Some changes may have more than one
answer.
Accounts
RM - Raw Materials Inventory
FG - Finished Goods Inventory
WIP - Work-in-Process Inventory
MOH - Manufacturing Overhead
CGS - Cost of Goods Sold
Answers
MOH
MOH
RM
RM
WIP
FG
WIP
MOH
FG
CGS
WIP
MOH

Changes
1. Increases when manufacturing overhead is incurred
2. Increases when indirect materials are transferred to production
3. Increases when raw materials are purchased on account.
4. Decreases when direct materials are used in production
5. Increases when direct labor costs are incurred
6. Increases when goods are finished.
7. Decreases when goods are finished.
8. Increases when indirect labor costs are incurred
9. Decreases when goods are sold.
10. Increases when goods are sold.
11. Increases when manufacturing overhead is applied
12. Decreases when manufacturing overhead is applied

Problem 29 - Norris, Inc. manufactures calculators. Norris uses a normal costing


system. Any amount of over or underapplied overhead is immaterial. During June,
Norriss transactions and accounts included the following:
Work in process inventory, beginning
Work in process inventory, ending
Indirect materials issued to production
Raw materials inventory, beginning
Raw materials inventory, ending
Total manufacturing overhead applied

$8,800
7,500
3,600
4,600
5,800
49,600

Sales
Direct labor cost (3,100 hours)
Raw materials purchased
Finished goods inventory, beginning
Finished goods inventory, ending
Total manufacturing overhead incurred

A. How much is the cost of direct materials issued to production during June?
Beginning inventory
+ Raw material purchases
- Indirect materials issued
= Available
Less ending raw materials
= Cost of materials used
B. Calculate the cost of goods manufactured.
MATERIALS:
Beginning inventory
+ Raw material purchases
- Indirect materials issued
=Available
Less ending raw materials
= Cost of materials used
LABOR
OVERHEAD APPLIED
MANUFACTURING COSTS
Add beginning WIP
Less ending work in process
Cost of goods manufactured

4,600
143,500
(3,600)
144,500
(5,800)
$138,700

4,600
143,500
(3,600)
144,500
(5,800)
$138,700
55,000
49,600
243,300
8,800
(7,500)
$244,600

C. How much is the cost of inventory on the May 31st balance sheet?
Raw materials
$ 4,600
Work in process
8,800
Finished goods
12,300
Total inventory at May 31st
$25,700
Problem 30 - Heath Company uses a normal product costing system. Any amount of
over or underapplied overhead is immaterial. The company applies manufacturing
overhead based on 80% of direct labor cost. The company reported the following
amounts for 2003:
Raw materials purchased
Beginning raw materials

$120,000
16,000

Direct labor used


Manufacturing overhead

$44,000
36,000

inventory
Ending raw materials inventory
Beginning finished goods
inventory
Ending finished goods inventory

costs incurred
Selling and administrative expenses

21,000

11,000

Beginning work-in-process inventory

17,000

8,000

Ending work-in-process inventory

16,000

5,000

A. Calculate the cost of materials used in production.


Beginning raw materials inventory
Raw materials purchased
= Materials available for use
Less ending raw materials inventory
= Materials used in production

$ 16,000
120,000
$136,000
5,000
$131,000

B. Calculate the cost of goods manufactured.


Materials used in production (part A)
Direct labor used
Manufacturing overhead costs applied (80%*44,000)
Total manufacturing costs
Add beginning work in process
Less ending work in process
Cost of goods manufactured

$131,000
44,000
35,200
$210,200
17,000
(16,000)
$211,200

Problem 31 - Peters, Inc. manufactures homework machines. It uses a normal costing


system. Any amount of over or underapplied overhead is immaterial. Actual
manufacturing overhead for the year is $55,500. Overhead is applied based on direct
labor cost. During June, Peters transactions and accounts included the following:
Finished goods inventory, ending
Finished goods inventory, beginning
Indirect materials issued to
production
General administrative expenses
Raw materials inventory, ending
Raw materials inventory, beginning

$11,600
12,300
3,200
9,400
4,500
5,100

Sales
Direct labor cost
Direct materials purchased

$324,000
72,400
178,000

Work in process inventory, ending


Work in process inventory,
beginning
Total manufacturing
overhead applied

A. How much is cost of goods manufactured?


Beginning raw materials inventory
Raw materials purchased
= Materials available for use
Less indirect materials used
Less ending raw materials inventory
= Materials used in production
Direct labor used
Manufacturing overhead costs applied
Total manufacturing costs
Add beginning work in process

12,800
10,500
56,100

$5,100
178,000
$183,100
(3,200)
(4,500)
$175,400
72,400
56,100
$303,900
10,500

Less ending work in process


Cost of goods manufactured
B. Calculate the cost of goods sold after adjustment for over/underapplied overhead.
Beginning finished goods
Cost of goods manufactured
Less ending finished goods inventory
= Cost of goods sold
Overapplied overhead ($55,500-$56,100)
Adjusted cost of goods sold
C. How much is total inventory on the June 30th balance sheet?
Raw materials
$11,600
Work in process
12,800
Finished goods
4,500
= Total inventory at 6-30-03
$28,900
Problem 32 - The manufacturing operations of Honcho, Inc. had the following
balances for the month of March:
Inventories
3/1/03
3/31/03
Raw Materials
$10,000
$12,000
Work in process
6,000
7,000
Finished goods
30,000
22,000
If Honcho transferred $38,000 of completed goods out of work in process during
March, what was the amount of the cost of goods sold?
Amounts transferred out of work in process are moved into finished goods as 'cost of
goods manufactured'. Beginning finished goods plus cost of goods manufactured less
ending finished goods = cost of goods sold
$30,000 + $38,000 - $22,000 = $46,000
Problem 33 - Under Company estimates the following overhead costs for 2003:
Equipment depreciation
$ 30,000
Equipment maintenance
64,000
Factory management salaries
150,000
Factory rent
50,000
Total manufacturing overhead
$294,000
Under Company incurred the following costs for 2003 for job 23:
Direct material
$80,000
Direct labor
60,000
Other jobs incurred $320,000 of direct labor. Under Company is also budgeting
$350,000 in direct labor costs and 20,000 machine hours for 2003. Actual
manufacturing overhead for 2003 was $300,000.

(12,800)
$301,600
$12,300
301,600
(11.600)
$302,300
(600)
$301,700

A. Calculate the predetermined overhead rate using direct labor costs as the allocation
base.
$294,000/$350,000 = $ 0.84 per direct labor dollar
B. Which of the allocation bases is preferred? Why?
Since most of the overhead costs are related to equipment, machine hours is
the preferred allocation base.
C. How much overhead will Under apply to job 23?
$0.84 x $60,000 = $50,400
D. What is the total cost of job 23?
$50,400 + $80,000 + $60,000 = $190.400
Problem 34 - Stranahan Company allocates overhead based on machine hours.
Estimated overhead costs for the year total $217,000 and the company estimates that
it will use 31,000 machine hours during the year. Actual overhead for the year was
$220,000 and the company used 30,000 machine hours. If Job 45 requires 1,000
machine hours, how much overhead will be allocated to Job 45?
$217,000/31,000 machine hours = $7.00 per machine hour
$7.00 per machine hour * 1,000 machine hours = $7,000
Problem 35 - Fane Company estimates that its employees will work 80,000 direct
labor hours during the coming year. Total overhead costs for the year are estimated to
be $1,000,000 and the direct labor costs are expected to be $1,300,000. Actual
overhead for the year was $980,000 and the company used 82,000 direct labor
hours. If the company allocates overhead based on direct labor hours, what is the
predetermined overhead rate?
$1,000,000/80,000 = $12.50 per direct labor hour
Problem 36 -Hernandez, Inc. manufactures calculators. The company uses a normal
costing system. The company allocates overhead at $25 per direct labor hour. Over or
underapplied overhead is not material. During May, Hernandezs transactions included
the following:
Direct labor cost incurred @ $20 an hour
Manufacturing overhead cost incurred
Direct materials purchased
Indirect materials issued to production
Manufacturing overhead cost applied
Raw materials inventory, beginning
Raw materials inventory, ending
Sales
Selling expenses
Work in process inventory, beginning
Work in process inventory, ending

$5,400
6,800
11,500
1,100
6,650
160
280
23,000
2,100
220
250

A. Briefly list any additional information you need to calculate cost of goods sold for
this company. (Be specific.)
Beginning finished goods inventory and ending finished goods inventory (You have
enough information to calculate cost of goods manufactured so you don't need that
amount.)
B. How much is the cost of direct materials issued to production during May?
Raw materials inventory, beginning
Direct materials purchased
Indirect materials issued
Less Raw materials inventory, ending
Cost of direct materials issued to production
C. How much overhead would be applied during May?
Direct labor cost/Cost per hour = number of direct labor hours incurred
$5,400/$20 = 270 hours
Applied = 270 hours x $25 = $6,750

$ 160
11,500
(1,100)
(280)
$10,280

D. How much is over or underapplied overhead for May?


$6,750 - $6,800 = $50 underapplied
Problem 37 - At the end of the year, Deary Company had the following balances in
selected accounts related to its job cost system:
Raw Materials Inventory
Finished Goods

$ 40,00
0
60,000

Work in Process Inventory


Cost of Goods Sold

$100,00
0
800,000

Information concerning manufacturing overhead and labor for the year follows:
Actual manufacturing overhead
Estimated manufacturing
overhead
Actual direct labor cost per hour

$290,000
$300,000
$17

Direct labor hours incurred


Direct labor hours
estimated
MOH applied based on

15,600
15,000
Direct labor
hours

A. Calculate the predetermined manufacturing overhead rate.


Estimated MOH/ Est. DL hours =
$300,000/15,000 =
$20 per DL hour
Note: This is the number we use to apply MOH to jobs as we are working on them.in
this case, for each direct labor hour our people work, we add $20 for MOH costs.
B.
How much overhead did Deary apply to jobs during the year?
Must be applied based on the estimated cost per DL hour calculated in part A since we
dont know how much the actual cost will be until the end of the period.
$20 x 15,600 hours =
$312,000
C. How much is CGS after Deary properly allocates any under or over-applied
manufacturing overhead?

Step 1: Determine how much is over or underapplied:


Actual amount in the MOH expense account
Applied (from part B)
(this is how much we took out of the MOH expense account)
Overapplied (a negative balance left in the MOH expense account)
[NOTE: This amount cannot stay therewe must take it out and move it all to CGS.
CGS = $800,000 - $22,000 = $778,000

Problem 38 - Saman, Inc. manufactures coasters and allocates overhead based on


direct labor cost. Saman uses a normal cost system. During August, Samans accounts
included the following balances and transactions:
Work in process, beginning
Work in process, ending
Finished goods beginning
Finished goods, ending
Administrative expenses
Direct labor cost incurred
Materials purchased
Raw materials, beginning
Direct materials used
Manufacturing overhead cost applied
Indirect materials issued to production
Sales
Marketing expenses
Manufacturing overhead cost incurred
A. How much is ending raw materials at August 31
Beginning inventory
+ Material purchases
- Indirect materials issued
- Direct materials used
= Ending raw materials
B. How much is cost of goods manufactured?
Direct materials
Direct labor
Manufacturing overhead
Total manufacturing costs
Add beginning WIP
Less ending WIP
Cost of goods manufactured

$25,
27,
7,
6,
12,
20,
78,
3,
76,
20,
2,
167,
11,
21,,
$

3,300
78,000
(2,200)
(76,400)
$2,700

$76,400
20,400
20,100
116,900
25,200
(27,600)
$114,500

C. How much is cost of goods sold? (Be sure to consider the under or overapplied
overhead.)
Beginning FG inventory
$7,300
Add CGM (part B)
114,500
Less ending FG inventory
(6,800)
= Cost of goods sold
$115,000
Underappplied($21,000-$20,100)
900
Adjusted cost of goods sold
$115.900
Problem 39 - Hager Inc. applies overhead based on direct labor cost using a normal
cost system. The company estimated the following annual amounts:
Estimated manufacturing overhead
$42,000
Estimated direct labor
1,600 hours at $15 per hour
Actual amounts for the year were:
Actual manufacturing overhead
$44,000
Actual direct labor
1,550 hours at $16 per hour
A. How much is the predetermined overhead rate?
Estimated manufacturing overhead/Estimated direct labor cost =
$42,000/(1,600*$15) = $1.75 per direct labor dollar
B. How much overhead was applied during the year?
Overhead rate x DL$ incurred =
$1.75 x [1,550*$16] = $43,400
C. Determine the amount of over or underapplied overhead.
Applied - Actual = $43,400 - $44,000 = $600 underapplied
Problem 40 - Jiffy Fabricators applies overhead based on direct labor cost. The
company provided the following annual amounts:
Estimated direct labor
2,000 hours at $12.50 per hour
Actual direct labor
1,900 hours at $13 per hour
Estimated manufacturing overhead
$30,000
Actual manufacturing overhead
$31,000
A. How much overhead was applied during the year? $29,640
Overhead application rate = Estimated MOH cost/Estimated DL$
= $30,000/[2,000*$12.50] = $1.20 per DL$
Overhead applied = $1.20 x [1,900*$13] = $29,640
B. Determine the amount of over or underapplied overhead. $1,360 Under applied
Applied MOH Actual MOH = $29,640 $31,000 = $1,360 underapplied
Remember me saying that some of you would forget that 'estimated MOH' does not
appear anywhere in the accounting records?

Problem 41 - Deegan, Inc. manufactures bliggles and allocates overhead based on


direct labor cost. During June, Deegans accounts included the following balances and
transactions:
Raw materials inventory, beginning
Raw materials inventory, ending
Manufacturing overhead cost applied
Marketing expenses
Manufacturing overhead cost incurred
Sales

$ 700
850
9,500
11,000
9,000
98,000

Direct materials purchased


Direct labor cost incurred
Indirect materials issued to production
Work in process inventory, beginning
Work in process inventory, ending
Administrative expenses

Under and overapplied overhead are considered immaterial.


A. How much is the cost of direct materials issued to production during June? $40,850
Raw materials inventory, beginning
Direct materials purchased
Goods available
Less raw materials inventory, ending
Less indirect materials to production
Cost of direct materials issued to production

$ 700
45,000
45,700
(850)
(4,000)
$40,850

B. How much is cost of goods manufactured? $67,950


Direct materials used in production (from part A)
Direct labor cost incurred
Manufacturing overhead cost applied
Total manufacturing costs
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufactured

$40,850
16,400
9,500
66,750
7,800
(6,600)
$67,950

Note: Indirect materials issued to production are considered manufacturing overhead


costs and as such, are already included in actual manufacturing overhead.
Problem 42 - The accounting records of Cinotti Manufacturing Company include the
following information:
Work in process inventory
Finished goods inventory
Materials purchased
Raw materials inventory
Direct materials used
Manufacturing overhead incurred
Direct labor
Selling expenses

Dec. 31, 2004

Dec. 31, 2003

$ 15,000
45,000
331,000
?
325,000
124,000
120,000
70,000

$ 12,000
51,000
24,000

Manufacturing overhead is applied at a rate of 110% of direct labor cost. Calculate the
following:

1.

2.

Raw materials inventory at 12-31-04


Beginning raw materials inventory
Raw materials purchased
= Materials available for use
Less materials used in production
Less ending raw materials inventory

$ 24,000
331,000
$355,000
(325,000)
$30,000

Total manufacturing costs added to Work in Process Inventory during 2004


Materials used in production
Direct labor used
Manufacturing overhead costs applied (110%*$120,000
Total manufacturing costs added to WIP

3.

4.

5.

$325,000
120,000
132,000
$577,000

Cost of goods manufactured during 2004


Total manufacturing costs added (From part 2)
Add beginning work in process
Less ending work in process
Cost of goods manufactured

$577,000
12,000
(15,000)
$574,000

Total inventories on Cinottis December 31, 2004 balance sheet


Raw materials (from part 1)
Work in process
Finished goods
Total inventory

$30,000
15,000
45,000
$90,000

Assume CGM is $500,000. How much is cost of goods sold for 2004?
Beginning finished goods
Cost of goods manufactured
Less ending finished goods inventory
Cost of goods sold

$51,000
500,000
(45,000)
$506,000

Problem 43 - Earl, Inc. manufactures baseballs and allocates overhead based on


direct labor cost. During June, Earls accounts included the following balances and
transactions:
Manufacturing overhead cost applied
Indirect materials issued to production
Administrative expenses
Direct labor cost incurred
Cost of materials purchased
Direct materials used in production
Manufacturing overhead cost incurred

$33,30
0
1,400
24,000
32,000
140,00
0
143,00
0
35,000

Raw materials, beginning


Finished goods beginning
Finished goods, ending
Work in process, beginning
Work in process, ending

$
11,500
8,400
9,600
21,500
18,900

Marketing expenses

27,000

Sales

285,00

Under and overapplied overhead are considered immaterial. Ignore over/ underapplied
elimination in parts B and C.
A. How much is ending raw materials at June 30
Raw materials inventory, beginning
Direct materials purchased
Goods available
Less cost of direct materials issued to production
Less indirect materials to production
Raw materials inventory, ending
B. How much is cost of goods manufactured for June?
Direct materials used in production
Direct labor cost incurred
Manufacturing overhead cost applied
Total manufacturing costs
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufactured
C. How much is cost of good sold?
Beginning finished goods
Cost of goods manufactured (part B)
Less ending finished goods inventory
Cost of goods sold
D. Is this company using an actual or normal costing system?
Normal costing
Problem 44 - Walker Company applies manufacturing overhead based on direct labor
hours. Information concerning manufacturing overhead and labor for May of 2005 as
follows:
Actual manufacturing overhead
$163,800
Estimated manufacturing overhead
$158,600
Direct labor incurred
2,500 hours @ $22 = $55,000
Direct labor estimated
2,600 hours @ $21 = $54,600
A. How much is the manufacturing overhead rate?
Estimated manufacturing overhead/estimated direct labor hours =
$158,600 / 2,600 hours = $61.00 per DL hour
B. How much overhead did Walker apply during the year?
Overhead rate times actual DL hours =
$61 x 2,500 = $152,500

C. How much is over or underapplied overhead at May 31?


Actual overhead - applied overhead =
$163,800 - $152,500 = $11,300 underapplied
Problem 45 - Harmon Company began jobs 35, 36, 37, and 38 during July. At the
beginning of July, jobs 31, 33, and 34 were in production, while jobs 30 and 32 were
completed and waiting to be shipped to customers. Jobs 31, 33, 34, 36, and 37 were
completed during July. Jobs 30, 31, 32, 34, and 36 were shipped to customers during
July.
Which jobs were completed and transferred out during July? 31, 33, 34, 36, 37
Which jobs are in work in process at July 31? 35 and 38
Which jobs are in finished goods at July 31? 33 and 37
Calculations:
WIP beginning = 31, 33, 34
Jobs added = 35, 36, 37, 38
Jobs worked on = 31, 33, 34, 35, 36, 37, 38
Less jobs completed and transferred out = 31, 33, 34, 36, 37
Ending jobs remaining in WIP = 35 and 38
Ending jobs remaining in FG = 33 and 37
Problem 46 - The underapplied balance of the Manufacturing Overhead account is
$30,000. The amount is considered material. The ending balances of Raw materials,
Work in Process, Finished Goods, and Cost of Goods Sold are $10,000, $25,000,
$50,000, and $425,000, respectively. What amount of the underapplied balance should
be allocated to Cost of Goods Sold?
Since the amount is considered material, the underapplied amount must be allocated
to the three accounts with overhead in them: Work in Process, Finished Goods, and
Cost of Goods Sold, based on their balances:
Work in Process
$25,000
Finished Goods
50,000
Cost of Goods Sold
425,000
Total
$500,000
Allocated to CGS: $425,000/$500,000 x $30,000 = $25,500
Problem 47 - Hoart Company applies overhead based on direct labor hours and
calculated an overhead rate of $2. Job 55 used $500 of direct materials, 100 machine
hours, $750 of direct labor. The labor rate per hour is $15. How much is the cost of job
55?
Number of hours = $750/$15 = 50 DL hours
DM + DL + MOH = $500 + $750 + 50*$2 = $1,350
Problem 24 Gottberg Company bases its predetermined overhead rates on machinehours. At the beginning of the year, the company estimated its manufacturing overhead

for the year would be $56,000 and there would be a total of 40,000 machine-hours.
Actual manufacturing overhead for year amounted to $58,000 and the actual machinehours totaled 44,800. How much manufacturing overhead was applied for the year?
Applied at the rate of: $56,000/40,000 = $1.40 per machine hour;
$1.40 x 44,800 MH = $62,720; Actual amounts cannot be used to determine the rate
because they are not known until the end of the year.
Problem 48 - Moss Company applies manufacturing overhead based on direct labor
hours. It provided the following information from its accounting records for 2003:
Expected
30,000 labor hours
production
Actual production
28,000 labor hours
Budgeted overhead
$1,500,000
Actual overhead
$1,450,000
Jobs 102 & 103 are completed during the period.
A. What is the overhead application rate?
$1,500,000/30,000 = $50 per hour
B. How much overhead will be applied to job 103 if its total labor cost was $4,320 and
labor is $18 per hour?
Number of labor hours = $4,320/$18 = 240 hours
Overhead applied = 240 hours*$50 = $12,000
Problem 49- Sat Companys factory overhead account showed a $8,000 underapplied
overhead balance on December 31. Other accounts showed the following balances at
year end:
Raw materials
$100,000
Work in Process
40,000
Finished Goods
60,000
Cost of Goods Sold
700,000
Which will be the balances of each account listed below after disposing the $8,000?
Cost of Goods Sold
$700,000 + $8,000 = $708,000
Work in Process
$40,000 no change
Finished Goods
$60,000 no change
Work in Process
$40,000 no change

Underapplied overhead is moved to cost of goods sold since most of the overhead
cost would likely be in that account by year end.
Problem 50 - Benny Company allocates overhead at $4 per direct labor dollar. Job 52
required 6 cases of direct materials at a cost of $6 per case and took employees of 5
hours to complete. Employees earn $10 per hour. How much is the total cost of Job
52?
DM = 6 x $6 = $36
DL = $10 x 5 hrs. = $50
MOH = $4 x $50 = $200
Total cost = $286
Problem 51 - Clinton's Furniture Company estimates its annual factory overhead to be
$47,000. The company assigns factory overhead using the number of pieces
produced. Clinton budgets annual production at 70,000 pieces of glassware. At yearend, you find out Clinton incurred $52,000 of factory overhead for the year. Suppose
the company produced 75,000 pieces in 2002.
A. What is the total amount of factory overhead applied to production for the year?
($47,000/70,000) x 75,000 = $50,357
B. How much is factory overhead under- or over-applied?
Answer: $50,357 - $52,000 = $1,643 underapplied
Problem 52 - Actual manufacturing overhead costs $120,000; estimated
manufacturing overhead costs $100,000; actual machine hours 25,000; and estimated
machine hours 20,000. The only cost driver is machine hours.
A. Using job order costing, how much is the 2002 predetermined overhead application
rate?
$100,000/20,000 = $5.00 per hour
B. How much is the amount of manufacturing overhead allocated to jobs during 2003?
$100,000/20,000 = $5.00/machine hour; $5.00 x 25,000 = $125,000
Problem 53 - Dougan, Inc. allocates overhead based on a predetermined overhead
rate of $16.00 per direct labor hour. Employees are paid $12.00 per hour. Job 24
requires 4 pounds of direct material at a cost of $30.00 per pound. It is estimated it will
take employees a total of 20 hours to complete the job. Actual manufacturing overhead
costs totaled $80,000 for the year for the company. How much is the cost of Job 24?
Direct materials (4 x $30)
$120
Direct labor ($12 x 20)
240
Manufacturing overhead ($16 x 20)
320
Total job cost
$680

Problem 54 - Duckworth Company uses a predetermined overhead rate based on


direct labor hours to apply manufacturing overhead to jobs. At the beginning of the
year, the company estimated manufacturing overhead would be $100,000 and direct
labor hours would be 10,000. The actual figures for the year were $110,000 for
manufacturing overhead and 10,500 direct labor hours. How much is over or
underapplied overhead for the year?
Actual manufacturing overhead
$110,000
Applied overhead:
Rate x DL hours incurred =
[$100,000/10,000] x 10,500 =
105,000
Underapplied overhead
$5,000
Problem 55 - Carr Company has the following estimated costs for next year:
Direct materials
Direct labor
Factory operating costs

$ 30,00
0
110,000
144,000

Salary of production supervisor


Indirect materials
Advertising expense

$70,00
0
10,000
32,000

Carr applies manufacturing overhead on the basis of machine hours. Carr estimates
that 20,000 direct labor and 32,000 machine hours will be worked during the
year. Actual direct labor and machine hours for the year were 19,600 and 33,000,
respectively. Actual overhead was $226,000 for the year. How much overhead is over
or underapplied at year end?
Overhead rate = Estimated Overhead/Estimated Activity
= [$144,000 + $70,000 + $10,000]/32,000 = $7.00 per machine hour
Applied = $7.00 x 33,000 machine hours = $231,000
Overapplied overhead = Actual overhead - applied overhead = $226,000 - $231,000 =
$5,000
Problem 56 - Martin Company applies manufacturing overhead based on direct labor
hours. Information concerning manufacturing overhead and labor for the year follows:
Actual manufacturing overhead
Estimated manufacturing
overhead

$150,00
0
$140,00
0

Direct labor hours incurred

4,800

Direct labor hours


estimated

5,000

How should the manufacturing overhead allocation rate be calculated?


$140,000 5,000 = $28
Problem 57 - The following amounts were reported by Winkler Company before
adjusting its overapplied manufacturing overhead of $20,000.
Raw Materials
Inventory
Finished Goods

$40,00
0

Work in Process
Inventory
Cost of Goods Sold

$100,00
0
840,000

60,000

How much will Winkler report as cost of goods sold after it disposes of its overapplied
overhead?

Since overhead is overapplied, too much was added to the product accounts. To
remove overapplied, you must subtract. Since the amount is immaterial, the entire
amount is removed from cost of goods sold: $840,000 - $20,000 = $820,000.
Problem 58 - On Monday, Janu Flowers purchases roses costing $8,000. On Tuesday,
Janu uses $5,000 of the flowers to begin preparing for Friday evening's Lovers Dance.
On Wednesday, Janu paid $1,500 of labor for its employees for working on the job.
Overhead is applied at 80% of direct labor cost. What is the ending account balance of
Finished Goods after these transactions when the job is complete?
Materials = $5,000 + Labor $1,500 + Mfg. overhead ($1,500*80%) $1,200 = $7,700
Problem 59 - During 2003 Lawson Manufacturing expected to produce 100,000 units
with $300,000 of overhead, $500,000 of material, and $200,000 in labor. Actual
production was 110,000 units with an overhead cost of $280,000, $550,000 in
materials used; and $220,000 in labor. All of the goods were completed and transferred
to Finished Goods.
A. What amount was transferred to Finished Goods?
Overhead is applied based on the estimates of overhead and activity:
$300,000/100,000 = $3 per unit produced;
As activity occurs (i.e., units are produced) the company applies overhead. In this
case, the company adds $3 to WIP each time one unit is produced. Total applied:
110,000 units x $3 = $330,000 applied. Total cost transferred: DM + DL + OH applied =
$550,000 + $220,000 + $330,000 = $1,100,000
B. How much is the amount of over/under applied overhead?
Applied = $330,000 less actual $280,000 = $50,000 overapplied
Problem 60 - Hernandez, Inc. pays its employees $12 per hour. It allocates overhead
at $3 per direct labor hour. Job R45 required 5 pounds of direct materials at a cost of
$5 per pound and took employees of 2 hours to complete. How much is the total cost
of Job R45?
DM + DL + MOH = total cost
[5 x $5] + [2 x $12] + [2 x $3] = $55
Problem 61 - Builder Bob Company allocates overhead at $9 per direct labor hour.
Job A45 required 5 boxes of direct materials at a cost of $30 per box and took
employees 12 hours to complete. Employees earn $15 per hour. How much is the total
cost of Job A45?
DM + DL + MOH = (5 x $30) + ($15 x 12) + ($9 x 12) = $438

Problem 62 - Holl Company incurred direct materials costs of $30,000 during the
year. Manufacturing overhead applied was $28,000 and is applied based on direct
labor costs. The predetermined overhead rate is 70%. How much are Holl Companys
total manufacturing costs for the year?
$28,000 = .70(DL); so DL = $40,000;
DM + DL + MOH = total manufacturing costs for the year
$30,000 + $40,000 + $28,000 = $98,000
Problem 63 - Bell Manufacturing assigns overhead based on direct labor dollars. The
company incurred the following for Job B22: $2,500 for direct materials and 20 hours
of direct labor. Employees are paid $11 per hour. The following estimates were made
by the company at the beginning of the year for 2004 operations:
Expected annual direct labor hours
10,000
Expected annual direct labor cost
$250,000
Expected manufacturing overhead costs
$300,000
How much is overhead applied to job B22?
Rate = $300,000/$250,000 = $1.20 per DL dollar;
Overhead applied at $1.20 for each dollar of labor incurred on the job: $1.20 x [$11 x
20] = $264
Problem 64 - Zing Manufacturing assigns overhead based on direct labor dollars. The
company incurred the following for job A24: $200 for direct materials and 30 hours of
direct labor. Employees are paid $12 per hour. The predetermined overhead rate was
calculated at $1.10 based on direct labor dollars. Estimated manufacturing overhead
for the year was $38,000. The company expected to complete 100 jobs during the
year. How much is the total cost of job A24?
Direct materials
$200
Direct labor [30 hours x $12]
360
MOH [$1.10 x $360 of labor]
396
Total job cost
$956
Problem 65 - McCargo Repair has the job 26 ($4,000) in beginning work in process,
and job 25 ($3,000) in beginning finished goods. Additional job costs incurred during
the year were: Job 27 $5,000, Job 28 $4,500, and Job 29 $5,500. Jobs 26, 27 and 29
are completed. Jobs 25, 26 and 29 are sold. What is the cost of ending finished
goods?
Only job 27; Cost = $5,000
Jobs 26, 27, and 29 were transferred from WIP into FG to join job 25 during the year.
Jobs (25, 26, and 29) were moved out to CGS when sold. This leaves only job 27 in
FG.

Problem 66 - McLeod Companys factory overhead account showed a $4,000


overapplied balance on December 31. Other accounts showed the following balances
at year end:
Raw materials
$25,000
Work in Process
20,000
Finished Goods
30,000
Cost of Goods Sold
450,000
Determine the balances of the accounts listed below after disposing the $4,000.
A.
B.
C.
D.

Cost of Goods Sold = $450,000 - $4,000 = $446,000


Work in Process = $20,000 Finished Goods = $30,000
Raw Materials = $25,000

Problem 67 - Timber Company uses a predetermined overhead rate of $7.00 per


machine hour. If estimated overhead costs were $350,000, overhead costs incurred
were $360,000, estimated machine hours were 50,000, and machine hours worked
were 51,000 this year, how much is applied overhead?
Overhead is applied based on the actual activity. The activity for the $7 rate is
'machine hour.' Every time one machine hour is incurred, $7 is added as MOH to WIP.
The rate was calculated by taking total estimated MOH costs divided by estimated
machine hours:
$350,000/50,000 = $7. Applied = $7 x 51,000 = $357,000
Problem 68 - Fibbe Company estimated it would incur $65,000 of manufacturing
overhead during 2004. An analysis indicates that overhead applied totaled $68,000.
The actual manufacturing overhead cost during the year was $66,000. How much is
over or under applied overhead?
Actual manufacturing overhead costs increase the MOH expense account. Applied
MOH costs decrease it. The difference is over or under applied. Note that the
estimated MOH amount does not get recorded into the accounting records.
($66,000
Actual MOH costs
)
Applied MOH
68,000
Overapplied overhead
$2,000
Problem 69 - Calky, Inc. completed Job No. G23 during 2004. The job cost sheet
listed the following:
Direct materials
$15,000
Direct labor
$5,000
Manufacturing overhead
$10,000
Units produced
1,000 units
Units sold
800 units

How much is the cost of the finished goods on hand from this job?
Accrual basis accounting tells us that the costs to produce are the costs that become
inventory:
Costs of all 1,000 units = DM + DL + MOH = $15,000 + $5,000 + $10,000 = $30,000
Cost per unit to produce = $30,000/1,000 = $30 per unit
Cost of goods on hand (ending inventory) = $30 x (1,000 - 800) = $6,000
Problem 70 - Puerto Company allocates overhead based on a predetermined
overhead rate of $3.00 per direct labor hour. Job 51 required 2 cases of direct material
at a cost of $10.00 per case and took employees who earn $12.00 per hour a total of 3
hours to complete. What is the total cost of Job 51?
DM + DL + MOH = [2 cases x $10] + [3 hrs x $12] + [3 hrs. x $3] = $65

Problem 71 Singleton Company applies overhead based on an overhead


rate of $0.25 per direct labor dollar. Job 24 used $800 of direct materials, 620
machine hours, and 150 hours of direct labor. The labor rate per hour is $18.
How much is the cost of job 24?
Direct materials
Direct labor (150*$18)
MOH ($2,700*$0.25)
Cost of job 24

$800
2,700
675
$4,175

Problem 72 - Hang Companys factory overhead account showed a $9,000


underapplied overhead balance on December 31. Other accounts showed
the following balances at year end:
Raw materials
Work in Process
Finished Goods
Cost of Goods Sold

$100,000
120,000
80,000
2,200,000

How much will cost of goods sold be after disposing of the $9,000?
Cost of goods sold adjusted balance = $2,200,000 + $9,000 = $2,209,000

Underapplied overhead is added to the accounts to which it is allocated


because not enough overhead was allocated.
Problem 73 - Yetter Company applies manufacturing overhead based on
direct labor hours. Information concerning manufacturing overhead and labor
for May of 2005 as follows:
Actual manufacturing
overhead

$180,000

Estimated manufacturing
overhead
Direct labor incurred
Direct labor estimated

$188,600
4,000 hours @ $23 =
$92,000
4,100 hours @ $22 =
$90,200

A. How much is the predetermined overhead rate?


Since the actual amount of overhead and actual direct labor incurred is not
known until the end of the period, we must use estimated amounts to
determine the POHR.
Estimated MOH/ Estimated DLH = $188,600/$4,100 = $46 per Direct labor
hour
B. How much overhead should be applied in total during May?
Each time one direct labor hour is incurred, we must apply (add) $46 of
manufacturing overhead.
$46/DLH x 4,000 hours = $184,000
C.

How much is over or underapplied overhead at May 31?


Actual MOH - Applied MOH = Over/Underapplied
$180,000 - $184,000 = $4,000 overapplied

Problem 74 Zimmerman, Inc. manufactures calculators and employs a


normal costing system. During June, Zimmermans transactions and
accounts included the following:
Raw materials acquired (cash paid)
Raw materials received on account
Indirect materials issued to production
Direct labor cost incurred
Total manufacturing overhead applied
Total manufacturing overhead incurred
Raw materials inventory, beginning
Raw materials inventory, ending
Finished goods inventory, beginning
Finished goods inventory, ending
Work in process inventory, beginning
Work in process inventory, ending

A. How much is the cost of direct materials transferred to production during


June?

$124,000
12,000
7,000
52,000
72,800
82,000
$6,500
5,800
11,200
12,400
26,000
22,000

Raw materials inventory, beginning


Direct materials purchased ($124K + $12K)
Indirect materials issued
Less Raw materials inventory, ending
Cost of direct materials issued to production

6,500
136,000
(7,000)
(5,800)
$129,700

B. Calculate the cost of goods manufactured.


Materials issued to production (part A)
Direct labor cost incurred
Manufacturing overhead cost applied
Total manufacturing costs
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufacturing

$129,700
52,000
72,800
254,500
26,000
(22,000)
$258,500

Because this is job costing and a normal costing system is used, only applied
overhead is added to WIP.
Problem 75 - Niebaum Company uses a normal product costing system. Any
amount of over or underapplied overhead is material. Niebaum's accounts
showed underapplied overhead of $5,000 at December 31. Other accounts
showed the following balances at year end:
Raw materials
Work in process
Finished goods
Sales revenue
Cost of goods sold

$ 30,000
50,000
80,000
830,000
620,000

Calculate gross profit after the disposal of under or overapplied manufacturing


overhead.
Sales
Cost of goods sold:
Adjustment for underapplied overhead
New cost of goods sold
Gross Profit

$830,000
$620,000
5,000
625,000
$205,000

Problem 77 - Dasani, Inc. considers any over or underapplied overhead to be


immaterial. The company reported the following amounts for 2006:
Raw materials purchased
Direct materials used
Indirect materials used

$88,000
83,000
6,000

Direct labor used

42,000

Indirect direct labor used


Manufacturing overhead applied

5,000
45,000

Beginning work-in-process inventory


Ending work-in-process inventory
Selling and administrative expenses
incurred
Other manufacturing overhead costs
incurred
Beginning finished goods inventory
Ending finished goods inventory

$17,000
19,000
16,000
36,000
7,000
10,000

A. Calculate total manufacturing costs if the company uses an actual


costing system.
Direct materials used
Direct labor cost
Manufacturing overhead:
Indirect materials used
Indirect direct labor used
Other manufacturing overhead costs incurred
Total manufacturing costs

$83,000
42,000
6,000
5,000
36,000
$172,000

Note that an actual costing system allocates the actual manufacturing


overhead costs directly to WIP.
B. Calculate the cost of goods manufactured assuming a normal costing
system.
Direct materials used
Direct labor cost
Manufacturing overhead applied
Total manufacturing costs
Add Beginning WIP
Less Ending WIP
CGM

$83,000
42,000
45,000
$170,000
17,000
(19,000)
$168,000

Problem 78 - Winfrey, Inc. manufactures calculators. The company employs a


normal costing system and keep all materials in a materials storeroom.
Wallaces related transactions for June follow:
Direct labor cost incurred
Materials purchased on account
Materials purchased for cash
Payment made for materials purchased in May
Total manufacturing overhead cost

$17,800
42,500
11,500
3,300
23,500

Work in process inventory, beginning


Work in process inventory, ending
Raw materials inventory, beginning
Raw materials inventory, ending
Indirect materials issued to production

How much is the cost of direct materials issued to production during June?
Raw materials inventory, beginning
Direct materials purchased ($42,500 + $11,500)
Indirect materials issued
Less Raw materials inventory, ending
Cost of direct materials issued to production
Problem 79 - Daniels Manufacturing used 30 hours of direct labor and $340 of direct
materials for job 66. Employees are paid $13 per hour. Fringe benefits cost $3 per hour.
The overhead rate was calculated at $24 based on direct labor hour. Estimated
manufacturing overhead for the year was $52,000. The company expected to complete
60 jobs during the year. How much is the total cost of job 66?

1,40
54,00
(2,200
(1,150
$52,05

Direct materials
Direct labor: ($13 + $3)*30
MOH applied: $24*30 DLH
Total job cost

340
480
720
$1,540

Problem 80 Salonga Company applies manufacturing overhead based on direct labor


dollars. Information for June follows:
Direct labor incurred
5,100 hours @ $20 = $102,000
Direct labor estimated
5,240 hours @ $20 = $104,800
Actual manufacturing overhead
$172,920
Estimated manufacturing overhead
$178,160
Direct materials incurred
$234,000
A. How much is the manufacturing overhead rate?
Estimated MOH / Estimated DL$ = $178.160 / $104,800 = $1.70 per DL$
Note that both amounts are estimated because this rate is created at the beginning of
the accounting period and actual amounts are not know.
B. How much overhead did Salonga apply during June?
MOH rate * Actual DL$ = $1.70*$102,000 = $173,400
C. 1. Post all necessary amounts to the taccount in which you would find the
amount of over or underapplied overhead
at June 30.
2. Label the account with the correct
name.
3. Calculate the balance and label if
over or underapplied.

Manufacturing Overhead
172,920 173,400
480 Overapplied

D. Briefly state the two reasons that manufacturing overhead is applied.


1-Timely information is needed for decision making and the actual OH cost is not know
until the end of the period.
2- It is not feasible nor in other cases possible to trace indirect costs to products or
services.
Problem 82 - The accounting records of Cinotti Manufacturing Company include the
following information:
Work in process inventory
Finished goods inventory
Materials purchased
Raw materials inventory
Direct materials used

Dec. 31,
2004
$ 15,000
45,000
331,000
?
325,000

Dec. 31,
2003
$ 12,000
51,000
24,000

Manufacturing overhead
incurred
Direct labor
Selling expenses

132,000
120,000
70,000

Cinotti uses an actual cost system. Calculate the following:


A.
B.

Raw materials inventory at 12-31-04


Total manufacturing costs added to Work in Process Inventory during 2004

A. Similar to the calculation of a bank balance--beginning plus increases less decreases


equals ending balance.
Raw materials inventory, beginning
$24,000
Add Materials purchased
331,000
Less direct materials used
(325,000)
Raw materials inventory, ending
$30,000
B. Total manufacturing costs consist of the three manufacturing costs incurred in
production which are added to work in process during the year:
Direct materials used
$325,000
Manufacturing overhead incurred
132,000
Direct labor
120,000
Total manufacturing costs incurred
$577,000