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Problem: 01

The following cost data relate to the manufacturing activities of Chang Company during the just completed
year:

Manufacturing overhead costs incurred:


Indirect materials 15,000
Indirect labor 130,000
Property taxes, factory 8,000
Utilities, factory 70,000
Depreciation, factory 240,000
Insurance, factory 10,000
Total actual costs incurred 473,000

Other costs incurred


Raw materials, beginning 20,000
Raw materials, ending 30,000
Work in progress, beginning 40,000
Work in progress, ending 70,000

The company uses a predetermined overhead rate to apply overhead cost to production. The rate for the
year was Tk. 25 per machine hour. A total of 19,400 machine hours was recorded for the year.

Required

1. Compute the amount of under-applied or over-applied overhead cost for the year.
2. Prepare a schedule of cost of goods manufactured for the year.
Problem: 02
Gold Nest Company of Guandong, China, is a family-owned enterprise that makes bridcages for the South
China market. A popular pastime among older Chinese men is to take their pet birds on daily excursions to
teahouses and public parks where they meet with other bird owners to talk and play mahjong. A great deal
of attention is lavished on these birds, and the birdcages are often elaborately constructed from exotic
woods and contain porcelain feeding bowls and silver roosts. Gold Nest Company makes a broad range of
birdcages that it sells through an extensive network of street vendors who receive commissions on their
sales. The Chinese currency is the renminbi, which is denoted by Rmb. All of the companys transactions
with customers, employees and suppliers are conducted in cash; there is no credit.

The Company uses a job-order costing system in which overhead is applied to jobs on the basis of direct
labor cost. At the beginning of the year, it was estimated that the total direct labor cost for the year would
be Rmb 200,000 and the total manufacturing overhead cost would be Rmb 330,000. At the beginning of
the year, the stock balances were as follows:

Direct materials 25,000


Work in progress 10,000
Finished goods 40,000

During the year, the following transactions were completed:


a) Raw materials purchased for cash, Rmb 275,000
b) Raw materials requisitioned for use in production, Rmb 280,000 (material costing Rmb 220,000 were
charges directly to jobs, the remaining materials were indirect).
c) Cost for employee services were incurred as follows:
Direct labor 180,000
Indirect labor 72,000
Sales commissions 63,000
Administrative salaries 90,000
d) Rent for the year was Rmb 18,000 (Rmb 13,000 of this amount related to factory operations, and the
remainder related to selling and administrative activities).
e) Utilities costs incurred in the factory, Rmb 57,000.
f) Advertising costs incurred, Rmb 140,000.
g) Depreciation recorded on equipment, Rmb 100,000. (Rmb 88,000 of this amount was on equipment
used in factory operations; the remaining Rmb 12,000 was on equipment used in selling and
administrative activities.)
h) Manufacturing overhead cost was applied to jobs, Rmb?....
i) Good that cost Rmb 675,000 to manufacture according to their job cost sheets were completed
during the year.
j) Sales for the year totaled Rmb 1,250,000. The total cost to manufacture these goods according to
their job cost sheet was Rmb 700,000.

Required
1. Prepare journal entries to record the transactions for the year.
2. Post the entries in (1) above to T-accounts (dont forget to enter the opening balances in the stock
accounts).
3. Is manufacturing overhead under-applied or over-applied for the year? Prepare a journal entry to
close any balance in the manufacturing overhead account to Cost of Goods Sold.
4. Prepare a profit and loss account for the year.
Problem: 03

Stroke Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-
order costing system in which predetermined overhead rates are used to apply manufacturing overhead
cost to jobs. The predetermined overhead rate in the Moulding Department is based on machine-hours,
and the rate in the Painting Department is based on direct labor hour cost. At the beginning of the year, the
companys management made the following estimates:

Department
Moulding Painting
Direct labor-hours 12,000 60,000
Machine-hours 70,000 8,000
Direct materials cost 510,000 650,000
Direct labor cost 130,000 420,000
Manufacturing overhead cost 602,000 735,000

Job 205 was started on August 1 and completed on August 10. The companys cost records show the
following information concerning the job:

Department
Moulding Painting
Direct labor-hours 30 85
Machine-hours 110 20
Materials placed into production 470 332
Direct labor cost 290 680

Required:

1. Compute the predetermined overhead rate used during the year in the Moulding Department.
Compute the rate used in the Painting Department.
2. Compute the total overhead cost applied to job 205.
3. What would be the total cost recorded for job 205? If the job contained 50 units, what would be the
cost per unit?
4. At the end of the year, the records of Stroke Potteryworks revealed the following actual cost and
operating data for all jobs worked on during the year:

Department
Moulding Painting
Direct labor-hours 10,000 62,000
Machine-hours 65,000 9,000
Direct materials cost 430,000 680,000
Direct labor cost 108,000 436,000
Manufacturing overhead cost 570,000 750,000
Problem: 04
Blast it! said David Wilson, CEO of Teledex Company, Weve just lost the bid on the Koopers job by
$2,000. It seems were either too high to get the job or too low to make any money on half the jobs we
bid.

Teledex Company manufactures products to customers specifications and operates a job-order cost
system. Manufacturing overhead cost is applied to jobs on the basis of direct labor cost. The following
estimates were made at the beginning of the year:
Department
Fabricating Machining Assembly Total Plant
Direct labor-hours 10,000 62,000 62,000 600,000
Manufacturing overhead cost 570,000 750,000 750,000 840,000

Jobs require varying amounts of work in the three departments. The Koopers job, for example, would
have required manufacturing costs in the three departments as follows:
Department
Fabricating Machining Assembly Total Plant
Direct materials 3,000 200 1,400 4,600
Direct labor 2,800 500 6,200 9,500
Manufacturing overhead ? ? ? ?

The company uses a plantwide overhead rate to apply manufacturing cost to jobs.

Required
1. Assuming use a plantwide overhead rate:
a. Compute the rate for the current year.
b. Determine the amount of manufacturing overhead cost that would have been applied to
the Koopers job.
2. Suppose that instead of using plantwide overhead rate, the company had used a separate
predetermined overhead rate in each department. Under these conditions:
a. Compute the rate for each department for the current year.
b. Determine the amount of manufacturing overhead cost that would have been applied to
the Koopers job.
3. Explain the difference between the manufacturing overhead that would have been applied using
the plantwide rate in question 1 (b) above and using the departmental rate in question 2(b).
4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct
materials, direct labor, and applied overhead). What was the companys bid price on the Koopers
job? What would the bid price have been if departmental overhead rates had been used to apply
overhead cost?
5. At the end of the year, the company assembled the following actual cost data relating to all jobs
worked on during the year:
Department
Fabricating Machining Assembly Total Plant
Direct materials 190,000 16,000 114,000 320,000
Direct labor 210,000 108,000 262,000 580,000
Manufacturing overhead 360,000 420,000 84,000 864,000