ACG 2071 Managerial Accounting

ACG 2071 Managerial Accounting
Product Costing and Cost Flows - Sample Problems for Chs 28-34
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 $ 26,200
+ CGM 340,000
= Available 366,200
- Ending FG inventory (24,000)
= Cost of goods sold $342,200
Problem 2 -Alex Company’s 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, Hernandez’s transactions included the
following:
Direct labor cost incurred $5,400
Total manufacturing overhead cost 6,650
Direct materials purchased 11,500
Raw materials inventory, 160
beginning
Raw materials inventory, ending 280
Sales 23,000
Selling expenses 2,100
Work in process inventory, 220
beginning
Work in process inventory, ending 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, $
beginning 160
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 $11,380
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 $23,400
Problem 4 Culvyhouse Company uses an actual product costing system. It reported the
following amounts for 2003:
Raw materials purchased $72,000 Beginning work-in-process inventory $21,000
Direct materials used 70,000 Ending work-in-process inventory 16,000
Indirect materials used 4,000 Selling and administrative expenses incurred 23,000
Direct labor used 66,000 Other manufacturing overhead costs incurred 18,000
Indirect direct labor used 7,000 Beginning finished goods inventory 6,000
Ending finished goods inventory 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: $18,000 + $4,000 + $7,000 29,000
Total 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.
Beginning FG inventory $6,000
Add CGM (part A) 170,000
Less ending FG inventory (9,000)
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 Changes
WIP 1. Increases when manufacturing overhead is incurred
WIP 2. Increases when indirect materials are transferred to production
RM 3. Increases when raw materials are purchased on account.
RM 4. Decreases when direct materials are used in production
WIP 5. Increases when direct labor costs are incurred
FG 6. Increases when goods are finished.
WIP 7. Decreases when goods are finished.
WIP 8. Increases when indirect labor costs are incurred
FG 9. Decreases when goods are sold.
CGS 10. Increases when goods are sold.
Problem 6 - Norris, Inc. manufactures calculators. Norris uses an actual costing

system. During June, Norris’s transactions and accounts included the following:
Work in process inventory, beginning $8,800 Sales
Work in process inventory, ending 7,500 Direct labor cost (3,100 hours)
Indirect materials issued from Supplies 3,600 Raw materials purchased
Raw materials inventory, beginning 4,600 Finished goods inventory, beginning
Raw materials inventory, ending 5,800 Finished goods inventory, ending
Total manufacturing overhead incurred 49,600 .
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:
=Available 148,100
LABOR 55,000
OVERHEAD INCURRED 49,600
MANUFACTURING COSTS 246,900
Less ending work in process (7,500)
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 $120,000 Direct labor used
$44,000
Beginning raw materials Manufacturing overhead
16,000 36,000
inventory costs incurred
Ending raw materials inventory 5,000 Selling and administrative expenses 21,000
Beginning finished goods
11,000 Beginning work-in-process inventory 17,000
inventory
Ending finished goods inventory 8,000 Ending work-in-process inventory 16,000
A. Calculate the cost of materials used in production.

Beginning raw materials inventory $ 16,000
Raw materials purchased 120,000
= Materials available for use $136,000
Less ending raw materials inventory 5,000
= Materials used in production $131,000
Materials used in production (part A) $131,000
Direct labor used 44,000
Manufacturing overhead costs incurred 36,000
Add beginning work in process 17,000
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,
Peter’s transactions and accounts included the following:
Finished goods inventory, ending $11,600 Sales
Finished goods inventory, beginning 12,300 Direct labor cost
Indirect materials issued to production 3,200 Direct materials purchased
General administrative expenses 9,400 Work in process inventory, ending
Raw materials inventory, ending 7,700 Work in process inventory, beginning
Raw materials inventory, beginning 5,100 Total manufacturing overhead incurred
A. How much is cost of goods manufactured?

Beginning raw materials inventory $5,100
Less ending raw materials inventory (7,700)
Manufacturing overhead costs incurred 56,100
B. Calculate the cost of goods sold

Beginning finished goods $12,300
Cost of goods manufactured 301,600
Less ending finished goods inventory (11.600)
C. How much will the company report as product costs on the June 30th balance
sheet?
Raw materials $11,600
= 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, Saman’s 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
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

+ 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
C. How much is cost of goods sold?

Add CGM (part B) 114,500
Problem 11 Deegan, Inc. manufactures weather machines and uses an actual costing
system. During June, Deegan’s accounts included the following balances and
transactions:
Raw materials inventory, beginning $ 700 Direct materials purchased $45,000
Raw materials inventory, ending 4,850 Direct labor cost incurred 16,400
Manufacturing overhead 9,500 Administrative expenses 13,000
cost incurred
Marketing expenses 11,000 Work in process inventory, beginning 7,800
Sales 98,000 Work in process inventory, ending 6,600
A.
A. How much is the cost of direct materials issued to production during June? $40,850
Raw materials inventory, beginning $ 700
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) $40,850
Add: Work in process inventory, beginning 7,800
Less: Work in process inventory, ending (6,600)
Cost of Goods Manufactured $67,950
C. Briefly list any additional information you need to calculate cost of goods sold for
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 $254,000
Beginning raw materials inventory 12,000
Ending raw materials inventory 7,900
Beginning finished goods inventory 7,400
Ending finished goods inventory 8,000
Direct labor incurred 51,000
Selling and administrative expenses 22,300
Actual manufacturing overhead costs 36,800
Beginning work-in-process inventory 15,100
Ending work-in-process inventory 12,000
A. Calculate the cost of direct materials used in production.


Beginning work in process $15,100
Raw materials used in production (part A) $258,100
Manufacturing overhead costs 36,800
Total manufacturing costs added $346,100
C. How much will Sound report as total inventories on its May 31 balance sheet?
Total inventory at May 31 $27,900
Problem 14 - Eng Manufacturing Company developed the following data:

Beginning work in process inventory $ 10,000
Actual manufacturing overhead 85,000
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:
Beginning work in process (given) $ 10,000
Total current manufacturing costs ??
Less ending work in process (given) (15,000)
Cost of goods manufactured (given) $295,000
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.
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
Raw materials inventory ? 24,000
Manufacturing overhead incurred 132,000
Direct labor 120,000
Cinotti uses an actual cost system. Calculate the following:
1. Raw materials inventory at 12-31-04

Less materials used in production (325,000)
Ending raw materials inventory $30,000
2. Total manufacturing costs added to Work in Process Inventory during 2004
Materials used in production $325,000

Manufacturing overhead costs 132,000
Total manufacturing costs added to WIP $577,000
3. Cost of goods manufactured during 2004
Total manufacturing costs added (From part 2) $577,000
4. Total inventories on Cinotti’s December 31, 2004 balance sheet

Raw materials (from part 1) $30,000
Total inventory at 6-30-03 $90,000
5. Assume CGM is $500,000. How much is cost of goods sold for 2004?
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, Earl’s accounts included
the following balances and transactions:
Manufacturing overhead cost incurred $ Raw materials, beginning $

33,300 11,500
Marketing expenses 27,000 Finished goods beginning 8,400
Administrative expenses 24,000 Finished goods, ending 9,600
Direct labor cost incurred 32,000 Work in process, beginning 21,500
Cost of materials purchased 138,600 Work in process, ending 18,900
Direct materials used in production 143,000 Sales 285,000
A. How much is ending raw materials at June 30 $7,100

Direct materials purchased 138
Goods available 150
Less cost of direct materials issued to production (143,
Raw materials inventory, ending $7
B. How much is cost of goods manufactured for June? $210,900

Direct materials used in production $143,000
C. How much is cost of good sold?

Cost of goods manufactured (part B) 210,900
Problem 17 - The manufacturing operations of Darden, Inc. had the following

balances for the month of March:
Raw Materials $10,000 $12,000
If Darden reported cost of goods sold totaling $46,000 in March, how much did
it transfer out of workin process as completed goods?
$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 supervisor’s 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 supervisor’s 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, Mitchell’s transactions and accounts included the following:
Sales $320,000 Raw m
Raw materials acquired (cash paid) 135,000 Raw m
Raw materials received on account 30,000 Finish
Direct labor cost incurred 42,000 Finish
Cost to deliver products to customers 800 Work
Total manufacturing overhead incurred 72,000 Work
A. How much is the cost of direct materials transferred to production during June?
Raw materials inventory, beginning $ 6,5
Raw materials purchased ($135,000 + $30,000) 165,0
Less raw materials inventory, ending (5,8
Less: Work in process inventory, ending (19,7
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 June’s manufacturing overhead.
Cost of goods manufactured totaled $199,000. How much are total manufacturing
costs for June?
WIP
Beginning 22,000
199,000 CGM
Mfg. costs X
Ending 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, Zimmerman’s transactions and accounts included the
following:
Raw materials acquired (cash paid) $117,000
Raw materials received on account 12,000
Total manufacturing overhead incurred 72,800
Raw materials inventory, beginning $6,500

Raw materials inventory, ending 5,800
Finished goods inventory, beginning 11,200
Finished goods inventory, ending 12,400
Work in process inventory, beginning 26,000
Work in process inventory, ending 22,000
A. How much is the cost of direct materials transferred to production during June?
Direct materials purchased ($117K + $12K) 129,000
Less Raw materials inventory, ending (5,800)

Materials issued to production (part A) $129,700
Problem 25 -The following information has been collected from Green Company’s
accounting records for the month of April:
Direct materials added to Work in Process Inventory $ 160,000
Indirect materials added to Manufacturing Overhead 40,000
Direct labor added to Work in Process Inventory 150,000
Indirect labor added to Manufacturing Overhead 65,000
Manufacturing overhead added to Work in Process Inventory 100,000
Depreciation Expense included in Manufacturing Overhead 50,000
Beginning work in process inventory 22,000
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
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, Hernandez’s transactions included the following:
Direct labor cost incurred $5,400
Total manufacturing overhead cost applied 6,650
Total manufacturing overhead cost incurred 6,300
Indirect materials issued to production 1,100
Raw materials inventory, beginning 160
Sales 23,000
Work in process inventory, beginning 220
A. How much is the cost of direct materials issued to production during May?
Indirect materials issued (1,100)
Less Raw materials inventory, ending (280)
B. How much is cost of goods manufactured for May?
Materials issued to production $10,280
Manufacturing overhead cost applied 6,650
Add: Work in process inventory, beginning 220
Less: Work in process inventory, ending (250)
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:
Selling and administrative
Indirect materials used 4,000 23,000
expenses incurred
Other manufacturing overhead
Direct labor used 66,000 17,000
costs incurred
Manufacturing overhead
29,000 Ending finished goods inventory 9,000
applied
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
B. Calculate cost of goods sold. Ignore any over or underapplied overhead.
Add CGM (part A) 170,000
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 Changes
MOH 1. Increases when manufacturing overhead is incurred
MOH 2. Increases when indirect materials are transferred to production
RM 3. Increases when raw materials are purchased on account.
RM 4. Decreases when direct materials are used in production
WIP 5. Increases when direct labor costs are incurred
FG 6. Increases when goods are finished.
WIP 7. Decreases when goods are finished.
MOH 8. Increases when indirect labor costs are incurred
FG 9. Decreases when goods are sold.
CGS 10. Increases when goods are sold.
WIP 11. Increases when manufacturing overhead is applied
MOH 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,
Norris’s transactions and accounts included the following:
Work in process inventory, beginning $8,800 Sales
Work in process inventory, ending 7,500 Direct labor cost (3,100 hours)
Indirect materials issued to production 3,600 Raw materials purchased
Raw materials inventory, beginning 4,600 Finished goods inventory, beginning
Raw materials inventory, ending 5,800 Finished goods inventory, ending
Total manufacturing overhead applied 49,600 Total manufacturing overhead incurred
A. How much is the cost of direct materials issued to production during June?
- Indirect materials issued (3,600)
= Available 144,500

MATERIALS:
=Available 144,500
LABOR 55,000
OVERHEAD APPLIED 49,600
MANUFACTURING COSTS 243,300
C. How much is the cost of inventory on the May 31st balance sheet?
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 $120,000 Direct labor used
$44,000
Beginning raw materials Manufacturing overhead
16,000 36,000
inventory costs incurred
Ending raw materials inventory 5,000 Selling and administrative expenses 21,000
11,000 Beginning work-in-process inventory 17,000
inventory
Ending finished goods inventory 8,000 Ending work-in-process inventory 16,000
A. Calculate the cost of materials used in production.
Less ending raw materials inventory 5,000

Materials used in production (part A) $131,000
Manufacturing overhead costs applied (80%*44,000) 35,200
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, Peter’s transactions and accounts included the following:
Finished goods inventory, ending $11,600 Sales $324,000
Finished goods inventory, beginning 12,300 Direct labor cost 72,400
Indirect materials issued to 3,200 Direct materials purchased 178,000
production
General administrative expenses 9,400 Work in process inventory, ending 12,800
Raw materials inventory, ending 4,500 Work in process inventory, 10,500
beginning
Raw materials inventory, beginning 5,100 Total manufacturing 56,100
overhead applied
A. How much is cost of goods manufactured?

Beginning raw materials inventory $5,100
Less indirect materials used (3,200)
Manufacturing overhead costs applied 56,100
B. Calculate the cost of goods sold after adjustment for over/underapplied overhead.
Less ending finished goods inventory (11.600)
Overapplied overhead ($55,500-$56,100) (600)
Adjusted cost of goods sold $301,700
C. How much is total inventory on the June 30th balance sheet?

= 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:
Raw Materials $10,000 $12,000
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?
$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.
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, Hernandez’s transactions included
the following:
Direct labor cost incurred @ $20 an hour $5,400
Raw materials inventory, beginning 160
Sales 23,000
Work in process inventory, beginning 220
A. Briefly list any additional information you need to calculate cost of goods sold for
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?
Less Raw materials inventory, ending (280)
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
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 $ 40,000 Work in Process Inventory $100,000
Finished Goods 60,000 Cost of Goods Sold 800,000
Information concerning manufacturing overhead and labor for the year follows:
Actual manufacturing overhead $290,000 Direct labor hours 15,600
incurred
Estimated manufacturing $300,000 Direct labor hours 15,000
overhead estimated
Actual direct labor cost per hour $17 MOH applied based on 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
don’t 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 there…we 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, Saman’s
accounts included the following balances and transactions:
Work in process, beginning $25,2
Work in process, ending 27,6
Finished goods beginning 7,3
Finished goods, ending 6,8
Administrative expenses 12,0
Raw materials, beginning 3,3
Sales 167,0
Marketing expenses 11,0
Manufacturing overhead cost incurred 21,,0
A. How much is ending raw materials at August 31

+ Material purchases 78,000
- Direct materials used (76,400)
= Ending raw materials $2,700
B. How much is cost of goods manufactured?

Direct labor 20,400
Manufacturing overhead 20,100
C. How much is cost of goods sold? (Be sure to consider the under or overapplied
overhead.)
Add CGM (part B) 114,500
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
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, Deegan’s accounts included the following balances and
transactions:
Raw materials inventory, beginning $ 700 Direct materials purchased
Raw materials inventory, ending 850 Direct labor cost incurred
Manufacturing overhead cost applied 9,500 Indirect materials issued to production
Marketing expenses 11,000 Work in process inventory, beginning
Manufacturing overhead cost incurred 9,000 Work in process inventory, ending
Sales 98,000 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

Less raw materials inventory, ending (850)
Less indirect materials to production (4,000)
B. How much is cost of goods manufactured? $67,950

Note: Indirect materials issued to production are considered manufacturing overhead

costs and as such, are already included in actual manufacturing overhead.

Dec. 31, 2004 Dec. 31, 2003
Manufacturing overhead is applied at a rate of 110% of direct labor cost. Calculate the
following:
1. Raw materials inventory at 12-31-04

Less materials used in production (325,000)
Less ending raw materials inventory $30,000
2. Total manufacturing costs added to Work in Process Inventory during 2004
Materials used in production $325,000

Manufacturing overhead costs applied (110%*$120,000 132,000
Total manufacturing costs added to WIP $577,000
3. Cost of goods manufactured during 2004

Total manufacturing costs added (From part 2) $577,000
4. Total inventories on Cinotti’s December 31, 2004 balance sheet
Raw materials (from part 1) $30,000
Total inventory $90,000
5. Assume CGM is $500,000. How much is cost of goods sold for 2004?
Problem 43 - Earl, Inc. manufactures baseballs and allocates overhead based on

direct labor cost. During June, Earl’s accounts included the following balances and
transactions:
Manufacturing overhead cost applied $33,300 Raw materials, beginning $

11,500
Indirect materials issued to production 1,400 Finished goods beginning 8,400
Administrative expenses 24,000 Finished goods, ending 9,600
Direct labor cost incurred 32,000 Work in process, beginning 21,500
Cost of materials purchased 140,000 Work in process, ending 18,900
Direct materials used in production 143,000 Marketing expenses 27,000
Manufacturing overhead cost incurred 35,000 Sales 285,000
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?

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:
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 machine-

hours. 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
machine-hours 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 Company’s factory overhead account showed a $8,000 underapplied
overhead balance on December 31. Other accounts showed the following balances at
year end:
Work in Process 40,000
Cost of Goods 700,000
Sold
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 year-
end, 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?
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 $ 30,000 Salary of production supervisor $70,000
Direct labor 110,000 Indirect materials 10,000
Factory operating costs 144,000 Advertising expense 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 $150,000 Direct labor hours incurred 4,800
Estimated manufacturing $140,000 Direct labor hours estimated 5,000
overhead
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 $40,000 Work in Process $100,000
Inventory
Finished Goods 60,000 Cost of Goods Sold 840,000
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 Company’s
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 Company’s factory overhead account showed a $4,000

overapplied balance on December 31. Other accounts showed the following balances
at year end:
Cost of Goods 450,000
Sold
Determine the balances of the accounts listed below after disposing the $4,000.
A. Cost of Goods Sold = $450,000 - $4,000 = $446,000

B. Work in Process = $20,000 -
C. Finished Goods = $30,000
D. 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.
Actual MOH costs ($66,000)
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 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 $800
Direct labor (150*$18) 2,700
MOH ($2,700*$0.25) 675
Cost of job 24 $4,175
Problem 72 - Hang Company’s factory overhead account showed a $9,000

underapplied overhead balance on December 31. Other accounts showed
the following balances at year end:
Cost of Goods 2,200,000
Sold
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 $180,000
overhead
Estimated manufacturing $188,600
overhead
Direct labor incurred 4,000 hours @ $23 =
$92,000
Direct labor estimated 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, Zimmerman’s transactions and
accounts included the following:
Raw materials acquired (cash paid) $124,000
Raw materials received on account 12,000
Total manufacturing overhead applied 72,800
Total manufacturing overhead incurred 82,000

Raw materials inventory, ending 5,800
Finished goods inventory, beginning 11,200
Finished goods inventory, ending 12,400
Work in process inventory, beginning 26,000
Work in process inventory, ending 22,000
A. How much is the cost of direct materials transferred to production during

June?
Direct materials purchased ($124K + $12K) 136,000

Materials issued to production (part A) $129,700
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:
Sales revenue 830,000
Cost of goods sold 620,000
Calculate gross profit after the disposal of under or overapplied manufacturing
overhead.
Sales $830,000
Cost of goods sold: $620,000
Adjustment for underapplied overhead 5,000
New cost of goods sold 625,000
Gross Profit $205,000
Problem 77 - Dasani, Inc. considers any over or underapplied overhead to be

immaterial. The company reported the following amounts for 2006:
Selling and administrative expenses
Indirect materials used 6,000 16,000
incurred
Other manufacturing overhead costs
Direct labor used 42,000 36,000
incurred
Manufacturing overhead applied 45,000 Ending finished goods inventory 10,000
A. Calculate total manufacturing costs if the company uses an actual

costing system.
Direct materials used $83,000
Direct labor cost 42,000
Manufacturing overhead:
Indirect materials used 6,000
Indirect direct labor used 5,000
Other manufacturing overhead costs incurred 36,000
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 labor cost 42,000
Manufacturing overhead applied 45,000
Add Beginning WIP 17,000
Less Ending WIP (19,000)
CGM $168,000
Problem 78 - Winfrey, Inc. manufactures calculators. The company employs

a normal costing system and keep all materials in a materials storeroom.
Wallace’s related transactions for June follow:
Direct labor cost incurred $17,800 Work in process inventory, $10,200
beginning
Materials purchased on account 42,500 Work in process inventory, 11,100
ending
Materials purchased for cash 11,500 Raw materials inventory, 1,400
beginning
Payment made for materials purchased 3,300 Raw materials inventory, ending 1,150
in May
Total manufacturing overhead cost 23,500 Indirect materials issued to 2,200
production
How much is the cost of direct materials issued to production during June?
Direct materials purchased ($42,500 + $11,500) 54,000
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?
Direct materials $ 340
Direct labor: ($13 + $3)*30 480
MOH applied: $24*30 DLH 720
Total job cost $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
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 t- Manufacturing Overhead

account in which you would find the amount 172,920 173,400
of over or underapplied overhead at June
30.
2. Label the account with the correct 480 Overapplied
name.
3. Calculate the balance and label if over
or underapplied.
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.

Dec. 31, Dec. 31,
2004 2003
Manufacturing overhead
132,000
incurred
Cinotti uses an actual cost system. Calculate the following:
A. Raw materials inventory at 12-31-04

B. 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.
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:
Total manufacturing costs incurred $577,000

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Problem 2 -Alex Company’s Work in Process Inventory account has a

Problem 3 Hernandez, Inc. manufactures calculators. The company employs

A. Calculate the cost of goods manufactured.

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

B. Calculate the cost of goods manufactured.

A. Calculate the cost of materials used in production.

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

A. How much is cost of goods manufactured?

B. Calculate the cost of goods sold

A. How much is ending raw materials at August 31

B. How much is cost of goods manufactured?

C. How much is cost of goods sold?

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

A. Calculate the cost of direct materials used in production.

B. Calculate the cost of goods manufactured.

Problem 14 - Eng Manufacturing Company developed the following data:

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

1. Raw materials inventory at 12-31-04

2. Total manufacturing costs added to Work in Process Inventory during 2004

Materials used in production $325,000

4. Total inventories on Cinotti’s December 31, 2004 balance sheet

Manufacturing overhead cost incurred $ Raw materials, beginning $

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

B. How much is cost of goods manufactured for June? $210,900

C. How much is cost of good sold?

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

How much is the cost per comb?

Problem 21 – Mitchell, Inc. manufactures calculators and employs an actual costing

Beginning WIP + Total manufacturing costs - CGM = Ending WIP

Problem 23 - Zimmerman, Inc. manufactures calculators and employs an actual

Raw materials inventory, beginning $6,500

B. Calculate the cost of goods manufactured.

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

Problem 27 Culvyhouse Company uses a normal product costing system. Any

A. Calculate the cost of goods manufactured.

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

B. Calculate the cost of goods manufactured.

B. Calculate the cost of goods manufactured.

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

A. How much is cost of goods manufactured?

C. How much is total inventory on the June 30th balance sheet?

B. Which of the allocation bases is preferred? Why?

C. How much overhead will Under apply to job 23?

D. What is the total cost of job 23?

Problem 34 - Stranahan Company allocates overhead based on machine hours.

Problem 36 -Hernandez, Inc. manufactures calculators. The company uses a normal

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

A. Calculate the predetermined manufacturing overhead rate.

CGS = $800,000 - $22,000 = $778,000

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

A. How much is ending raw materials at August 31

B. How much is cost of goods manufactured?

A. How much is the predetermined overhead rate?

B. How much overhead was applied during the year?

C. Determine the amount of over or underapplied overhead.

A. How much overhead was applied during the year? $29,640

B. Determine the amount of over or underapplied overhead. $1,360 Under applied

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

Raw materials inventory, beginning $ 700

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

Direct materials used in production (from part A) $40,850

Note: Indirect materials issued to production are considered manufacturing overhead

Problem 42 - The accounting records of Cinotti Manufacturing Company include the