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ACCT 386 - Week 2 - Homework 2

ACCT 386 - Week 2 - Homework 2
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ACCT 386 - Week 2 - Homework 2

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Question 1

Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year:

  

 

 

  Computer-hours

 

87,000  

  Fixed manufacturing overhead cost

$

1,279,000  

  Variable manufacturing overhead per computer-hour

$

3.60  


During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year

 

 

 

  Computer-hours

 

50,000  

  Manufacturing overhead cost

$

970,000  

  Inventories at year-end:

 

 

     Raw materials

$

420,000  

     Work in process

$

190,000  

     Finished goods

$

1,030,000  

  Cost of goods sold

$

2,800,000  


 

 

Question 2

Valenko Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials):

  

 

 

  Selling expenses

$

212,000  

  Purchases of raw materials

$

263,000  

  Direct labor

 

?

  Administrative expenses

$

150,000  

  Manufacturing overhead applied to work in process

$

337,000  

  Total actual manufacturing overhead costs

$

356,000  


Inventory balances at the beginning and end of the year were as follows:

  

Beginning of Year

End of Year

  Raw materials

$

60,000

 

$

36,000

 

  Work in process

 

?

 

$

28,000

 

  Finished goods

$

31,000

 

 

?

 


The total manufacturing costs for the year were $670,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $661,000; and the net operating income was $39,000. The company’s overapplied or underapplied overhead is closed entirely to cost of goods sold.

 

Question 3

Southworth Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of direct materials used in production. Its predetermined overhead rate was based on a cost formula that estimated $243,200 of manufacturing overhead for an estimated allocation base of $152,000 direct material dollars.

The following transactions took place during the year (all purchases and services were acquired on account):

a.

Raw materials purchased, $145,000.

b.

Raw materials requisitioned for use in production (all direct materials), $143,000.

c.

Utility bills incurred in the factory, $22,000.

d.

Costs for salaries and wages were incurred as follows:

  

 

 

  Direct labor

$

216,000  

  Indirect labor

$

90,200  

  Selling and administrative salaries

$

142,000  


e.

Maintenance costs incurred in the factory, $23,000.

f.

Advertising costs incurred, $121,000.

g.

Depreciation recorded for the year, $43,000 (70% relates to factory assets, and the remainder relates to selling and administrative assets).

h.

Rental cost incurred on buildings, $85,000 (80% of the space is occupied by the factory, and 20% is occupied by sales and administration).

i.

Miscellaneous selling and administrative costs incurred, $13,000.

j.

Manufacturing overhead cost was applied to jobs, $ ?

k.

Cost of goods manufactured for the year, $557,000.

l.

Sales for the year (all on account) totaled $1,300,000. These goods cost $510,000 according to their job cost sheets.

The balances in the inventory accounts at the beginning of the year were as follows:

  

 

 

  Raw materials

$

16,000  

  Work in process

$

25,000  

  Finished Goods

$

33,000  


 

 

Question 4

WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine hours, and the rate in the Fabrication Department is based on direct labor-hours. At the beginning of the year, the company’s management made the following estimates for the year:

  

Department

 


  

Preparation

Fabrication

  Machine-hours

80,000   

31,000   

  Direct labor-hours

33,000   

50,900   

  Direct materials cost

$189,000   

$199,000   

  Direct labor cost

$274,000   

$511,000   

  Fixed manufacturing overhead cost

$224,000   

$468,280   

  Variable manufacturing overhead per machine-hour

$2.40   

-      

  Variable manufacturing overhead per direct labor-hour

-      

$4.40   


 Job 127 was started on April 1 and completed on May 12. The company's cost records show the following information concerning the job

  

Department

 


  

Preparation

Fabrication

  Machine-hours

390     

69     

  Direct labor-hours

84     

128     

  Direct materials cost

$942     

$1,260     

  Direct labor cost

$690     

$990     


   

 

Question 5

Sovereign Millwork, Ltd., produces reproductions of antique residential moldings at a plant located in Manchester, England. Because there are hundreds of products, some of which are made only to order, the company uses a job-order costing system. On July 1, the start of the company’s fiscal year, inventory account balances were as follows:

  

 

 

  Raw materials

£

10,300 

  Work in process

£

4,800 

  Finished goods

£

8,200 


The company applies overhead cost to jobs on the basis of machine-hours. Its predetermined overhead rate for the fiscal year starting July 1 was based on a cost formula that estimated £104,000 of manufacturing overhead for an estimated activity level of 40,000 machine-hours. During the year, the following transactions were completed:

a.

Raw materials purchased on account, £165,000.

b.

Raw materials requisitioned for use in production, £142,000 (materials costing £121,000 were chargeable directly to jobs; the remaining materials were indirect).

c.

Costs for employee services were incurred as follows:

  

 

 

 Direct labor

£

98,000 

 Indirect labor

£

51,700 

 Sales commissions

£

24,000 

 Administrative salaries

£

44,000 


d.

Prepaid insurance expired during the year, £18,600 (£13,200 of this amount related to factory operations, and the remainder related to selling and administrative activities).

e.

Utility costs incurred in the factory, £13,000.

f.

Advertising costs incurred, £12,000.

g.

Depreciation recorded on equipment, £21,000. (£17,000 of this amount was on equipment used in factory operations; the remaining £4,000 was on equipment used in selling and administrative activities.)

h.

Manufacturing overhead cost was applied to jobs, £? (The company recorded 39,000 machine-hours of operating time during the year.)

i.

Goods that had cost £289,000 to manufacture according to their job cost sheets were completed.

j.

Sales (all on account) to customers during the year totaled £500,000. These goods had cost £289,000 to manufacture according to their job cost sheets.