: Designate the best answer for each of the following questions.____ 1. A debit balance in the Manufacturing Overhead account at the end of an interim month means that a. the balance should be reported as a current liability in the monthly balance sheet. b. corrective action by management is necessary. c. overhead has been under applied. d. cost of goods sold should be credited on the monthly income statement.The following data should be used for questions 7-10:Raw materials inventory, January 1 $10,000 Raw materials purchases $600,000Raw materials inventory, December 31 15,000 Direct labor 230,000Work in process, January 1 9,000 MHO Factory utilities 75,000Work in process, December 31 5,000 MOH Indirect labor 25,000Finished goods, January 1 16,000 MOH Factory depreciation 200,000Finished goods, December 31 20,000 Selling and administrative expenses 210,000____ 2. Direct materials used is a. $630,000. b. $610,000. c. $600,000. d. $595,000.____ 3. Total manufacturing cost added is a. $1,130,000. b. $1,127,000. c. $1,030,000. d. $1,340,000.____ 4. Cost of goods manufactured equals a. $1,096,000. b. $1,097,000. c. $1,104,000. d. $1,109,000.____ 5. The cost of goods sold is a. $1,123,000. b. $1,104,000. c. $1,116,000. d. $1,124,000. PROBELM II ? CLASSIFICATION OF COSTS AND EXPENSES (20 points)Instructions: Classify the following manufacturing costs and expenses incurred by Garcia Manufacturing Co., making soda drinks, by using the following code letters:A. Direct material Cost B. Direct labor cost C. Manufacturing overhead cost D. Period Cost1. Sale?s commissions to employees 6. Depreciation on delivery trucks2. Depreciation on factory equipment 7. Factory insurance cost3. Promotions in a radio station 8. Factory maintenance materials4. Syrup, alkaline water and sugar 9. Wages of maintenance workers5. Rent on leased factory machinery 10. Wages of mixing line workersPROBLEM III ?Determine work in process and finished goods balances (12 points)Robles Manufacturing begins operations on October 1. Information from job cost sheets shows the following: Manufacturing Costs Assigned Job October November DecemberA $14,600 B $ 5,400 $9,300 C $ 3,200 $5,800 $5,800D $7,400 $8,300E $4,400Job A was completed in October. Job B was completed in November. Job C was completed in December. Each job was sold in the month following completion. Instructions: Determine the following amounts:1 Work in process inv. Oct 31 4 Finished goods inv. Nov 30 2 Finished goods inv. Oct 31 5 Work in process inv. Dec 31 3 Work in process inv. Nov 30 6 Finished goods inv. Dec 31 PART IV ? JOB ORDER COST ACCOUNTING ENTRIES (24 points)The ledger accounts of ROPRIN Company are presented below, with an identification number for each.Instructions: Prepare appropriate job order cost system entries to record the data/events given below. 1. Cash 6. Manufacturing Overhead 11. Depreciation Expense2. Accounts Receivable 7. Accounts Payable 12. Factory Labor3. Raw Materials Inv. 8. Factory Wages Payable 13. Wages Expense4. Work in Process Inv. 9. Accumulated Depreciation 14. Cost of Goods Sold5. Finished Goods Inv. 10. Sales 15. Other AccountsTransaction Information for the Entry1. Incurred factory labor, $110,000.2. Charged direct labor to Job AA, $80,000.3. Purchased raw materials on account, $180,000.4. Charged direct materials to Job AA, $78,000.5. Recorded the remaining factory labor as indirect labor related to Job AA6. Incurred manufacturing overhead on account, $57,000.7. Recognized depreciation on factory equipment, $30,000.8. Charged overhead to Job AA at $1.25 for each direct labor dollar cost.9. Recorded completion of Job AA.10. Recorded cost of sales for Job AA. 11. Recorded revenue from sale of Job AA on account, $425,000.12. Assume total actual overhead was $2,280,000 and total applied overhead was $2,230,000 for the year. Record the entry to close the MOH account and transfer the over or under applied overhead to Cost of Good Sold account. PROBLEM IV ? JOB ORDER COST ACCOUNTING ENTRIES:GENERAL JOURNAL # ACCOUNTS DESCRIPTION DEBIT CREDIT1 2 3 4 5 6 7 8 9 10 11 12 Problem V. (20 Points) ROMALY, INC. has several processing departments. Costs charged to the Forming Department for December 2011 totaled $1,505,000 as follows:Work in Process, December 1 Materials $ 103,400 Conversion costs 60,000 $ 163,400Costs Added: Materials added $ 1,100,800 Labor $ 100,000 Manufacturing Overhead 102,800 Total Conversion Costs 202,800 Total Cost added 1,303,600Total Department Costs $ 1,467,000Production records show that:1. 60,000 units were in beginning work in process inventory a. 25% complete as to materials costs b. 70% complete as to conversion cost2. 410,000 units were started into production3. 40,000 units were in ending work in process inventory a. 40% complete as to materials costsb. 20% complete as to conversion costs. Required:a. Compute the physical unit flow, step 1.b. Determine the equivalent units of production for materials and conversion costs, step 2.c. Compute the unit cost of production, step 3.d. Determine the costs to be assigned to the units transferred out and in process.e. Prepare a production cost report for the Forming Department for the month of December. Problem V: FOUR SPETS TO PREPARE PRODUCTION COST REPORT (86 Puntos)FORMING DEPARTMENT INFORMATION (23 Puntos)WIP, Dec/1 (Beginning Inventory) DIRECT MATERIALS: _____________Units X _____% COMPLETED CONVERSION COSTS: _____________Units X _____ %COMPLETED UNITS STARTED IN PRODUCTION DURING DECEMBER UNITS COMPLETED AND TRANSFERRED OUT TO PACKING WIP, Dec/31 (Ending Inventory) DIRECT MATERIALS: _____________Units X _____% COMPLETED CONVERSION COSTS: _____________Units X _____% COMPLETED C O S T SWIP, Dec/1 (Bebinning Inventory) DIRECT MATERIALS $ CONVERSION COSTS TOTAL COST OF WIP, Dec/1 (Beginning Inventory) $COSTS ADDED DURING PRODUCTION IN DECEMBER DIRECT MATERIALS $ CONVERSION COSTS (DL $_________ + MOH $__________) TOTAL COST ADDED IN DECEMBER TOTAL COST AS OF DECEMBER 31 Part a. Compute the physical units flow (step 1).FORMING DEPARTMENT (6 Puntos)PHYSICAL UNITS TO BE ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) STARDED (TRANSFERRED) INTO PRODUCTION TOTAL UNITS COMPLETED AND TRANSFERRD OUT WIP, Dec 31 (Ending Inventory) TOTAL UNITS Part b. Determine the equivalent units of production for materials and conversion costs (step 2).FORMING DEPARTMENT (6 Puntos) EQUIVALENT UNITS MATERIAL CONVERSION COSTSUNITS TRANSFERRED OUT WIP, Dec 31 (Ending Inventory) MATERIALS WIP, Dec 31 (Ending Inventory)CONVERSION COST TOTAL EQUIVALENT UNITS Part c. Compute the unit cost of production (Sept 3).STEP 3: COMPUTE UNIT PRODUCTION COSTS (15 Puntos)FORMING DEPARTMENT M A T E R I A L C O S T S PER UNITWIP, Dec 1 ? (Beginning Inventory) Direct Material $ Material Costs incurred or added into production during December Total Material Costs $ TOTAL MATERIAL COSTS / EQUIVALENT UNITS = UNITS MATERIAL COST $_____________ DIVIDIDO ENTRE ___________ = $________ C O N V E R S I O N C O S T S PER UNITWIP, Dec 1 ? (Beginning Inventory) Conversion costs $Conversion costs incurred or added into production during December TOTAL CONVERSION COSTS $ TOTAL CONVERSION COSTS / EQUIVALENT UNITS = UNIT CONVERSION COST $__________ DIVIDIDO ENTRE ___________ = $_________MATERIAL UNIT COST $CONVERSION UNIT COST TOTAL MANUFACTURING UNIT COST $Part d. Determine the costs to be assigned to the units transferred out and in process (Step 4)FORMING DEPARTMENT (8 Puntos) C O S T RECONCILIATION REPORTCOST ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) $ STARTED INTO PRODUCTION TOTAL COSTS $COST ACCOUNTED FORCompleted & Transferred Out $WIP Ending Inventory- Dec 31 MATERIALS $ WIP Ending Inventory- Dec31 CONVERSION COSTS TOTAL WIP Dec 31 (Ending Inventory) TOTAL COSTS $ Part e. Prepare a production cost report for the Forming Department for the month of December.FORMING DEPARTMENT (28 Puntos)PRODUCTION COST REPORTFOR THE MONTH ENDED DECEMBER 31, 2011STEPS 1 AND 2 PHYSICAL UNITS UNITS TO BE ACCOUNTED FOR STEP 1 WIP, Dec 1 (Beginning Inventory) STARTED INTO PRODUCTION TOTAL UNITS STEP 2 STEP 1 EQUIVALENT UNITSUNITS TO BE ACCOUNTED FOR PHYSICAL UNITS MATERIALS CONVERSION COSTS TRANSFERRED OUT WIP, Dec 31 (Ending Inventory) TOTAL UNITS STEP 3U N I T C O S T SCOSTS MATERIALS CONVERSION COSTS TOTAL TOTAL COSTS AS OF DECEMBER (a) $ $ $ EQUIVALENT UNITS (b) UNIT COST a/b $ $ $STEP 4C O S T ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) $ STARTED INTO PRODUCTION TOTAL COST FOR THE MONTH OF DECEMBER $COST RECONCILIATION SCHEDULECompleted & Transferred Out $WIP Ending Inventory-Dec 31-Direct Material Costs(Equivalent Units) $ WIP Ending Inventory-Dec 31-Conversion Costs (Equivalent Units) Total Costs WIP Ending Inventory-Dec 31 (Based on equivalent units) TOTAL COST FOR THE MONTH OF DECEMBER 2011 $ CHAPTER 4ACTIVITY BASED COSTING (ABC)PROBLEM VI: (52 Points)JOKARY Company manufactures two models of TV: (1) Regular TV (2) Custom TV. The Regular TV model is a high volume product and the Custom TV model is a low volume product. The following information was provided by management: Regular TV Custom TV Total Quantity Per Unit Quantity Per Unit Volume of Production in units 50,000 10,000 60,000Direct Material per unit $100.00 $400.00 Direct Labor Hours per Unit 5.0 5.0 Total Direct Labor (DL) Hours 250,000 50,000 300,000Direct Labor Cost per Unit $10.00 $10.00 Total MHO $1,650,000Predetermined MHO Per DL Hours $5.50**$1,650,000 / 300,000 = $5.50Management identified six activities cost pools and related cost drivers and accumulated overhead by cost pool as follows:Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Expected Use of Drivers by Product Regular TV Custom TVPurchasing Orders $ 200,000 500 170 330Receiving Pounds 161,000 140,000 58,000 82,000Forming Parts 581,000 830,000 415,000 415,000Inspecting Inspections 208,000 130,000 82,000 48,000Painting Units 240,000 120,000 80,000 40,000Warehousing Cartons 260,000 10,000 7,000 3,000 $1,650,000 Instructions:a) Compute the total unit cost of each product under the traditional product costing. b) Compute the activity based overhead rates (per cost driver).c) Assign each activity?s overhead cost pool to each product based on the use of cost drivers. (Include a computation of overhead cost per unit, rounding to the nearest cent.)d) Compute the total cost per unit for each product under ABC. b. Computation of each product unit cost?traditional costing.Manufacturing Cost Products Regular TV Model Custom TV ModelDirect materials Direct Labor Overhead Total unit cost c. Computation of the activity based overhead rates (per cost driver).Activity Cost Pools Total Estimated Overhead Expected Use of Cost Drivers Activity Based Overhead RatePurchasing $ 200,000 500 Receiving 161,000 140,000 Forming 581,000 830,000 Inspecting 208,000 130,000 Painting 240,000 120,000 Warehousing 260,000 12,100 $1,650,000 d. Assign each activity?s overhead cost pool to each product based on the use of cost drivers.Activity Cost Pools Regular TV Model Custom TV Model Expected Use of Drivers Activity-BasedOverheadRates CostAssigned ExpectedUse ofDrivers Activity-BasedOverheadRates CostAssignedPurchasing 170 330 Receiving 58,000 82,000 Forming 415,000 415,000 Inspecting 82,000 48,000 Painting 80,000 40,000 Warehousing 8,040 4,060 Total Cost Assigned Units Produced Overhead Cost Per Unit e. Compute the total cost per unit for each product under ABC.ABC Manufacturing Cost Regular TV Model Custom TV ModelDirect Materials Direct Labor Overhead Total cost per unit

PROBLEM I MULTIPLE CHOICES (10 points) Instructions: Designate the best answer for each of the following questions. ____ 1. A debit balance in the Manufacturing Overhead account at the end of an interim month means that a. the balance should be reported as a current liability in the monthly balance sheet. b. corrective action by management is necessary. c. overhead has been under applied. d. cost of goods sold should be credited on the monthly income statement. The following data should be used for questions 7-10: Raw materials inventory, January 1 $10,000 Raw materials purchases Raw materials inventory, December 31 15,000 Direct labor Work in process, January 1 9,000 MHO Factory utilities Work in process, December 31 5,000 MOH Indirect labor Finished goods, January 1 16,000 MOH Factory depreciation Finished goods, December 31 20,000 Selling and administrative expenses ____ 2. Direct materials used is a. $630,000. b. $610,000. c. $600,000. d. $595,000. ____ 3. Total manufacturing cost added is a. $1,130,000. b. $1,127,000. c. $1,030,000. d. $1,340,000. ____ 4. Cost of goods manufactured equals a. $1,096,000. b. $1,097,000. c. $1,104,000. d. $1,109,000. ____ 5. The cost of goods sold is a. $1,123,000. b. $1,104,000. c. $1,116,000. d. $1,124,000. $600,000 230,000 75,000 25,000 200,000 210,000 PROBELM II CLASSIFICATION OF COSTS AND EXPENSES (20 points) Instructions: Classify the following manufacturing costs and expenses incurred by Garcia Manufacturing Co., making soda drinks, by using the following code letters: A. Direct material Cost B. Direct labor cost C. Manufacturing overhead cost D. Period Cost 1. 2. 3. 4. 5. Sale's commissions to employees Depreciation on factory equipment Promotions in a radio station Syrup, alkaline water and sugar Rent on leased factory machinery 6. 7. 8. 9. 10. Depreciation on delivery trucks Factory insurance cost Factory maintenance materials Wages of maintenance workers Wages of mixing line workers PROBLEM III Determine work in process and finished goods balances (12 points) Robles Manufacturing begins operations on October 1. Information from job cost sheets shows the following: Job A B C D E Manufacturing Costs Assigned October November December $14,600 $ 5,400 $9,300 $ 3,200 $5,800 $5,800 $7,400 $8,300 $4,400 Job A was completed in October. Job B was completed in November. Job C was completed in December. Each job was sold in the month following completion. Instructions: Determine the following amounts: 1 2 3 Work in process inv. Oct 31 Finished goods inv. Oct 31 Work in process inv. Nov 30 4 5 6 Finished goods inv. Nov 30 Work in process inv. Dec 31 Finished goods inv. Dec 31 PART IV JOB ORDER COST ACCOUNTING ENTRIES (24 points) The ledger accounts of ROPRIN Company are presented below, with an identification number for each. Instructions: Prepare appropriate job order cost system entries to record the data/events given below. 1. Cash 6. Manufacturing Overhead 11. Depreciation Expense 2. Accounts Receivable 7. Accounts Payable 12. Factory Labor 3. Raw Materials Inv. 8. Factory Wages Payable 13. Wages Expense 4. Work in Process Inv. 9. Accumulated Depreciation 14. Cost of Goods Sold 5. Finished Goods Inv. 10. Sales 15. Other Accounts Transaction Information for the Entry 1. Incurred factory labor, $110,000. 2. Charged direct labor to Job AA, $80,000. 3. Purchased raw materials on account, $180,000. 4. Charged direct materials to Job AA, $78,000. 5. Recorded the remaining factory labor as indirect labor related to Job AA 6. Incurred manufacturing overhead on account, $57,000. 7. Recognized depreciation on factory equipment, $30,000. 8. Charged overhead to Job AA at $1.25 for each direct labor dollar cost. 9. Recorded completion of Job AA. 10. Recorded cost of sales for Job AA. 11. Recorded revenue from sale of Job AA on account, $425,000. 12. Assume total actual overhead was $2,280,000 and total applied overhead was $2,230,000 for the year. Record the entry to close the MOH account and transfer the over or under applied overhead to Cost of Good Sold account. PROBLEM IV JOB ORDER COST ACCOUNTING ENTRIES: # 1 2 3 4 5 6 7 8 9 10 11 12 GENERAL JOURNAL ACCOUNTS DESCRIPTION DEBIT CREDIT Problem V. (20 Points) ROMALY, INC. has several processing departments. Costs charged to the Forming Department for December 2011 totaled $1,505,000 as follows: Work in Process, December 1 Materials Conversion costs Costs Added: Materials added Labor Manufacturing Overhead Total Conversion Costs Total Cost added Total Department Costs $ 103,400 60,000 $ 163,400 $ 1,100,800 $ 100,000 102,800 202,800 1,303,600 $ 1,467,000 Production records show that: 1. 60,000 units were in beginning work in process inventory a. 25% complete as to materials costs b. 70% complete as to conversion cost 2. 410,000 units were started into production 3. 40,000 units were in ending work in process inventory a. 40% complete as to materials costs b. 20% complete as to conversion costs. Required: a. b. c. d. e. Compute the physical unit flow, step 1. Determine the equivalent units of production for materials and conversion costs, step 2. Compute the unit cost of production, step 3. Determine the costs to be assigned to the units transferred out and in process. Prepare a production cost report for the Forming Department for the month of December. Problem V: FOUR SPETS TO PREPARE PRODUCTION COST REPORT (86 Puntos) FORMING DEPARTMENT INFORMATION (23 Puntos) WIP, Dec/1 (Beginning Inventory) DIRECT MATERIALS: _____________Units X _____% COMPLETED CONVERSION COSTS: _____________Units X _____ %COMPLETED UNITS STARTED IN PRODUCTION DURING DECEMBER UNITS COMPLETED AND TRANSFERRED OUT TO PACKING WIP, Dec/31 (Ending Inventory) DIRECT MATERIALS: _____________Units X _____% COMPLETED CONVERSION COSTS: _____________Units X _____% COMPLETED COSTS WIP, Dec/1 (Bebinning Inventory) DIRECT MATERIALS CONVERSION COSTS TOTAL COST OF WIP, Dec/1 (Beginning Inventory) COSTS ADDED DURING PRODUCTION IN DECEMBER DIRECT MATERIALS $ CONVERSION COSTS (DL $_________ + MOH $__________) TOTAL COST ADDED IN DECEMBER TOTAL COST AS OF DECEMBER 31 $ $ Part a. Compute the physical units flow (step 1). FORMING DEPARTMENT (6 Puntos) PHYSICAL UNITS TO BE ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) STARDED (TRANSFERRED) INTO PRODUCTION TOTAL UNITS COMPLETED AND TRANSFERRD OUT WIP, Dec 31 (Ending Inventory) TOTAL UNITS Part b. Determine the equivalent units of production for materials and conversion costs (step 2). FORMING DEPARTMENT (6 Puntos) EQUIVALENT UNITS MATERIAL CONVERSION COSTS UNITS TRANSFERRED OUT WIP, Dec 31 (Ending Inventory) MATERIALS WIP, Dec 31 (Ending Inventory)CONVERSION COST TOTAL EQUIVALENT UNITS Part c. Compute the unit cost of production (Sept 3). STEP 3: COMPUTE UNIT PRODUCTION COSTS FORMING DEPARTMENT M A T E R I A L C O S T S PER UNIT WIP, Dec 1 - (Beginning Inventory) Direct Material Material Costs incurred or added into production during December Total Material Costs (15 Puntos) $ $ TOTAL MATERIAL COSTS / EQUIVALENT UNITS = UNITS MATERIAL COST $_____________ DIVIDIDO ENTRE ___________ = $________ C O N V E R S I O N C O S T S PER UNIT WIP, Dec 1 - (Beginning Inventory) Conversion costs Conversion costs incurred or added into production during December TOTAL CONVERSION COSTS $ $ TOTAL CONVERSION COSTS / EQUIVALENT UNITS = UNIT CONVERSION COST $__________ DIVIDIDO ENTRE ___________ = $_________ MATERIAL UNIT COST CONVERSION UNIT COST TOTAL MANUFACTURING UNIT COST $ $ Part d. Determine the costs to be assigned to the units transferred out and in process (Step 4) FORMING DEPARTMENT (8 Puntos) C O S T RECONCILIATION REPORT COST ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) $ STARTED INTO PRODUCTION TOTAL COSTS $ COST ACCOUNTED FOR Completed & Transferred Out WIP Ending Inventory- Dec 31 MATERIALS $ WIP Ending Inventory- Dec31 CONVERSION COSTS TOTAL WIP Dec 31 (Ending Inventory) TOTAL COSTS $ $ Part e. Prepare a production cost report for the Forming Department for the month of December. FORMING DEPARTMENT (28 Puntos) PRODUCTION COST REPORT FOR THE MONTH ENDED DECEMBER 31, 2011 STEPS 1 AND 2 UNITS TO BE ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) STARTED INTO PRODUCTION TOTAL UNITS UNITS TO BE ACCOUNTED FOR TRANSFERRED OUT WIP, Dec 31 (Ending Inventory) TOTAL UNITS PHYSICAL UNITS STEP 1 STEP 1 PHYSICAL UNITS STEP 2 EQUIVALENT UNITS MATERIALS CONVERSION COSTS STEP 3 UNIT COSTS COSTS MATERIALS TOTAL COSTS AS OF DECEMBER (a) $ EQUIVALENT UNITS CONVERSION COSTS TOTAL (b) UNIT COST a/b $ $ $ $ $ STEP 4 C O S T ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) STARTED INTO PRODUCTION TOTAL COST FOR THE MONTH OF DECEMBER COST RECONCILIATION SCHEDULE Completed & Transferred Out WIP Ending Inventory-Dec 31-Direct Material Costs(Equivalent Units) $ WIP Ending Inventory-Dec 31-Conversion Costs (Equivalent Units) Total Costs WIP Ending Inventory-Dec 31 (Based on equivalent units) TOTAL COST FOR THE MONTH OF DECEMBER 2011 $ $ $ $ CHAPTER 4 ACTIVITY BASED COSTING (ABC) PROBLEM VI: (52 Points) JOKARY Company manufactures two models of TV: (1) Regular TV (2) Custom TV. The Regular TV model is a high volume product and the Custom TV model is a low volume product. The following information was provided by management: Volume of Production in units Direct Material per unit Direct Labor Hours per Unit Total Direct Labor (DL) Hours Direct Labor Cost per Unit Total MHO Predetermined MHO Per DL Hours Regular TV Quantity Per Unit 50,000 $100.00 5.0 250,000 $10.00 Custom TV Quantity Per Unit 10,000 $400.00 5.0 50,000 $10.00 Total 60,000 300,000 $1,650,000 $5.50* *$1,650,000 / 300,000 = $5.50 Management identified six activities cost pools and related cost drivers and accumulated overhead by cost pool as follows: Activity Cost Pools Purchasing Receiving Forming Inspecting Painting Warehousing Cost Drivers Orders Pounds Parts Inspections Units Cartons Estimated Overhead $ 200,000 161,000 581,000 208,000 240,000 260,000 $1,650,000 Expected Use of Cost Drivers 500 140,000 830,000 130,000 120,000 10,000 Expected Use of Drivers by Product Regular TV Custom TV 170 330 58,000 82,000 415,000 415,000 82,000 48,000 80,000 40,000 7,000 3,000 Instructions: a) Compute the total unit cost of each product under the traditional product costing. b) Compute the activity based overhead rates (per cost driver). c) Assign each activity's overhead cost pool to each product based on the use of cost drivers. (Include a computation of overhead cost per unit, rounding to the nearest cent.) d) Compute the total cost per unit for each product under ABC. b. Computation of each product unit costtraditional costing. Products Manufacturing Cost Direct materials Direct Labor Overhead Total unit cost Regular TV Model Custom TV Model c. Computation of the activity based overhead rates (per cost driver). Total Estimated Expected Use Activity Cost Pools Overhead of Cost Drivers Purchasing $ 200,000 500 Receiving 161,000 140,000 Forming 581,000 830,000 Inspecting 208,000 130,000 Painting 240,000 120,000 Warehousing 260,000 12,100 $1,650,000 Activity Based Overhead Rate d. Assign each activity's overhead cost pool to each product based on the use of cost drivers. Regular TV Model Custom TV Model ActivityExpected ActivityExpected Based Cost Use of Based Cost Activity Cost Pools Use of Overhead Drivers Overhead Assigned Assigned Drivers Rates Rates Purchasing 170 330 Receiving 58,000 82,000 Forming 415,000 415,000 Inspecting 82,000 48,000 Painting 80,000 40,000 Warehousing 8,040 4,060 Total Cost Assigned Units Produced Overhead Cost Per Unit Compute the total cost per unit for each product under ABC. ABC Manufacturing Cost Regular TV Model Direct Materials Direct Labor Overhead Total cost per unit e. Custom TV Model PROBLEM I MULTIPLE CHOICES (10 points) Instructions: Designate the best answer for each of the following questions. ____ 1. A debit balance in the Manufacturing Overhead account at the end of an interim month means that a. the balance should be reported as a current liability in the monthly balance sheet. b. corrective action by management is necessary. c. overhead has been under applied. d. cost of goods sold should be credited on the monthly income statement. The following data should be used for questions 7-10: Raw materials inventory, January 1 $10,000 Raw materials purchases Raw materials inventory, December 31 15,000 Direct labor Work in process, January 1 9,000 MHO Factory utilities Work in process, December 31 5,000 MOH Indirect labor Finished goods, January 1 16,000 MOH Factory depreciation Finished goods, December 31 20,000 Selling and administrative expenses ____ 2. Direct materials used is a. $630,000. b. $610,000. c. $600,000. d. $595,000. ____ 3. Total manufacturing cost added is a. $1,130,000. b. $1,127,000. c. $1,030,000. d. $1,340,000. ____ 4. Cost of goods manufactured equals a. $1,096,000. b. $1,097,000. c. $1,104,000. d. $1,109,000. ____ 5. The cost of goods sold is a. $1,123,000. b. $1,104,000. c. $1,116,000. d. $1,124,000. $600,000 230,000 75,000 25,000 200,000 210,000 PROBELM II CLASSIFICATION OF COSTS AND EXPENSES (20 points) Instructions: Classify the following manufacturing costs and expenses incurred by Garcia Manufacturing Co., making soda drinks, by using the following code letters: A. Direct material Cost B. Direct labor cost C. Manufacturing overhead cost D. Period Cost 1. 2. 3. 4. 5. Sale's commissions to employees Depreciation on factory equipment Promotions in a radio station Syrup, alkaline water and sugar Rent on leased factory machinery 6. 7. 8. 9. 10. Depreciation on delivery trucks Factory insurance cost Factory maintenance materials Wages of maintenance workers Wages of mixing line workers PROBLEM III Determine work in process and finished goods balances (12 points) Robles Manufacturing begins operations on October 1. Information from job cost sheets shows the following: Job A B C D E Manufacturing Costs Assigned October November December $14,600 $ 5,400 $9,300 $ 3,200 $5,800 $5,800 $7,400 $8,300 $4,400 Job A was completed in October. Job B was completed in November. Job C was completed in December. Each job was sold in the month following completion. Instructions: Determine the following amounts: 1 2 3 Work in process inv. Oct 31 Finished goods inv. Oct 31 Work in process inv. Nov 30 4 5 6 Finished goods inv. Nov 30 Work in process inv. Dec 31 Finished goods inv. Dec 31 PART IV JOB ORDER COST ACCOUNTING ENTRIES (24 points) The ledger accounts of ROPRIN Company are presented below, with an identification number for each. Instructions: Prepare appropriate job order cost system entries to record the data/events given below. 1. Cash 6. Manufacturing Overhead 11. Depreciation Expense 2. Accounts Receivable 7. Accounts Payable 12. Factory Labor 3. Raw Materials Inv. 8. Factory Wages Payable 13. Wages Expense 4. Work in Process Inv. 9. Accumulated Depreciation 14. Cost of Goods Sold 5. Finished Goods Inv. 10. Sales 15. Other Accounts Transaction Information for the Entry 1. Incurred factory labor, $110,000. 2. Charged direct labor to Job AA, $80,000. 3. Purchased raw materials on account, $180,000. 4. Charged direct materials to Job AA, $78,000. 5. Recorded the remaining factory labor as indirect labor related to Job AA 6. Incurred manufacturing overhead on account, $57,000. 7. Recognized depreciation on factory equipment, $30,000. 8. Charged overhead to Job AA at $1.25 for each direct labor dollar cost. 9. Recorded completion of Job AA. 10. Recorded cost of sales for Job AA. 11. Recorded revenue from sale of Job AA on account, $425,000. 12. Assume total actual overhead was $2,280,000 and total applied overhead was $2,230,000 for the year. Record the entry to close the MOH account and transfer the over or under applied overhead to Cost of Good Sold account. PROBLEM IV JOB ORDER COST ACCOUNTING ENTRIES: # 1 2 3 4 5 6 7 8 9 10 11 12 GENERAL JOURNAL ACCOUNTS DESCRIPTION DEBIT CREDIT Problem V. (20 Points) ROMALY, INC. has several processing departments. Costs charged to the Forming Department for December 2011 totaled $1,505,000 as follows: Work in Process, December 1 Materials Conversion costs Costs Added: Materials added Labor Manufacturing Overhead Total Conversion Costs Total Cost added Total Department Costs $ 103,400 60,000 $ 163,400 $ 1,100,800 $ 100,000 102,800 202,800 1,303,600 $ 1,467,000 Production records show that: 1. 60,000 units were in beginning work in process inventory a. 25% complete as to materials costs b. 70% complete as to conversion cost 2. 410,000 units were started into production 3. 40,000 units were in ending work in process inventory a. 40% complete as to materials costs b. 20% complete as to conversion costs. Required: a. b. c. d. e. Compute the physical unit flow, step 1. Determine the equivalent units of production for materials and conversion costs, step 2. Compute the unit cost of production, step 3. Determine the costs to be assigned to the units transferred out and in process. Prepare a production cost report for the Forming Department for the month of December. Problem V: FOUR SPETS TO PREPARE PRODUCTION COST REPORT (86 Puntos) FORMING DEPARTMENT INFORMATION (23 Puntos) WIP, Dec/1 (Beginning Inventory) DIRECT MATERIALS: _____________Units X _____% COMPLETED CONVERSION COSTS: _____________Units X _____ %COMPLETED UNITS STARTED IN PRODUCTION DURING DECEMBER UNITS COMPLETED AND TRANSFERRED OUT TO PACKING WIP, Dec/31 (Ending Inventory) DIRECT MATERIALS: _____________Units X _____% COMPLETED CONVERSION COSTS: _____________Units X _____% COMPLETED COSTS WIP, Dec/1 (Bebinning Inventory) DIRECT MATERIALS CONVERSION COSTS TOTAL COST OF WIP, Dec/1 (Beginning Inventory) COSTS ADDED DURING PRODUCTION IN DECEMBER DIRECT MATERIALS $ CONVERSION COSTS (DL $_________ + MOH $__________) TOTAL COST ADDED IN DECEMBER TOTAL COST AS OF DECEMBER 31 $ $ Part a. Compute the physical units flow (step 1). FORMING DEPARTMENT (6 Puntos) PHYSICAL UNITS TO BE ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) STARDED (TRANSFERRED) INTO PRODUCTION TOTAL UNITS COMPLETED AND TRANSFERRD OUT WIP, Dec 31 (Ending Inventory) TOTAL UNITS Part b. Determine the equivalent units of production for materials and conversion costs (step 2). FORMING DEPARTMENT (6 Puntos) EQUIVALENT UNITS MATERIAL CONVERSION COSTS UNITS TRANSFERRED OUT WIP, Dec 31 (Ending Inventory) MATERIALS WIP, Dec 31 (Ending Inventory)CONVERSION COST TOTAL EQUIVALENT UNITS Part c. Compute the unit cost of production (Sept 3). STEP 3: COMPUTE UNIT PRODUCTION COSTS FORMING DEPARTMENT M A T E R I A L C O S T S PER UNIT WIP, Dec 1 - (Beginning Inventory) Direct Material Material Costs incurred or added into production during December Total Material Costs (15 Puntos) $ $ TOTAL MATERIAL COSTS / EQUIVALENT UNITS = UNITS MATERIAL COST $_____________ DIVIDIDO ENTRE ___________ = $________ C O N V E R S I O N C O S T S PER UNIT WIP, Dec 1 - (Beginning Inventory) Conversion costs Conversion costs incurred or added into production during December TOTAL CONVERSION COSTS $ $ TOTAL CONVERSION COSTS / EQUIVALENT UNITS = UNIT CONVERSION COST $__________ DIVIDIDO ENTRE ___________ = $_________ MATERIAL UNIT COST CONVERSION UNIT COST TOTAL MANUFACTURING UNIT COST $ $ Part d. Determine the costs to be assigned to the units transferred out and in process (Step 4) FORMING DEPARTMENT (8 Puntos) C O S T RECONCILIATION REPORT COST ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) $ STARTED INTO PRODUCTION TOTAL COSTS $ COST ACCOUNTED FOR Completed & Transferred Out WIP Ending Inventory- Dec 31 MATERIALS $ WIP Ending Inventory- Dec31 CONVERSION COSTS TOTAL WIP Dec 31 (Ending Inventory) TOTAL COSTS $ $ Part e. Prepare a production cost report for the Forming Department for the month of December. FORMING DEPARTMENT (28 Puntos) PRODUCTION COST REPORT FOR THE MONTH ENDED DECEMBER 31, 2011 STEPS 1 AND 2 UNITS TO BE ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) STARTED INTO PRODUCTION TOTAL UNITS UNITS TO BE ACCOUNTED FOR TRANSFERRED OUT WIP, Dec 31 (Ending Inventory) TOTAL UNITS PHYSICAL UNITS STEP 1 STEP 1 PHYSICAL UNITS STEP 2 EQUIVALENT UNITS MATERIALS CONVERSION COSTS STEP 3 UNIT COSTS COSTS MATERIALS TOTAL COSTS AS OF DECEMBER (a) $ EQUIVALENT UNITS CONVERSION COSTS TOTAL (b) UNIT COST a/b $ $ $ $ $ STEP 4 C O S T ACCOUNTED FOR WIP, Dec 1 (Beginning Inventory) STARTED INTO PRODUCTION TOTAL COST FOR THE MONTH OF DECEMBER COST RECONCILIATION SCHEDULE Completed & Transferred Out WIP Ending Inventory-Dec 31-Direct Material Costs(Equivalent Units) $ WIP Ending Inventory-Dec 31-Conversion Costs (Equivalent Units) Total Costs WIP Ending Inventory-Dec 31 (Based on equivalent units) TOTAL COST FOR THE MONTH OF DECEMBER 2011 $ $ $ $ CHAPTER 4 ACTIVITY BASED COSTING (ABC) PROBLEM VI: (52 Points) JOKARY Company manufactures two models of TV: (1) Regular TV (2) Custom TV. The Regular TV model is a high volume product and the Custom TV model is a low volume product. The following information was provided by management: Volume of Production in units Direct Material per unit Direct Labor Hours per Unit Total Direct Labor (DL) Hours Direct Labor Cost per Unit Total MHO Predetermined MHO Per DL Hours Regular TV Quantity Per Unit 50,000 $100.00 5.0 250,000 $10.00 Custom TV Quantity Per Unit 10,000 $400.00 5.0 50,000 $10.00 Total 60,000 300,000 $1,650,000 $5.50* *$1,650,000 / 300,000 = $5.50 Management identified six activities cost pools and related cost drivers and accumulated overhead by cost pool as follows: Activity Cost Pools Purchasing Receiving Forming Inspecting Painting Warehousing Cost Drivers Orders Pounds Parts Inspections Units Cartons Estimated Overhead $ 200,000 161,000 581,000 208,000 240,000 260,000 $1,650,000 Expected Use of Cost Drivers 500 140,000 830,000 130,000 120,000 10,000 Expected Use of Drivers by Product Regular TV Custom TV 170 330 58,000 82,000 415,000 415,000 82,000 48,000 80,000 40,000 7,000 3,000 Instructions: a) Compute the total unit cost of each product under the traditional product costing. b) Compute the activity based overhead rates (per cost driver). c) Assign each activity's overhead cost pool to each product based on the use of cost drivers. (Include a computation of overhead cost per unit, rounding to the nearest cent.) d) Compute the total cost per unit for each product under ABC. b. Computation of each product unit costtraditional costing. Products Manufacturing Cost Direct materials Direct Labor Overhead Total unit cost Regular TV Model Custom TV Model c. Computation of the activity based overhead rates (per cost driver). Total Estimated Expected Use Activity Cost Pools Overhead of Cost Drivers Purchasing $ 200,000 500 Receiving 161,000 140,000 Forming 581,000 830,000 Inspecting 208,000 130,000 Painting 240,000 120,000 Warehousing 260,000 12,100 $1,650,000 Activity Based Overhead Rate d. Assign each activity's overhead cost pool to each product based on the use of cost drivers. Regular TV Model Custom TV Model ActivityExpected ActivityExpected Based Cost Use of Based Cost Activity Cost Pools Use of Overhead Drivers Overhead Assigned Assigned Drivers Rates Rates Purchasing 170 330 Receiving 58,000 82,000 Forming 415,000 415,000 Inspecting 82,000 48,000 Painting 80,000 40,000 Warehousing 8,040 4,060 Total Cost Assigned Units Produced Overhead Cost Per Unit Compute the total cost per unit for each product under ABC. ABC Manufacturing Cost Regular TV Model Direct Materials Direct Labor Overhead Total cost per unit e. Custom TV Model