PART 2 MATCHING

Use the correct number to designate each item below. Assume a clothing manufacturer.

1. product costs -- direct materials

2. product costs -- direct labor

3. product costs -- manufacturing overhead

4. period costs

A) _____3 rent expense on the building where the garments are made

B) _____4 supplies used to prepare the trade show booth

C) _____3 wages of quality inspectors

D) _____3 spools of thread

E) _____2 wages of fabric cutters and sewing machine operators

F) _____1 bolts of fabric

G) _____4 depreciation expense on sales office computers

H) _____4 the CEOs salary

I) _____4 advertising expense

J) _____3 sewing machine oil

PART 3 SHORT PROBLEMS (50 points)

Show all work for partial credit.

1. [10 points] London Ceramics makes custom ceramic tiles. During March, the company started and finished Job #266. Job #266 consists of 2,500 tiles; each tile sells for $10.00. The company's records show the following direct materials were requisitioned for Job #266.

Basic terra cotta tiles: 2,500 units

Specialty paint: 5 quarts

High gloss glaze: 4 quarts

Labor time records show the following employees worked on Job #266:

Alice Cooper: 18 hours

Matthew Kline: 20 hours

London Ceramics allocates manufacturing overhead at a rate of $27 per direct labor hour.

A) Complete Job #266's job cost record below to calculate the unit cost of the job.

Job cost per unit =

Manufacturing Cost Information	Cost Detail	Cost Total
Direct Materials:
Basic Terra Cotta Tiles	$4.00 per unit
Specialty Paint	$7.00 per quart
High gloss glaze	$12.00 per quart
Total Direct Materials Cost
Direct Labor:
Cooper	$25 per hour
Kline	$15 per hour
Total Direct Labor
Manufacturing Overhead
Total Job Cost	DM+DL+MOH
Number of Units
Job Cost per Unit

B) What is the gross profit per tile on Job #266?

2. [10 points] Selected financial information for Brookeville Manufacturing is presented in the following table (in $ thousands).

Sales revenue	$ 4,000
Purchases of direct materials	$ 400
Direct labor	$ 450
Manufacturing overhead	$ 620
Operating expenses	$ 650
Beginning raw materials inventory	$ 200
Ending raw materials inventory	$ 180
Beginning work in process inventory	$ 320
Ending work in process inventory	$ 410
Beginning finished goods inventory	$ 250
Ending finished goods inventory	$ 200

A) Calculate direct materials used.

B) Calculate cost of goods manufactured.

C) Calculate cost of goods sold.

D) Calculate operating income.

3. [10 points] Ryan Fabrication produces small electronic components for sale to other manufacturers. There are two fabrication departments. The primary cost driver of the Machining Department is machine hours, and the primary cost driver of the Assembly Department is direct labor hours. Ryan currently uses a plant-wide overhead rate, based on direct labor hours. Ryan is considering switching to the use of departmental overhead rates, and has gathered the following estimates for the year:

Department	Total Estimated Manufacturing Overhead Cost	Total Estimated Direct Labor Hours	Total Estimated Machine Hours
Machining Department	$600,000	3,100	14,500
Assembly Department	$500,000	17,900	0
Total Plant-wide	$1,100,000	21,000	14,500

Job 200, consisting of 1,000 units, was completed at the end of September. The job is priced at $10 per unit. The average labor rate is $20 per hour. Additional information about Job 200:

Department	Actual Direct Materials Used on Job 200	Actual Direct Labor Hours for Job 200	Actual Machine Hours for Job 200
Machining	$1,230	1	1
Assembly	$20	4	0
Total	$1,250	5	1

Compute the amount of manufacturing overhead allocated to Job 200 using the plant-wide overhead rate:

Compute the amount of manufacturing overhead allocated to Job 200 using departmental overhead rates:

Did the use of plant-wide rate over-cost or under-cost Job 200? By how much

What would be the gross profit per unit sold, if the total product cost was calculated using departmental overhead rates

4. [10 points] Kramer Company manufactures a variety of products and is considering switching to an activity-based costing system. They have been using a plant-wide manufacturing overhead rate based upon machine hours. Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows:

Activity	Allocation Base	Total Estimated Cost Pool	Total Estimated Activity	Activity Cost Allocation Rate
Machine maintenance cost	Machine Hours	$130,000	13,000 machine hours
Engineering change orders	Change orders	$240,000	4,000 change orders
Hazardous waste disposal	Pounds of hazardous waste	$1,190,000	3,500 pounds of waste
Total overhead cost	Not applicable	$1,560,000	Not Applicable	Not Applicable

During the year, Job 150 was started and completed. Usage data for this job are as follows:

Cost category	Quantity	Cost per unit	Total Cost
Direct materials	270 pounds of direct materials	$60 per pound
Direct labor hours	50 direct labor hours	$15 per hour
Machine maintenance cost	100 machine hours
Engineering change orders	5 change orders
Hazardous waste disposal	50 pounds of waste

Complete the blank boxes in the tables above for Activity Cost Allocation Rate and Total Cost.

Calculate the total product cost of Job 150 using activity-based costing:

Calculate the plant-wide rate manufacturing overhead (MOH) rate:

Calculate the total product cost of Job 150 using the plant-wide rate:

What is the primary factor that causes the two product costs calculated above to be different?

5. [10 points] Sunrise Enterprises uses a job costing system. Record the following transactions in Sunrise Enterprises general journal for the current month:

a) Purchased raw materials on account, $100,000.

b) Requisitioned $41,300 of direct materials and $7,000 of indirect materials for use in production.

c) Factory payroll incurred, $110,000; 75% direct labor, 25% indirect labor.

d) Recorded depreciation expense on factory equipment $25,000, and paid factory utilities of $56,200 on account.

e) Allocated manufacturing overhead costs based on 120% of direct labor cost.

f) Cost of completed production for the current month, $135,000.

g) Cost of finished goods sold, $112,000; selling price, $162,000 (all sales on account).

ENTRY		ACCOUNTS	DEBIT	CREDIT
1	A
2
3	B
4
5
6	C
7
8
9	D
10
11
12	E
13
14	F
15
16	G
17
18
19

Sunrise Enterprises

Chart of Accounts

Cash

Accounts Receivable

Raw Materials Inventory

Work in Process Inventory

Finished Goods Inventory

Manufacturing Overhead

Office Supplies

Prepaid Insurance

Factory Equipment

Administrative Equipment

Buildings

Accumulated Depreciation Factory Equipment

Accumulated Deprecation Administrative Equipment

Accumulated Depreciation Buildings

Patents

Accounts Payable

Wages Payable

Retained Earnings

Sales Revenue

Cost of Goods Sold

Depreciation Expense

Insurance Expense

Rent Expense

Salaries and Wages Expense

Supplies Expense

Utilities Expense