7.

The following information was taken from the records of the Beaumont Corporation for the month of
July. (There were no inventories of work in process or finished goods on July 1.)
Units
Sales during month
Manufacturing costs for month:
Direct material
Direct labor
Overhead costs applied
Overhead costs under-applied
Inventories, July 31:
Work in process
Finished goods

Cost

8,000

$ ?
32,000
20,000
15,000
800

1,000
2,000

?
?

Indirect manufacturing costs are applied on a direct labor cost basis. The under-applied balance is due to
seasonal variations and will be carried forward. The following cost estimates have been submitted for the
work in process inventory of July 31: material, $3,000; direct labor, $2,000.
Required:
a.
b.
c.
d.
e.

Determine the number of units that were completed and transferred to finished goods during
the month.
Complete the estimate of the cost of work in process on July 31.
Compute cost of goods manufactured for the month.
Determine the cost of each unit completed during the month.
Determine the total amount debited to the Overhead Control accounts during the month.

ANS:
a.
b.

8,000 SOLD + 2,000 ENDING FG = 10,000 UNITS

$3,000
DM
2,000
DC
1,500
OH

=$15,000/$20,000

x
$2,000

$6,500

c.

d.

$32,000
20,000
15,000
(6,500)
$60,500

DM
DL
OH
- END WIP
= COGM
COGM/COMPLETE UNITS =

$ 60,500

10,000 UNITS
e.

OH APPLIED
+ OH UNDERAPPLIED
ACTUAL OH

PTS: 1
Meade Company

DIF: Moderate

$15,000
800
$15,800

OBJ: 2-6

= $6.05/UNIT

Meade Company uses activity-based costing. The company produces two products: computers and
PDA's. The annual production and sales volume of computers is 8,000 units and of PDA's is 6,000 units.
There are three activity cost pools with the following expected activities and estimated total costs:
Activity
Cost Pool
Activity 1
Activity 2
Activity 3

Estimated
Cost
$20,000
$37,000
$91,200

Expected
Activity
computers
100
800
800

Expected
Activity
PDA's
400
200
3,000

Total
500
1,000
3,800

87. Refer to Meade Company. Using ABC, the cost per unit of computers is approximately:
a. $2.40
b. $3.90
ANS: C
Activity
1
2
3

PTS: 1

c. $ 6.60
d. $10.59
Cost Allocation
$20,000 * 100/500 = $ 4,000 / 8,000
$37,000 * 800/1,000 = $29,600 / 8,000
$91,200 * 800/3,800 = $19,200 / 8,000
Total Cost per Unit
DIF: Difficult

Cost per Unit

$0.50
3.70
2.40
6.60

OBJ: 4-4

88. Refer to Meade Company. Using ABC, the cost per unit of PDA's is approximately:
a. $2.40
b. $3.90
ANS: D
Activity
1
2
3

PTS: 1

c. $12.00
d. $15.90
Cost Allocation
$20,000 * 400/500 = $ 16,000 / 6,000
$37,000 * 200/1,000 = $ 7,400/ 6,000
$91,200 * 3,000/3,800 = $72,000 / 6,000
Total Cost per Unit
DIF: Difficult

Cost per Unit

$2.67
1.23
12.00
15.90

OBJ: 4-4

10.You are asked to bring the following incomplete accounts of Anderson Printing, Inc. up to date through
January 31,20X9. Consider the data that appear in the T-accounts as well as additional information given
in items (a) through (i).
Andersons job-order costing system has two direct cost categories (direct material and direct
manufacturing labor) and one indirect cost pool (manufacturing overhead, which is allocated using direct
manufacturing labor costs).
Materials Inventory Control
12/31/20X8

Wages Payable Control

1/31/20X9

Balance 15,000

Work in Process Inventory Control

Balance 3,000
Manufacturing Department
Overhead Control
January 20X9
Charges 57,000
Manufacturing Overhead Control

Finished Goods Inventory Control

12/31/20X8
Balance 20,000

Cost of Goods Sold

Additional Information:
a. Manufacturing department overhead is allocated using a budgeted rate set every
December. Management forecasts next year's overhead and next year's direct
manufacturing labor costs. The budget for 20X9 is $400,000 of direct manufacturing
labor and $600,000 of manufacturing overhead.
b. The only job unfinished on January 31, 20X9 is No. 419, on which direct
manufacturing labor costs are $2,000 (125 direct manufacturing labor hours) and
direct material costs are $8,000.
c. Total material placed into production during January is $90,000.
d. Cost of goods completed during January is $180,000.
e. Material inventory as of January 31, 20X9 is $20,000.
f. Finished goods inventory as of January 31, 20X9 is $15,000.
g. All plant workers earn the same wage rate. Direct manufacturing labor hours for
January totals 2,500. Other labor and supervision totals $10,000.
h. The gross plant payroll on January paydays totals $52,000. Ignore withholdings. All
personnel are paid on a weekly basis.
i. All "actual" manufacturing department overhead incurred during January has already
been posted.
Required:
a. Material purchased during January
b. Cost of Goods Sold during January
c. Direct Manufacturing Labor Costs incurred during January
d. Manufacturing Overhead Allocated during January
e. Balance, Wages Payable Control, December 31, 20X8
f. Balance, Work in Process Inventory Control, January 31, 20X9
g. Balance, Work in Process Inventory Control, December 31, 20X8
h. Balance, Finished Goods Inventory Control, January 31, 20X9
i. Manufacturing Overhead underapplied or overapplied for January
ANS:

a.

$15,000 + Purchases - $20,000 = $90,000. Purchases = $95,000

b.

$20,000 + $180,000 - $15,000 = $185,000

c.

DL = $2,000 = $16/HR 2,500 HRS = $40,000

125

d.

$600,000 = 150% DL cost $40,000 = $60,000

$400,000

e.

BEGIN + $50,000 - $52,000 = $3,000 BEGIN = $5,000

f.

$2,000 + ($2,000 150%) + $8,000 = $13,000

g.

BEGIN + $90,000 + $40,000 + $60,000 - $180,000 = $13,000 BEGIN = $3,000

h.

$20,000 + $180,000 - $185,000 = END = $15,000

i.

APPLIED
ACTUAL

PTS: 1

$60,000
57,000
$ 3,000 overapplied
DIF: Moderate

OBJ: 5-4

13.Yummy Yogurt Company produces yogurt in two departments-Mixing and Finishing. In Mixing, all
ingredients except fruit are added at the start of production. In Finishing, fruit is added and then the
mixture is placed into containers. Adding the fruit to the basic yogurt mixture increases the volume
transferred in by the number of gallons of fruit added. Any spoilage that occurs is in the Finishing
Department. Spoilage is detected just before the yogurt is placed into containers or at the 98 percent
completion point. All spoilage is abnormal.
Finishing Department
5,000
5,500
1,200
1,700
9,000
1,000

BWIP (100% fruit, 0% container, 30% CC)

Gallons transferred in
Gallons of fruit added
EWIP (100% fruit, 0% container, 60% CC)
Gallons transferred out
Abnormal spoilage
BWIP Costs:
Transferred In
Fruit
CC
Current Costs:
Transferred In
Fruit
Containers
CC

9,700
10,500
15,000

12,400
54,000
11,000
98,000

gallons
gallons

$ 210,600

Total Costs

Prepare a cost of production report for October 20X9. The company uses weighted average.
ANS:
Yummy Yogurt Company
Cost Report
October 31, 20X9
5,000
5,500
1,200
11,700

BWIP
Trans. In
Fruit
Acctble. For
TI

Fruit

9,000
1,700
1,000
11,700

Transferred Out
EWIP
Abnormal Spoilage

Container

9,000
1,700
1,000
11,700

9,000
0
0
9,000

CC
9,000
1,020
980
11,000

Costs:
TI

Fruit

$ 9,700
12,400
$22,100
11,700
$1.89

BWIP
Current
EUP
Per unit

Container

$10,500
54,000
$64,500
11,700
$5.51

$ 0
11,000
$11,000
9,000
$1.22

$ 3,213
9,367
10,475

$ 23,055

$ 1,890
5,510
10,065

17,465

CC
$ 15,000
98,000
$113,000
11,000
$10.27

Cost Assignment:
EWIP
1,700 x $1.89 =
1,700 x $5.51 =
1,020 x $10.27 =
Spoilage
1,000 x $1.89 =
1,000 x $5.51 =
980 x $10.27 =
Transferred Out
$210,600 - 23,055 - 17,465 =

170,080
$210,600

Total accounted for

PTS: 1

DIF: Moderate

OBJ: 6-3 | 6-8

Anchor Company
The following information is available for Anchor Company for March 20Y2. All materials are added at
the start of production.
Beginning Work in Process: (80% complete)

8,000

units

35,000
6,000
2,500
15,000
19,500

Started
Normal spoilage (continuous)
Abnormal spoilage
Ending Work in Process: (55% complete)
Transferred out
Beginning Work in Process Costs:
Material
Conversion
Current Costs:
Material
Conversion
Total Costs

units
units
units
units
units

14,000
45,000

50,000
175,000
$ 284,000

14. Refer to Anchor Company. Prepare a cost of production report for March using FIFO.
ANS:
BI 8,000 + Started 35,000 = Accountable for 43,000
Anchor Company
Cost Report
March 31, 20Y2
Material
8,000
11,500
15,000
6,000
2,500
43,000

BWIP
S&C
EWIP
Norm
Abnorm.
Acctd. for

0
11,500
15,000
0
2,500
29,000

CC
1,600
11,500
8,250
0
2,500
23,850

Material: $50,000/29,000 = $1.72

Conversion Costs: $175,000/23,850 = $7.34
Cost Assignment:
Ending Work in Process
15,000 x $1.72 =
8,250 x $7.34 =
Abnormal Spoilage
2,500 x $9.06 =
Cost Transferred Out
$284,000 - 86,355 - 22,650 =

$ 25,800
60,555

22,650
174,995
$ 284,000

Total costs accounted for

PTS: 1

DIF: Moderate

$ 86,355

STA: 6-4 | 6-8

15. Refer to Anchor Company. Prepare the cost of production report assuming the weighted average method.
ANS:

BI 8,000 + Started 35,000 = Accountable for 43,000

Anchor Company
Cost Report
March 31, 20Y2
Material
Transferred Out
Ending Work In Process
Normal Spoilage
Abnormal Spoilage
Accounted For

19,500
15,000
6,000
2,500
43,000

19,500
15,000
0
2,500
37,000

CC
19,500
8,250
0
2,500
30,250

Material: $64,000/37,000 = $1.73

Conversion Costs: $220,000/30,250 = $ 7.27
Cost Assignment:
Ending Work in Process
15,000 x $1.73 =
8,250 x $7.27 =
Abnormal Spoilage
2,500 x $9.00 =
Transferred Out
$284,000 - 85,928 - 22,500 =
Total costs accounted for
PTS: 1

DIF: Moderate

$25,950
59,978

$ 85,928
22,500
175,572
$ 284,000

OBJ: 6-3 | 6-8

12.Pest Away Company manufactures a product effective in controlling beetles. The company uses a standard
cost system and a flexible budget. Standard cost of a gallon is as follows:
Direct material:
2 quarts of A
4 quarts of B
Total direct material

$14
16
$30

Direct labor:
2 hours
Manufacturing overhead
Total

16
12
$58

The flexible budget system provides for $50,000 of fixed overhead at normal capacity of 10,000 direct
labor hours. Variable overhead is projected at $1 per direct labor hour.
Actual results for the period indicated the following:
Production:
Direct material:
A
B

5,000 gallons
12,000 quarts purchased at a cost of $7.20/quart; 10,500 quarts used
20,000 quarts purchased at a cost of $3.90/quart; 19,800 quarts used

Direct labor:
Overhead:

9,800 hours worked at a cost of $79,380

Fixed
$48,100
Variable
21,000
Total overhead
$69,100

Required:
1.
2.

What is the application rate per direct labor hour, the total overhead cost equation, the
standard quantity for each material, and the standard hours?
Compute the following variances:
a. Total material price variance
b. Total material quantity variance
c. Labor rate variance
d. Labor efficiency variance
e. MOH volume variance
f. MOH efficiency variance
g. MOH spending variance, both fixed and variable

ANS:
1.

App rate = $6/DLH

TOHC = $50,000 + $1/DLH
Std O (A)
5,000 2 = 10,000
(B)
5,000 4 = 20,000
Std Hrs.
5,000 2 = 10,000

2.

a.

1. ($7.20 - $7.00) 12,000 =

2. ($3.90 - $4.00) 20,000 =

$2,400 U
2,000 F
$ 400 U

b.

1. (10,500 - 10,000) $7.00 =

2. (19,800 - 20,000) $4.00 =

$3,500 U
800 F
$2,700 U

c.

$79,380 - (9,800 $8) = $980 U

d.

(9,800 - 10,000) $8 = $1,600 F

e.

(10,000 - 10,000) $5 = 0

f.

(9,800 - 10,000) $1 = $200 F

g.

Fix Spd $48,100 - $50,000 = $1,900 F

Var Spd $21,000 - (9,800 $1) = $11,200 U

PTS: 1

DIF: Moderate

OBJ: 7-3

13. Adams Company operates a factory. One of its departments has three kinds of employees on its direct
labor payroll, classified as pay grades A, B, and C. The employees work in 10-person crews in the
following proportions:

Pay Grade
A
B
C
Total

No. of
Workers in
Standard Crew

Standard
Hourly
Wage Rate

Standard
Cost per
Crew Hour

6
3
1
10

$4
6
8

$24
18
8
$50

The work crews can't work short-handed. To keep a unit operating when one of the regular crew members
is absent, the head of the department first tries to reassign one of the department's other workers from
indirect labor operations.
If no one in the department is able to step in, plant management will pull maintenance department
workers off their regular work, if possible, and assign them temporarily to the department. These
maintenance workers are all classified as Grade D employees, with a standard wage rate of $10 an hour.
The following data relate to the operations of the department during the month of May:
1.

Actual work time, 1,000 crew hours.

2.

Actual direct labor hours:

Grade A, 5,400 hours.
Grade B, 3,200 hours.
Grade C, 1,300 hours.
Grade D, 100 hours.

3.

Standard crew hours for actual output, 980.

Required: Compute labor rate, mix, and yield variances.

ANS:

MIX VARIANCE
A

5,400 $4 =

B
C

3,200 $6 =
1,300 $8 =

100 $10 =

$21,60
0
19,200
10,400
1,00
0
$52,20
0

YIELD VARIANCE
6,000 $4 =
3,000 $6 =
1,000 $8 =

$24,00
0
18,000
8,00
0
$50,00
0

5,880 $4 =
2,940 $6 =
980 $8 =

$23,52
0
17,640
7,84
0
$49,00
0

MIX VARIANCE
YIELD VARIANCE
RATE VARIANCE
PTS: 1

= $2,200 UNF
= $1,000 UNF
= $ 800 UNF ($53,000 - $52,200)
DIF: Difficult

OBJ: 7-7

14. Alexander Company manufactures a certain product by mixing three kinds of materials in large batches.
The blendmaster has the responsibility for maintaining the quality of the product, and this often requires
altering the proportions of the various ingredients. Standard costs are used to provide material control
information. The standard material inputs per batch are:

Material A
Material B
Material C
Total batch

Quantity
(pounds)

Price
(per pound)

Standard Cost
of Material

420
70
10
500

$0.06
0.12
0.25

$25.20
8.40
2.50
$36.10

The finished product is packed in 50-pound boxes; the standard material cost of each box is, therefore,
$3.61.
During January, the following materials were put in process:
Material A
Material B
Material C
Total

181,000
33,000
6,000
220,000

lbs.
lbs.

Inventories in process totaled 5,000 pounds at the beginning of the month and 8,000 pounds at the end of
the month. It is assumed that these inventories consisted of materials in their standard proportions.
Finished output during January amounted to 4,100 boxes.
Required: Compute the total material quantity variance for the month and break it down into mix and
yield components.
ANS:
Material Quantity Variance:
A
B
C

(181,000 - 172,200) $0.06 =

(33,000 - 28,700) $0.12 =
(6,000 - 4,100) $0.25 =

528
516
475
$1,519

UNF
UNF
UNF

A 181,000 $0.06 = $10,860

B 33,000 $0.12 = 3,960
6,000 $0.25 =
1,500
C
$16,320
MIX VARIANCE =
YIELD VARIANCE =
Total

PTS: 1

184,800 $0.06 = $11,088 172,200 $0.06 = $10,332

30,800 $0.12 =
3,696 28,700 $0.12 =
3,444
4,400 $0.25 =
1,100
4,100 $0.25 =
1,025
$15,884
$14,801

$ 436 UNF
$1,083 UNF
$1,519 UNF

DIF: Moderate

OBJ: 7-7

9.Davenport Corporation manufactures three identifiable product lines, Products A, B, and C, from a basic
processing operation. The cost of the basic operation is $320,000 for a yield of 5,000 tons of Product A;
2,000 tons of Product B; and 1,000 tons of Product C. The basic processing cost is allocated to the
product lines in proportion to the relative weight produced.
Davenport Corporation does both the basic processing work and the further refinement of the three
product lines. After the basic operation, the products can be sold at the following prices per metric ton:
Product A$60
Product B$53
Product C$35
Costs to refine each of the three product lines follow:

Variable cost per metric ton

Total fixed cost

Product Lines
B

$8
$20,000

$7
$16,000

$4
$6,000

The fixed cost of the refining operation will not be incurred if the product line is not refined.
The refined products can be sold at the following prices per metric ton:
Product A$75
Product B$65
Product C$40
Required:
a. Determine the total unit cost of each product line in a refined state.
b. Which of the three product lines, if any, should be refined and which should be sold
after the basic processing operation? Show computations.
ANS:

a.

A
B
C

WT

ALLOCATION

5,000
2,000
1,000
8,000

5,000/8,000 $320,000 =
2,000/8,000 $320,000 =
1,000/8,000 $320,000 =

$200,000
80,000
40,000
$320,000

UNIT COST
A
B
C

b.

($200,000 + $20,000)/5,000 + $8 =
($80,000 + $16,000)/2,000 + $7 =
($40000 + $6,000)/1,000 + $4 =

$52
$55
$50

CHANGE IN REVENUE - CHANGE IN COST = CHANGE IN PROFIT

A
B
C

$75-$60 = $15 - ($20,000/5,000) + $8 =

$65-$53 = $12 - ($16,000/2,000) + $7 =
$40-$35 = $5 - ($6,000/1,000) + $4 =

+ $3
$3
$5

Therefore, process only Product A.

PTS: 1

DIF: Moderate

OBJ: 11-3

10. Rice Company produced three joint products at a joint cost of $100,000. These products were processed
further and sold as follows:
Product
A
B
C

Sales

Additional Processing Costs

$245,000
330,000
175,000

$200,000
300,000
100,000

The company has had an opportunity to sell at split-off directly to other processors. If that alternative had
been selected, sales would have been: A, $56,000; B, $28,000; and C, $56,000.
The company expects to operate at the same level of production and sales in the forthcoming year.
Required: Consider all the available information and assume that all costs incurred after split-off are
variable.
a.

Could the company increase net income by altering its processing decisions? If so,
what would be the expected overall net income?

b.

Which products should be processed further and which should be sold at split-off?

ANS:
a.

Currently NI is

Sales
Additional Processing Costs
- JC

NI can be increased by $11,000 if A is not processed.

$750,000
(600,000)
$150,000
(100,000)
$ 50,000

b.

Sales
- Cost
NI/(LOSS)

PTS: 1

$189,000
(200,000)
$(11,000)

$302,000
(300,000)
$ 2,000

$119,000
(100,000)
$ 19,000

DIF: Easy

OBJ: 11-3