Chapter 3
1.Rustafson Corporation is a diversified manufacturer of consumer goods. The company’s activity-based costing system has the following seven activity cost pools:
Activity Cost Pool EstimatedOverhead Cost Expected ActivityLabor-related $ 51,000 8,000 direct labor-hoursMachine-related $ 14,900 20,525 machine-hoursMachine setups $ 44,000 500 setupsProduction orders $ 18,000 400 ordersProduct testing $ 50,000 1,700 testsPackaging $ 67,125 5,200 packagesGeneral factory $101,125 8,000 direct labor-hours
Required:1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
General factory $ per DLH
2.
2. Compute the company’s predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.)
Predetermined overhead rate $ per DLH
3.
Sultan Company uses an activity-based costing system.At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:
Activity Cost Pool Activity Measure EstimatedOverhead Cost ExpectedActivityLabor-related Direct labor-hours $ 280,000 40,000 DLHsPurchase orders Number of orders $ 90,000 1,500 ordersParts management Number of part types $ 120,000 400 part typesBoard etching Number of boards $ 360,000 2,000 boardsGeneral factory Machine-hours $ 400,000 80,000 MHs
Required:1. Compute the activity rate for each of the activity cost pools.
General factory $ per MH
2. The expected activity for the year was distributed among the company’s four products as follows:
Expected Activity
Activity Cost Pool Product A Product B Product C Product DLabor-related (DLHs) 5,800 7,900 3,700 5,400Purchase orders (orders) 55 30 20 87Parts management (part types) 35 28 36 19Board etching (boards) 410 907 412 0General factory (MHs) 2,600 8,100 4,800 5,500
Using the ABC data, determine the total amount of overhead cost assigned to each product. (Leave no cells blank – be certain to enter “0” wherever required.)
Labor-related (DLHs) $
General factory (MHs)
Total $
Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:
Activity Cost Pool
Activity Measure ExpectedOverheadCost
Expected ActivityLabor-related Direct labor-hours $ 272,000 30,000 DLHsPurchase orders Number of orders $ 63,000 750 ordersProduct testing Number of tests $ 182,000 1,200 testsTemplate etching Number of templates $ 320,000 8,000 templatesGeneral factory Machine-hours $ 837,000 60,000 MHs
4.
Required:1. Compute the activity rate for each of the activity cost pools. (Round your answers to 2 decimal places.)
General factory $ per MH
5.
2. The expected activity for the year was distributed among the company’s four products as follows: Expected Activity
Activity Cost Pool Product A Product B Product C Product DLabor-related (DLHs) 7,600 11,200 3,800 9,400Purchase orders (orders) 160 190 110 240Product testing (tests) 105 535 260 400Template etching (templates) 2,400 0 5,500 0General factory (MHs) 12,500 16,500 13,200 18,800
Using the ABC data, determine the total amount of overhead cost assigned to each product. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
TotalOverhead CostProduct A $ Product B $ Product C $ Product D $
6.
Gino’s Restaurant is a popular restaurant of Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified the following major activities:
Activity Cost Pool Activity Measure Serving a party of diners Number of parties served Serving a diner Number of diners served Serving drinks Number of drinks ordered
A group of diners who ask to sit at the same table is counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served.
Data concerning these activities are shown below.
Serving a Party Serving a Dinner Serving Drinks TotalTotal cost $ 31,000 $ 214,000 $ 67,000 $ 312,000Total activity 6,000 parties 15,000 diners 10,000 drinks
Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month was $312,000 and that 15,000 diners had been served. Therefore, the average cost per diner was $20.80 ($312,000 ÷ 15,000 diners = $20.80 per diner).
Required:1. Compute the activity rates for each of the three activities.(Round your answers to 2 decimal places.)
Serving Drinks $ per drink
2. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
a. A party of four diners who order three drinks in total.b. A party of two diners who do not order any drinks.c. A lone diner who orders two drinks.
Party of one diner who orders two drinks $
3. Convert the total costs you computed in Requirement 2 above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
a. A party of four diners who order three drinks in total.b. A party of two diners who do not order any drinks.c. A lone diner who orders two drinks.
Party of one diner who orders two drinks $ per diner
7.
Adria Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:
Activity Cost Pool ActivityMeasure ExpectedOverheadCost ExpectedActivityLabor-related Direct labor-hours $206,500 35,000 DLHsPurchase orders Number of orders $ 68,040 900 ordersMaterial receipts Number of receipts $160,860 1,400 receiptsRelay assembly Number of relays $302,400 10,500 relaysGeneral factory Machine-hours $805,000 70,000 MHs
Required:1. Compute the activity rate for each of the activity cost pools.(Round your answer to 2 decimal places.)
General factory $ per MH
8.
2. The expected activity for the year was distributed among the company’s four products as follows:
Expected Activity
Activity Cost Pool Product A Product B Product C Product DLabor-related (DLHs) 5,600 7,600 9,900 8,900Production orders (orders) 135 300 80 435Material receipts (receipts) 360 175 220 545Relay assembly (relay) 0 4,550 0 6,950General factory (MHs) 10,300 20,700 16,500 20,500
Using the ABC data, determine the total amount of overhead cost assigned to each product. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
Product A $ Product B $ Product C $ Product D $
Chapter 4
1.
The PVC Company manufactures a high-quality plastic pipe that goes through three processing stages prior to completion.
Information on work in the first department, Cooking, is given below for May:
Production data:Pounds in process, May 1: materials 100%complete; conversion 90% complete 81,000Pounds started into production during May 460,000Pounds completed and transferred tothe next department ? Pounds in process, May 31:materials 80% complete; conversion 20% complete 55,000Cost data:Work in process inventory, May 1:Materials cost $ 158,200Conversion cost $ 50,500Cost added during May:Materials cost $ 822,300Conversion cost $ 277,520
The company uses the weighted-average method.
Required:1. Compute the equivalent units of production.
Equivalent units of production
2. Compute the costs per equivalent unit for the month. (Round your answers to 2 decimal places.)
Cost per equivalent unit $
3. Determine the cost of ending work in process inventory and of the units transferred out to the next department. (Round your intermediate calculation to 2 decimal places and final answers to the nearest whole dollar amount.)
Materials Conversion TotalCost of ending work in process inventory $ $ $ Cost of units completed and transferred out $ $ $
4. Prepare a cost reconciliation report for the month. (Round your intermediate calculation to 2 decimal places and final answers to the nearest whole dollar amount.)
Costs to be accounted for: Cost Reconciliation
Total cost to be accounted for $
Costs accounted for as follows:
Total cost accounted for $
2.
Brady Products manufactures a silicone paste wax that goes through three processing departments—Cracking, Blending, and Packing. All raw materials are introduced at the start of work in the Cracking Department. The Work in Process T-account for the Cracking Department for a recent month is given below:
Work in Process—Cracking Department
Inventory, May 1 228,200 Completed and transferred tothe Blending Department ?Materials 757,990 Conversion 403,410 Inventory, May 31 ?
The May 1 work in process inventory consisted of 70,000 pounds with $142,100 in materials cost and $86,100 in conversion cost. The May 1 work in process inventory was 100% complete with respect to materials and 80% complete with respect to conversion. During May, 341,000 pounds were started into production. The May 31 inventory consisted of 121,000 pounds that were 100% complete with respect to materials and 60% complete with respect to conversion. The company uses the weighted-average method to account for units and costs.
Required:1. Determine the equivalent units of production for May.
Equivalent units of production
2. Determine the costs per equivalent unit for May. (Round your answers to 2 decimal places.)
Cost per equivalent unit $
3. Determine the cost of the units completed and transferred to the Blending Department during May. (Round your intermediate calculation to 2 decimal places. Round your final answers to nearest whole dollar amount.)
Cost of units completed and transferred out
3. Materials Conversion Total Nature’s Way, Inc., keeps one of its production facilities busy making a perfume called Essence de la Vache. The perfume goes through two processing departments: Blending and Bottling.
The following incomplete Work in Process account is provided for the Blending Department for March:
Work in Process—Blending
March 1 balance 32,800 Completed and transferredto Bottling (760,000 ounces) ?Materials 153,600 Direct labor 71,200 Overhead 489,000 March 31 balance ?
The $32,800 beginning inventory in the Blending Department consisted of the following elements: materials,$7,900; direct labor, $3,600; and overhead applied, $21,300.Costs incurred during March in the Bottling Department were: materials used, $45,000; direct labor, $17,600;and overhead cost applied to production, $106,000.
Required:1. Prepare journal entries to record the costs incurred in both the Blending Department and Bottling Department during March.
a. Raw materials were issued for use in production.b. Direct labor costs were incurred.c. Manufacturing overhead costs for the entire factory were incurred, $636,000. (Credit Accounts Payable and usea single Manufacturing Overhead control account for the entire factory.)d. Manufacturing overhead was applied to production using a predetermined overhead rate.e. Units that were complete with respect to processing in the Blending Department were transferred to the BottlingDepartment, $662,000.f. Units that were complete with respect to processing in the Bottling Department were transferred to FinishedGoods, $790,000.g. Completed units were sold on account for $1,320,000. The cost of goods sold was $680,000. Items General Journal Debit Credit a. (Click to select)
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b. (Click to select)
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c. (Click to select)
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d. (Click to select)
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e. (Click to select)
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f. (Click to select)
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g. (Click to select)
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2. Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March. (The beginning balance in the Blending Department’s Work in Process account is given above.) (Record the transactions in the given order.)
Raw materials $ 208,600Work in process-Bottling department $ 52,000Finished goods $ 16,000
After posting the entries to the T-accounts, find the ending balances in the inventory accounts and the manufacturing overhead account. Accounts Receivable
(Click to select)
Raw Materials
Bal. (Click to select)
Bal.
Work in Process – Blending Department
Bal. (Click to select)
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Bal.
Work in Process – Bottling Department
Bal. (Click to select)
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Bal.
Finished Goods
Bal. (Click to select)
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Manufacturing Overhead
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Bal.
Accounts Payable (Click to select)
Salaries and Wages Payable (Click to select)
Sales (Click to select)
Cost of Goods Sold
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4.
The following information pertains to Yap Company’s Grinding Department for the month of April:
Units MaterialsCostsBeginning work in process 50,000 $13,200Started in April 96,000 $118,800Units completed and transferred out 112,500 Ending work in process 33,500
All materials are added at the beginning of the process. Using the weighted-average method, the cost per equivalent unit for materials is closest to:
$1.38
$1.02
$0.90
5.
Jaderston Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:
Beginning work in process inventory: Units in beginning work in process inventory 200Materials costs $2,500Conversion costs $2,800Percent complete with respect to materials 60%Percent complete with respect to conversion 35%Units started into production during the month 6,900Units transferred to the next department during the month 6,400Materials costs added during the month $136,300Conversion costs added during the month $243,400Ending work in process inventory: Units in ending work in process inventory 700Percent complete with respect to materials 55%Percent complete with respect to conversion 50%
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least two decimal places.
The cost per equivalent unit for materials for the month in the first processing department is closest to:
$19.55
$20.12
$20.46
$19.05
6.
In January, one of the processing departments at Seidl Corporation had ending work in process inventory of$43,000. During the month, $133,000 of costs were added to production and the cost of units transferred out from the department was $104,000.
In the department’s cost reconciliation report for January, the cost of beginning work in process inventory for the department would be:
$61,000
$14,000
$90,000
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