Solutions Guide: Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as is

Chapter 2 Exercise 3-28 The controller for Tender Bird Poultry, Inc. estimates that the company’s fixed overhead is $150,000 per year. She also has determined that the variable overhead is approximately $.15 per chicken raised and sold. Since the firm has a single product, overhead is applied on the basis of output units, chickens raised and sold. Required: 1. Calculate the predetermined overhead rate under each of the following output predictions: 100,000 chickens, 200,000 chickens, and 300,000 chickens. 2. Does the predetermined overhead rate change in proportion to the change in predicted production? Why? Exercise 3-31 Selected data concerning the past year’s operations of the Lone Star Leather Company are as follows: Inventories Beginning Ending Raw material...... $142,000 $ 162,000 Work in process ...... 160,000 60,000 Finished goods ...... 180,000 220,000 Other data: Direct material used ...... $ 652,000 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and manufacturing overhead applied at a rate of 60% of direct-labor cost) ...... 1,372,000 Cost of goods available for sale...... 1,652,000 Selling and administrative expenses ...... 63,000 Required: 1. What was the cost of raw materials purchased during the year? 2. What was the direct-labor cost charged to production during the year? 3. What was the cost of goods manufactured during the year? 4. What was the cost of goods sold during the year?

Exercise 3-35 The following information pertains to Paramus Metal Works for the year just ended. Budgeted direct-labor cost: 77,000 hours at $17 per hour Actual direct-labor cost: 79,000 hours at $18 per hour Budgeted manufacturing overhead: $993,300 Budgeted selling and administrative expenses: $417,000 Actual manufacturing overhead: Depreciation...... $225,000 Property taxes ...... 19,000 Indirect labor...... 79,000 Supervisory salaries ...... 210,000 Utilities ...... 58,000 Insurance ...... 32,000 Rental of space ...... 295,000 Indirect material (see data below) ...... 79,000 Indirect material: Beginning inventory, January 1 ...... 46,000 Purchases during the year...... 95,000 Ending inventory, December 31 ...... 62,000 Required: 1. Compute the firm’s predetermined overhead rate, which is based on direct-labor hours. 2. Calculate the over applied or under applied overhead for the year. 3. Prepare a journal entry to close out the Manufacturing Overhead account into Cost of Goods Sold. 4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1) and (2) above. Show how the solution will change if the following data change: budgeted manufacturing overhead was $990,000, property taxes were $25,000 and purchases of indirect material amounted to $97,000.

Exercise 4-18 Andromeda Glass Company manufactures decorative glass products. The firm employs a process costing system for its manufacturing operations. All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. The company’s production schedule for August follows. Units Work in process on August 1 (60% complete as to conversion) ...... 2,000 Units started during August ...... 3,500 Total units to account for ...... 5,500 Units from beginning work in process, which were completed and transferred out during August ...... 2,000 Units started and completed during August ...... 1,800 Work in process on August 31 (20% complete as to conversion)...... 1,700 Total units accounted for ...... 5,500 Required: Calculate each of the following amounts using weighted-average process costing. 1. Equivalent units of direct material during August. 2. Equivalent units of conversion activity during August.

Exercise 4-24 The November production of MVP’s Minnesota Division consisted of batch P25 (2,000 professional basketballs) and batch S33 (4,000 scholastic basketballs). Each batch was started and finished during November, and there was no beginning or ending work in process. Costs incurred were as follows: Direct material: Batch P25, $42,000, including $2,500 for packaging material; batch S33, $45,000. Conversion costs: Preparation Department, predetermined rate of $7.50 per unit; Finishing Department, predetermined rate of $6.00 per unit; Packaging Department, predetermined rate of $.50 per unit. (Only the professional balls are packaged.) Required: 1. Draw a diagram depicting the division’s batch manufacturing process. Refer to Exhibit 4–10 for guidance. 2. Compute the November product cost for each type of basketball. 3. Prepare journal entries to record the cost flows during November.

Problem 4-37 Plastic sheets ...... 10,000 $ 90,000 Standard model ...... 12,000 108,000 $36,000 Deluxe model ...... 6,000 54,000 18,000 $13,500 Executive model ...... 4,000 36,000 12,000 9,000 $18,000 Total ...... 32,000 $288,000 $66,000 $22,500 $18,000 Operation Costing; Unit Costs Direct labor ...... $228,000 $ 90,000 $45,000 $27,000 Manufacturing overhead ...... 360,000 108,000 58,500 36,000 Required: 1. For each product produced by Plattsburg Plastics Corporation during the month of March, determine the ( a ) unit cost and ( b ) total cost. Be sure to account for all costs incurred during the month.(Carry out unit costs to three decimal places, i.e., a tenth of a cent.) 2. Prepare journal entries to record the flow of production costs during March. . Chapter 3 .

Asisngment 1

a)  Chapter 3, p. 115 - Complete exercise 3-28

1. /
(a) / At 100,000 chicken volume:
(b) / At 200,000 chicken volume:
(c) / At 300,000 chicken volume:

2. The predetermined overhead rate does not change in proportion to the change in production volume. As production volume increases, the $150,000 of fixed overhead is allocated across a larger activity base. When volume rises by 100%, from 100,000 to 200,000 chickens, the decline in the overhead rate is 45.45% [($1.65 – $.90)/$1.65]. When volume rises by 50%, from 200,000 to 300,000 chickens, the decline in the overhead rate is 27.78% [($.90 – $.65)/$.90].

b) Chapter 3, p. 117 - Complete exercise 3-31

1. / Raw material:
Beginning inventory / $142,000
Add: Purchases / ?
Deduct: Raw material used / 652,000
Ending inventory / $162,000
Therefore, purchases for the year were / $672,000
2. / Direct labor:
Total manufacturing cost / $1,372,000
Deduct: Direct material / 652,000
Direct labor and manufacturing overhead / $ 720,000
Direct labor + manufacturing overhead / = / $720,000
Direct labor + (60%) (direct labor) / = / $720,000
(160%) (direct labor) / = / $720,000
Direct labor / = / $720,000
1.6
Direct labor / = / $450,000
3. / Cost of goods manufactured:
Work in process, beginning inventory / $ 160,000
Add: Total manufacturing costs / 1,372,000
Deduct: Cost of goods manufactured / ?
Work in process, ending inventory / $ 60,000
Therefore, cost of goods manufactured was / $1,472,000
4. / Cost of goods sold:
Finished goods, beginning inventory / $ 180,000
Add: Cost of goods manufactured / 1,472,000
Deduct: Cost of goods sold / ?
Finished goods, ending inventory / $ 220,000
Therefore, cost of goods sold was / $1,432,000

c) Chapter 3, p. 118 - Complete exercise 3-35

1. Predetermined overhead rate = $993,300 / 77,000 hours = $12.90 per hour

2. / To compute actual manufacturing overhead:
Depreciation / $225,000
Property taxes / 19,000
Indirect labor / 79,000
Supervisory salaries / 210,000
Utilities / 58,000
Insurance / 32,000
Rental of space / 295,000
Indirect material:
Beginning inventory, January 1 / $46,000
Add: Purchases / 95,000
Indirect material available for use / $141,000
Deduct: Ending inventory, December 31 / 62,000
Indirect material used / 79,000
Actual manufacturing overhead / $997,000
actual / applied
Overapplied / = / manufacturing / – / manufacturing
overhead / overhead / overhead
= / $997,000 – ($12.90 ´ 79,000*) = $22,100

*Actual direct-labor hours.

3. / Manufacturing Overhead / 22,100
Cost of Goods Sold / 22,100

d) Chapter 4, p. 155 - Complete exercise 4-18

1. / 5,500 equivalent units (refer to (a) in the following table)
2. / 4,140 equivalent units (refer to (b) in the following table)
Calculation of Equivalent Units: ANDROMEDA GLASS COMPANY
Weighted-Average Method
Physical Units / Percentage
of
Completion with Respect to Conversion /
Equivalent Units
Direct Material /
Conversion
Work in process, August 1 / 2,000 / 60%
Units started during August / 3,500
Total units to account for / 5,500
Units completed and transferred out during August /
3,800 /
100% /
3,800 /
3,800
Work in process, August 31 / 1,700 / 20% / 1,700 / 340
Total units accounted for / 5,500 / _____ / ____
Total equivalent units / (1) 5,500 / (2) 4,140

e) Chapter 4, p. 157 - Complete exercise 4-24

1. Diagram of production process:

/ Work-in-Process Inventory:
Preparation Department
Batch P25 Batch S33
Accumulated
by
department / Conversion costs: Direct-labor Manufacturing overhead
/ Work-in-Process Inventory:
Finishing Department
Batch P25 Batch S33
Accumulated
by
batch / Direct-
material
costs
/ Work-in-Process Inventory:
Packaging Department
Batch P25
Finished-Goods Inventory

2.  The product cost for each basketball is computed as follows:

Professional / Scholastic
Direct material:
Batch P25 ($42,000 ÷ 2,000) / $21.00 / -0-
Batch S33 ($45,000 ÷ 4,000) / -0- / $11.25
Conversion: Preparation Department / 7.50 / 7.50
Conversion: Finishing Department / 6.00 / 6.00
*Conversion: Packaging Department / .50 / -0-
Total product cost / $35.00 / $24.75

*The two production departments each worked on a total of 6,000 balls, but the Packaging Department handled only the 2,000 professional balls.

3. / Journal entries:
Work-in-Process Inventory: Preparation Department / 39,500*
Raw-Material Inventory / 39,500
*$39,500 = $42,000 of direct material
for batch P25 – $2,500 of packaging material
Work-in-Process Inventory: Preparation Department / 45,000*
Raw-Material Inventory / 45,000
*Direct-material cost for batch S33.
Work-in-Process Inventory: Preparation Department / 45,000*
Applied Conversion Costs / 45,000
*$45,000 = 6,000 units ´ $7.50 per unit
Work-in-Process Inventory: Finishing Department / 129,500*
Work-in-Process Inventory: Preparation Department / 129,500
*$129,500 = $39,500 + $45,000 + $45,000
Work-in-Process Inventory: Finishing Department / 36,000*
Applied Conversion Costs / 36,000
*$36,000 = 6,000 units ´ $6.00 per unit
Work-in-Process Inventory: Packaging Department / 66,500*
Finished-Goods Inventory / 99,000†
Work-in-Process Inventory: Finishing Department / 165,500
*$66,500 = $39,500 + (2,000 ´ $7.50) + (2,000 ´ $6.00).
These are the costs accumulated for batch P25 only.
†$99,000 = $45,000 + (4,000 ´ $7.50) + (4,000 ´ $6.00).
These are the costs accumulated for batch S33 only.
Work-in-Process Inventory: Packaging Department / 3,500
Raw-Material Inventory / 2,500*
Applied Conversion Costs / 1,000†
*Cost of packaging material for batch P25.
†$1,000 = 2,000 units ´ $.50 per unit
Finished-Goods Inventory / 70,000*
Work-in-Process Inventory: Packaging Department / 70,000
*$70,000 = $66,500 + $3,500

f) Chapter 4, p. 164 - Complete problem 4-37

1. / The unit costs and total costs for each of the products manufactured by Plattsburg Plastics Corporation during the month of March are calculated as follows:
Extrusion / Form / Trim / Finish
Units produced / 32,000 / 22,000 / 10,000 / 4,000
Material costs / $288,000 / $ 66,000 / $22,500 / $18,000
Unit material cost / 9.00 / 3.00 / 2.25 / 4.50
Conversion costs* / 588,000 / 198,000 / 103,500 / 63,000
Unit conversion cost / 18.375 / 9.00 / 10.35 / 15.75
*Direct labor and manufacturing overhead.
Unit Costs / Plastic Sheets / Standard Model / Deluxe Model / Executive Model
Material costs:
Extrusion / $9.00 / $9.00 / $9.00 / $9.00
Form / 3.00 / 3.00 / 3.00
Trim / 2.25 / 2.25
Finish / 4.50
Conversion costs:
Extrusion / 18.375 / 18.375 / 18.375 / 18.375
Form / 9.00 / 9.00 / 9.00
Trim / 10.35 / 10.35
Finish / _ / _ / _ / 15.75
Total unit cost / $27.375 / $39.375 / $51.975 / $72.225
Units produced / ´10,000 / ´12,000 / ´ 6,000 / ´ 4,000
Total product cost* / $273,750 / $472,500 / $311,850 / $288,900
*Total costs accounted for:
Product / Total
Product Costs
Plastic sheets / $ 273,750
Standard model / 472,500
Deluxe model / 311,850
Executive model / 288,900
Total / $1,347,000
2. / Journal entries:
Work-in-Process Inventory: Extrusion / 876,000
Raw-Material Inventory / 288,000
Applied Conversion Costs / 588,000
Finished-Goods Inventory / 273,750
Work-in-Process Inventory: Extrusion / 273,750
Work-in-Process Inventory: Forming / 866,250
Work-in-Process Inventory: Extrusion / 602,250
Raw-Material Inventory / 66,000
Applied Conversion Costs / 198,000
Finished-Goods Inventory / 472,500
Work-in-Process Inventory: Forming / 472,500
Work-in-Process Inventory: Trimming / 519,750
Work-in-Process Inventory: Forming / 393,750
Raw-Material Inventory / 22,500
Applied Conversion Costs / 103,500
Finished-Goods Inventory / 311,850
Work-in-Process Inventory: Trimming / 311,850
Work-in-Process Inventory: Finishing / 288,900
Work-in-Process Inventory: Trimming / 207,900
Raw-Material Inventory / 18,000
Applied Conversion Costs / 63,000
Finished-Goods Inventory / 288,900
Work-in-Process Inventory: Finishing / 288,900