Burlington Clock Works, Twisto Pretzel and Bordin Company

Product Costing and Cost Accumulation

Exercise 3-27
Bordin Company manufactures finger splints for kids who get tendonitis from playing video games. The firm had the following inventories at the beginning and end of the month of January.
January 1 January 31
Finished goods $125,000 $117,000
Work in process 235,000 251,000
Raw material 134,000 124,000
The following additional data pertain to January operations.
Raw material purchased $191,000
Direct labor 300,000
Actual manufacturing overhead 175,000
Actual selling and administrative expenses 115,000
The company applies manufacturing overhead at the rate of 60 percent of direct-labor cost. Any over applied or under applied manufacturing overhead is accumulated until the end of the year.
Compute the following amounts.
1. The company's prime cost for January.
2. The total manufacturing cost for January.
3. The cost of goods manufactured from January.
4. The cost of goods sold for January.
5. The balance in Manufacturing Overhead account on January 31, Debit or credit?

Problem 3-42

The following data refer to Twisto Pretzel Company for the year 20x1
Work in-process Inventory, 12/31/x10 $ 8,100
Selling and administrative 13,800
Insurance on factory and equipment 3,600
Work in process inventory 12/31x1 8,300
Finished-goods inventory, 12/31/x1 14,000
Cash balance, 12/31/x1 6,000
Indirect material used 4,900
Depreciation on factory equipment 2,100
Raw-material inventory 10,100
Property taxes on factory 2,400
Finished-goods inventory, 12/31/x1 15,400
Purchases of raw material in 20x1 39,000
Utilities for factory 6,000
Utilities for sales and administrative offices 2,500
Other selling and administrative expenses 4,000
Indirect labor cost incurred 29,000
Depreciation of factory buildings 3,800
Depreciation of cars used by sales personnel 1,200
Direct-labor cost incurred 79,000
Raw material inventory, 12/31/x1 11,000
Account receivable, 12/31/x1 4,100
Rental for warehouse space to store raw material 3,100
Rental of space for company president's office 1,700
Applied manufacturing overhead 58,000
Sales revenue 205,800
Income tax expense 5,100

Required:
1. Prepare Twisto Pretzel Company's schedule of cost of goods manufactured for 20x1.
2. Prepare the company's schedule of cost of goods sold for 20x1. The company closes over applied or under applied Cost of Goods Sold.
3. Prepare the company's income statement for 20x1.

Problem 3-43

Burlington Clock Works manufactures fine, handcrafted clocks. The firm uses a job-order costing system, and manufacturing overhead is applied on the basis of direct-labor hours. Estimated manufacturing overhead for the year is $240,000. The firm employs 10 master clockmakers, who constitute the direct-labor force. Each of these employees is expected to work 2,000 ours during the year. The following events occurred during October.

a. The firm purchased 3,000 board feet of mahogany veneer at $11 per board foot.
b. Twenty brass counterweights were requisitioned for production. Each weight cost $23.
c. Five gallons of glue were requisitioned for production. The glue cost $20 per gallon. Glue is treated as an indirect material.
d. Depreciation on the clockworks building for October was $8,000.
e. A $400 utility bill was paid in cash.
f. The cards showed the following usage of labor:
Job number G60: 12 grandfather's clocks, 1,000 hours of direct labor
Job number C81: 20 cuckoo clocks, 700 hours of direct labor
The master clockmakers (direct-labor personnel) earn $20 per hour.
g. The October property tax bill for $910 was received but has not yet been paid in cash.
h. The firm employs laborers who perform various tasks such as material handling and shop cleanup. Their wages for October amounted to $2,500.
i. Job number G60, which was started in July, was finished in October. The total cost of the job was $14,400.
j. Nine of the grandfather's clock from job number G60 were sold in October for $1,500 each.
1. Calculate the firm's predetermined overhead rate for the year.
2. Prepare journal entries to record the events described above.