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Cost Accounting Explained in this Solution

Solve the following problems. Show all your calculations. You may use the space provided. (If you prefer to use Excel or add supplemental pages within this document, please clearly identify the problem number.)

11. Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:

Work-in-process inventory (January 1) $140,400
Work-in-process inventory (March 31) 171,000
Finished goods inventory (January 1) 540,000
Finished goods inventory (March 31) 510,000

Direct materials used 378,000
Indirect materials used 84,000
Direct manufacturing labor 480,000
Indirect manufacturing labor 186,000

Property taxes on manufacturing plant building 28,800
Salespersons' company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600

Miscellaneous plant overhead 135,000
Plant utilities 92,400
General office expenses 305,400
Marketing distribution costs 30,000

Required:
a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare a cost of goods sold schedule for the quarter.

12. Furniture, Inc., sells lamps for $30. The unit variable cost per lamp is $22. Fixed costs total $9,600.

Required:
a. What is the contribution margin per lamp?
b. What is the breakeven point in lamps?
c. How many lamps must be sold to earn a pretax income of $8,000?
d. What is the margin of safety, assuming 1,500 lamps are sold?

13. Jordan Company has two departments, X and Y. Overhead is applied based on direct labor cost in Department X and machine-hours in Department Y. The following additional information is available:

Budgeted Amounts Department X Department Y
Direct labor cost $180,000 $165,000
Factory overhead $225,000 $180,000
Machine-hours 51,000 mh 40,000 mh

Actual data for Job #10 Department X Department Y
Direct materials $10,000 $16,000
requisitioned
Direct labor cost $11,000 $14,000
Machine-hours 5,000 mh 3,000 mh

Required:
a. Compute the budgeted factory overhead rate for Department X.
b. Compute the budgeted factory overhead rate for Department Y.
c. What is the total overhead cost of Job 10?
d. If Job 10 consists of 50 units of product, what is the unit cost of this job?

14. The following information pertains to Amigo Corporation:

Month Sales Purchases
July $30,000 $10,000
August 34,000 12,000
September 38,000 14,000
October 42,000 16,000
November 48,000 18,000
December 60,000 20,000

Cash is collected from customers in the following manner:
Month of sale (2% cash discount) 30%
Month following sale 50%
Two months following sale 15%
Amount uncollectible 5%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.

Required:
a. Prepare a summary of cash collections for the 4th quarter.
b. Prepare a summary of cash disbursements for the 4th quarter.

15. Madzinga's Draperies manufactures curtains. A certain window requires the following:

Direct materials standard 10 square yards at $5 per yard
Direct manufacturing labor standard 5 hours at $10

During the second quarter, the company made 1,500 curtains and used 14,000 square yards of fabric costing $68,600. Direct labor totaled 7,600 hours for $79,800.

Required:
a. Compute the direct materials price and efficiency variances for the quarter.
b. Compute the direct manufacturing labor price and efficiency variances for the quarter.

16. The Wildcat Company has provided the following information:

Units of Output 30,000 Units 42,000 Units
Direct materials $ 180,000 $ 252,000
Workers' wages 1,080,000 1,512,000
Supervisors' salaries 312,000 312,000
Equipment depreciation 151,200 151,200
Maintenance 81,600 110,400
Utilities 384,000 528,000
Total $2,188,800 $2,865,600

Using the high-low method and the information provided above,
a. identify the linear cost function equation and
b. estimate the total cost at 36,000 units of output.

17. Bruster Company sells its products for $66 each. The current production level is 25,000 units, although only 20,000 units are anticipated to be sold.

Unit manufacturing costs are:
Direct materials $12.00
Direct manufacturing labor $18.00
Variable manufacturing costs $9.00
Total fixed manufacturing costs $180,000
Marketing expenses $6.00 per unit, plus $60,000 per year

Required:
a. Prepare an income statement using absorption costing.
b. Prepare an income statement using variable costing.

18. Lewis Auto Company manufactures a part for use in its production of automobiles. When 10,000 items are produced, the costs per unit are:

Direct materials $ 12
Direct manufacturing labor 60
Variable manufacturing overhead 24
Fixed manufacturing overhead 32
Total $128

Monty Company has offered to sell Lewis Auto Company 10,000 units of the part for $120 per unit. The plant facilities could be used to manufacture another part at a savings of $180,000 if Lewis Auto accepts the supplier's offer. In addition, $20 per unit of fixed manufacturing overhead on the original part would be eliminated.

Required:
a. What is the relevant per unit cost for the original part?
b. Which alternative is best for Lewis Auto Company? By how much?

Solution Preview

Below are eight essay questions
Solve the following problems. Show all your calculations. You may use the space provided. (If you prefer to use Excel or add supplemental pages within this document, please clearly identify the problem number.)

11. Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:

Work-in-process inventory (January 1) $140,400
Work-in-process inventory (March 31) 171,000
Finished goods inventory (January 1) 540,000
Finished goods inventory (March 31) 510,000

Direct materials used 378,000
Indirect materials used 84,000
Direct manufacturing labor 480,000
Indirect manufacturing labor 186,000

Property taxes on manufacturing plant building 28,800
Salespersons' company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600

Miscellaneous plant overhead 135,000
Plant utilities 92,400
General office expenses 305,400
Marketing distribution costs 30,000

Required:
a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare a cost of goods sold schedule for the quarter.

Messinger Manufacturing Company
Cost of Goods Manufactured and Sold
For Quarter
Direct raw materials used 378,000
Direct labor 480,000
Overhead
Indirect Material 84,000
Indirect Labor 186,000
Property taxes on Plant Building 28,800
Depreciation of manufacturing equipment 264,000
Miscellaneous plant overhead 135,000
Plant Utilities 92,400 790,200
Total manufacturing costs 1,648,200
Plus: Beginning W-I-P inventory 140,400
Total W-I-P inventory 1,788,600
Less: Ending W-I-P inventory (171,000)
Cost of goods manufactured 1,617,600
Plus: Beginning finish. goods inventory 540,000
Cost of goods available for sale 2,157,600
Less ending finished goods inventory (510,000)
Cost of goods sold $1,647,600

12. Furniture, Inc., sells lamps for $30. The unit variable cost per lamp is $22. Fixed costs total $9,600.

Required:
a. What is the contribution margin per lamp?

Contribution margin per lamp = unit selling price - unit variable cost
= 30-22 = $8

b. What is the breakeven point in lamps?

Breakeven point in units = Fixed cost/contribution margin per unit
Breakeven point in units = 9,600/8 = 1,200 units

c. How many lamps must be sold to earn a pretax income of $8,000?

Units to be sold = (Fixed cost + desired profit)/unit contribution margin
Units to be sold = (9,600+8,000)/8 = 2,200 units

d. What is the margin of safety, assuming 1,500 lamps are sold?

Margin of safety = Current Sales - Breakeven Sales
Margin of Safety = 1,500-1,200 = 300 units or $9,000

13. Jordan Company has two departments, X and Y. Overhead is applied based on direct labor cost in Department X and machine-hours in Department Y. The following additional information is available:

Budgeted Amounts Department X Department Y
...

Solution Summary

The solution explains various questions relating to cost accounting. 8 questions answered.

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