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COST ACCOUNTING By Matz usry 9th edition solutions

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COST ACCOUNTING By Matz usry 9th edition solutions …

COST ACCOUNTING By Matz usry 9th edition solutions
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  • 1. COST ACCOUNTING 9TH EDITION MUHAMMAD SHAHID MBA (FINANCE) UOS Digitally signed by Muhammad Shahid DN: CN = Muhammad Shahid, C = US, O = 3S Inc Location: Sargodha Date: 2008.05.16 07:42:29 +05’00’ Page 1 of 16
  • 2. COST ACCOUNTING 9TH EDITION CHAPTER 2 EXERCISES Exercise 2.1 1) Identify the estimated conversion cost per unit. Direct Labour $ 20 Variable Factory overhead $ 15 Fixed Factory Overhead $ 6 $ 41 2) Identify the estimated Prime Cost per unit. Direct Material $ Direct Labour $ $ 32 20 52 3) Determine the estimated total varialbe cost per unit. Direct Material $ 32 Direct Labour $ 20 Variable Factory overhead $ 15 Variable marketing $ 3 Total Variable Cost $ 70 4) Compute the total cost that would be incurred during a month with a production level of a) 12000 Units Cost Item Estimated Unit Cost Total Cost Direct Material $ 32 384000 Direct Labour $ 20 240000 Variable Factory overhead $ 15 180000 Fixed factory Over head $ 6 72000 Total Cost $ 73 876000 b) Sale Level of 8000 Units Cost Item Direct Material Direct Labour Variable Factory overhead Fixed factory Over head Variable marketing Fixed marketing Total Cost Estimated Unit Cost $ 32 $ 20 $ 15 $ 6 $ 3 $ 4 $ 80 Total Cost 256000 160000 120000 48000 24000 32000 640000 Exercise 2.2 The Mercaldo Company Income Statement For the Period ended on 31st December, 19B Sales 1995000 X85%= Less Cost of Sales Variable Cost 11571000 X 85%= 9835350 Fixed Cost = 7623000 Total Cost of Sales Loss for the Year 16957500 17458350 (500850) Page 2 of 16
  • 3. COST ACCOUNTING 9TH EDITION Exercise 2.3 3. Manufacturing Costs: Cost of Goods Manufactured; Cost of goods sold. Crockett Company 1 Opening Purchases Transport in Material Control 176000 2400000 32000 2608000 3 5 1 2 3 Payroll Control WIP 2412000 3204000 Closing 196000 2608000 3204000 FOH Control 1885600 WIP 1885600 Opening WIP 2 Finished Goods 620000 7494600 CGS Closing 8114600 4 1885600 1885600 opening Material Labour FOH 6 7547200 567400 8114600 Total Manufacturing Cost Cost of Goods Manufactured Cost of Goods Sold WIP 3204000 3204000 Work in Process 129800 2412000 F.Goods 3204000 1885600 Closing 7631400 7494600 136800 7631400 Cost of Goods Sold F. Goods 7547200 (2412000+3204000+1885600) 7501600 7494600 7547200 OR The Crocket Company Cost of Goods Sold Statement For the Period ended on 31st, December 19B. Description Amount $ Direct Material Opening Inventory of Raw Material Add Purchases Add Transportation In Total Cost of Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost 1: Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 2: Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory 3: Cost of Goods Sold $ 176000 2400000 32000 2432000 2608000 196000 2412000 3204000 1885600 7501600 129800 7631400 136800 7494600 620000 8114600 567400 7547200 Page 3 of 16
  • 4. COST ACCOUNTING 9TH EDITION Exercise 2.4 4. Journal Entires for the Cost accounting Cycle. Date a Description Work in process Control FOH Control Material Control Direct & Indirect Material issued b Payroll Control P.R Amount Debit($) Credit($) 24500 4500 29000 44000 Income Tax Withheld FICA Tax Accrued Payroll Payroll Recorded and deductions made b-2 Accrued Payroll 7000 3300 33700 33700 Voucher Payable Voucher of Payroll made Voucher Payable 33700 33700 Bank Payment of Payroll is made c d e f Work in process Control FOH Control Sales Salaries Payroll Distribution of payroll is made FOH Control Sales Expenses Contorl SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded 33700 30000 6000 8000 44000 4932 1096 2376 352 3300 Work in process Control FOH Applied FOH is charged to production 22932 Finished Goods 60000 22932 Work in process Control Cost of Production completed recorded g Material Control 60000 50000 Voucher Payable 50000 Material Purchased h-1 Cost of Goods Sold 20000 Finished goods Cost of Goods Sold recorded h-2 Accounts Receivables 20000 26000 Sales 26000 Page 4 of 16
  • 5. COST ACCOUNTING 9TH EDITION Finished Goods Shipped to Customers 5. Journal entries for the cost accountng Cycle. MultiElectro Incorporated Date a b b-2 b-3 c d e f g Description Material Control Voucher Payable Direct Material Purchased P.R Amount Debit($) Credit($) 120000 120000 Payroll Control Income Tax Withheld FICA Tax Accrued Payroll Payroll Recorded and deductions made 90000 Accrued Payroll Voucher Payable Voucher of Payroll made 67500 Work in process Control FOH Control Sales Salaries Admin Salaries Payroll Distribution of payroll is made 45000 9000 15000 21000 Material Control Voucher Payable Indirect Material & Supplies Purchased 26250 FOH Control Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded Work in process Control FOH Control Sales Expense Control Material Control Direct and Indirect Material Issued Voucher Payable Material Control Deffective Shipping Supplies returned to vendors Vouchers Payable Bank Accounts Payable including Salaries paid 15750 6750 67500 67500 90000 26250 6156 1710 2394 2790 720 6750 60000 15000 4500 79500 900 900 142500 142500 Page 5 of 16
  • 6. COST ACCOUNTING 9TH EDITION FOH Control Accumulated Depreciaton Depreciation on Factory Building recorded i 1000 FOH Control Voucher Payable Sundry FOH recorded as Liability. h 6900 1000 6900 Work in process Control FOH Control Actual FOH is charged to Production k 38056 Finished Goods Work in process Control Cost of Production completed recorded j 126000 38056 126000 Cost of Goods Sold Finished goods Cost of Goods Sold recorded l-1 96000 96000 Accounts Receivables Sales Finished Goods Shipped to Customers l-2 150000 150000 Exercise 2.6 6. Journal entries for the cost accountng Cycle. Romer Company for month of February Date Description a Work in Process Control FOH Control Material Control Direct & Indirect Material issued 18500 2800 Finished Goods Work in Process Control Work in Process Completed and transferred to Finished goods 51800 Material Control Voucher Payable Material Purchased and received 32000 Payroll Control FICA Tax Federal Income Tax State Income Tax Accrued Payroll Payroll Recorded and deductions made 50000 Accrued Payroll Voucher Payable Voucher of Payroll made 50000 b c d d-2 P.R Amount Debit($) Credit($) 21300 51800 32000 3750 8750 2500 35000 50000 Page 6 of 16
  • 7. COST ACCOUNTING 9TH EDITION e f g h i i-2 j Work in process Control FOH Control Marketing Salaries Admin Salaries Payroll Distribution of payroll is made 27500 9000 8500 5000 50000 FOH Control Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded 5001 1165 685 2700 400 3750 FOH Control Accumulated Depreciation Prepaid Insurance Vouchers Payable FOH Expenses Recorded 11300 9450 600 1250 Work in process Control FOH Applied Actual FOH is charged to Production 28100.5 28100.5 Cost of Goods Sold (92120*100/140) Finished goods Cost of Goods Sold recorded 65800 Accounts Receivables Sales Sale of Finished Goods Recorded 92120 Bank 76000 65800 92120 Accounts Receivables Accounts receivables collected 76000 Exercise 2.7 7. Cost of Goods Manufactured Statement. TheThornton Company Cost of Goods Manufactured Statement For the Period ended on ----Description Amount $ $ Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost 1 Total Manufacturing Cost Add Opening Work in Process Inventory 16200 20000 36200 17000 19200 16500 8580 44280 3600 Page 7 of 16
  • 8. COST ACCOUNTING 9TH EDITION Cost of goods to be manufactured Less: Closing Work in process Inventory 2 Cost of Goods manufactured 47880 7120 40760 Exercise 2.8 8. Cost of Goods Sold Statement. Pensacola Corporation Cost of Goods Sold Statement For the Period ended on 31st, December Description Amount $ Direct Material Opening Inventory of Raw Material Add Purchases Add Freight on Material Total Cost of Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Other FOH Depreciation 1 Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 2 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory 3 Cost of Goods Sold $ 88000 366000 6600 372600 460600 64000 396600 523600 468400 104400 572800 1493000 29800 1522800 38800 1484000 54200 1538200 66000 1472200 Page 8 of 16
  • 9. COST ACCOUNTING 9TH EDITION Problems Chapter-2 2.1 Cost of Goods manufactured; Prime and Conversion costs. Mat Company's Cost of Goods Manufactured & Sold Statement For the Period ended on 31st, December Description Amount $ $ Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 1 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory Cost of Goods Sold 2.2 20000 110000 130000 26000 104000 160000 80000 344000 40000 384000 36000 348000 102000 450000 105000 345000 Income Statement relationships. Company A Description Amount $ Sales Cost of Goods Sold Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold Gross Profit $ 4,000,000 3,800,000 600,000 4,400,000 1,200,000 3,200,000 800,000 Company B Description Amount $ Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold $ $ 1,490,000 190,000 1,300,000 Company C Page 9 of 16
  • 10. COST ACCOUNTING 9TH EDITION Description Amount $ Sales Cost of Goods Sold Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less Closing Finished Goods Inventory Cost of Goods Sold Gross Profit $ 834000 340000 450000 790000 52000 738000 96000 2.3 Cost accounting Cycle in T Accounts Crockett Company 1 Opening Purchases Material Control 20000 65000 2 WIP 70000 Closing 3 supplies ind labour Depreciation Insurance Misc 5 Opening WIP FOH Control 20000 WIP 55000 10000 2000 13000 100000 Finished Goods 34000 346000 CGS Closing 380000 7 180000 15000 85000 85000 Sales Receivables (1) (3) opening Material Labour FOH 9 V/P c/b Payment of Payroll o/b Direct 184000 Labor 9000 193000 180000 (2) 180000 Work in Process Control 7000 70000 F.Goods 180000 100000 Closing 357000 346000 (4) 11000 357000 100000 6 350000 30000 380000 (5) F. Goods 500000 (6) 500000 13000 180000 10 o/b Sales Cost of Goods Sold 350000 8 V/P c/b 0 WIP 180000 4 100000 Payroll Controll Accounts Payable o/b 77000 Materials 6000 83000 18000 65000 83000 Accounts Receivables 54000 500000 193000 554000 Cash c/b 532000 22000 554000 (7) Page 10 of 16
  • 11. COST ACCOUNTING 9TH EDITION 1 2 3 4 5 6 70000 180000 100000 346000 350000 77000 Material Issued to production Direct Labour Total Factory overhead Cost of Goods Manufactured Cost of Goods Sold Payment of Accounts Payable Collection of accounts receivable Payment of payroll 7 8 532000 184000 2.4 Journal Entries for the cost accounting cycle. Waterlux Company 1 Opening Purchases Material Control 17000 91000 WIP Closing 108000 3 2 84000 50000 24000 108000 50000 Facotory Overhead Control 35000 WIP 35000 35000 5 Opening WIP Finished Goods 28000 157000 CGS Closing 185000 Payroll Control 4 opening Material Labour FOH WIP Work in Process Control 12000 84000 F.Goods 50000 25000 Closing 171000 50000 50000 157000 14000 171000 35000 6 140000 45000 185000 F. Goods Cost of Goods Sold 140000 Journal Entries Date a b c d Description Description P.R Debit($) Amount Credit($) Material Control Voucher Payable Direct Material Purchased 91000 Work in process Control Material Control Direct Material Charged to Production 84000 Work in process Control Payroll Control Direct Labour Charged to Production 50000 Accrued Payroll 50000 91000 84000 50000 Page 11 of 16
  • 12. COST ACCOUNTING 9TH EDITION Voucher Payable Voucher of Payroll made 50000 FOH Control e 35000 Voucher Payable Sundry FOH recorded as Liability. 35000 Work in process Control FOH Control Actual FOH is charged to Production f 35000 35000 Finished Goods Work in process Control Cost of Production completed recorded h 157000 Cost of Goods Sold Finished goods Cost of Goods Sold recorded g 145000 157000 145000 2.5 The Cost Accounting Cycle. Montana Company Date a Description Material Control P.R Debit($) Amount Credit($) 92000 Voucher Payable Direct Material Purchased b FOH Control 120000 18500 Voucher Payable Sundry FOH recorded as Liability. c-1 Payroll Control 18500 86000 Income Tax Withheld SUI Tax FUI Tax FICA Tax Accrued Payroll Payroll Recorded and deductions made c-2 Accrued Payroll 8170 2322 688 6450 68370 68370 Voucher Payable Voucher of Payroll made c-3 c-4 Work in process Control FOH Control Sales Salaries Admin Salaries Payroll Control Distribution of payroll is made FOH Control 68370 60500 12500 8000 5000 86000 8030 Page 12 of 16
  • 13. COST ACCOUNTING 9TH EDITION Sales Expenses Contorl Admn Expenses Control SUI Contribution FUI Contribution FICA Contribution Employers Contribution recorded d e f 880 550 2322 688 6450 Work in process Control FOH Control Material Control Direct and Indirect Material Issued 82500 8300 Work in process Control FOH Control Actual FOH is charged to Production 47330 90800 47330 Finished Goods 188000 Work in process Control Cost of Production completed recorded g g-2 h 188000 Cost of Goods Sold Finished goods Cost of Goods Sold recorded 185500 Accounts Receivables Sales Finished Goods Shipped to Customers 241150 185500 241150 208662 4258 Bank/Cash Discount Allowed Accounts Receivables Accounts Receivables Collected subject to 2% Discount 212920 Ledger Accounts 1 Opening h Closing 228662 3 O/B a Material Control 10000 d 92000 d Closing 102000 5 Opening f 2 Cash Account 20000 208662 Finished Goods 9500 188000 g Closing 197500 O/b g 228662 228662 Closing 266150 4 82500 8300 11200 Accounts Receivables 25000 h 241150 opening c-3 d e Work in Process 4500 f 60500 82500 47330 Closing 194830 212920 53230 266150 188000 6830 194830 102000 6 185500 12000 197500 g Cost of Goods Sold 185500 Page 13 of 16
  • 14. COST ACCOUNTING 9TH EDITION 7 Machinery Opening 8 40000 Closing 40000 9 Accrued Payroll O/B 40000 40000 Closing 10 Accounts Payables O/B a b 194370 c-2 194370 Accumulated Depreciation 2250 O/B Closing Closing 11 Closing 2250 2250 b c-3 c-4 d 15 10000 10000 60000 12 60000 Income Tax with Held c-1 21250 14 17 8170 8170 c-1 86000 19 c-2 86000 16 86000 86000 SUI Tax 8170 c-1 c-4 2322 2322 4644 4644 8170 18 FUI Tax 688 688 1376 1376 1376 Accurued Payroll 68370 c-1 Closing FICA Contribution c-1 c-4 12900 12900 68370 20 0 6450 6450 12900 Sales g Closing 0 c-4 4644 c-1 c-4 Closing 21250 Payroll Control Closing Closing 21250 21250 60000 Factory Over Head Control 18500 e 47330 12500 8030 8300 47330 0 10000 Retained Earnings O/B Closing 60000 13 10000 2250 Common Stock O/B 15500 92000 18500 68370 194370 241150 241150 241150 241150 Page 14 of 16
  • 15. COST ACCOUNTING 9TH EDITION 21 c-3 c-4 22 Sales Expenses Control 8000 880 c-3 c-4 Admn Salaries Control 5000 550 Closing Closing 8880 23 h 8880 0 5550 5550 5550 Discount Allowed 4258 Closing 4258 4258 4258 Montana Company Trial Balance As on P/R Debit S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Description Cash Account Accounts Receivables Material Control Work in Process Finished Goods Cost of Goods Sold Machinery Accounts Payables Accrued Payroll Accumulated Depreciation Common Stock Retained Earnings Income Tax with Held SUI Tax FUI Tax FICA Contribution Sales Sales Expenses Control Admn Salaries Control Discount Allowed Total Credit 228662 53230 11200 6830 12000 185500 40000 194370 2250 10000 60000 21250 8170 4644 1376 12900 241150 8880 5550 4258 556110 556110 2.6 Cost of goods sold statement; Income Statement Mandmeyer Company Income Statement For the Period ended on 31st, December 19b Description Amount $ Sales Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used $ $ 56000 4250 18000 22250 4000 18250 Page 15 of 16
  • 16. COST ACCOUNTING 9TH EDITION Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 1 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory Cost of Goods Sold Gross Profit Less Operating Expenses Marketing Expenses Admn Expenses Other Expenses Net Profit 7500 5000 30750 7500 38250 4000 34250 5100 39350 3500 2800 1120 560 35850 20150 4480 15670 Page 16 of 16
  • 17. COST ACCOUNTING 9TH EDITION Chapter 3 Page 17
  • 18. COST ACCOUNTING 9TH EDITION CHAPTER 3 Exercises 1. Manufacturing Costs 1 FOH Rate to Direct Labour Direct Labour= 800000 FOH = 640000 FOH Rate= 80% 2 Work in Process Ending = Less Direct Labour= FOH 80% of Labour Direct Material Cost 140000 50000 40000 90000 50000 2. Manufacturing Costs Direct Material Cost= Direct Labour Cost= FOH Costs Indirect Labour= 80000 Indirect Material= 20000 Other FOH= 124000 Total Manufacturing Costs= FOH Rate=FOH/DL Rate of Direct Labour = Closing Finished Goods= Less Direct Material Cost= Conversion cost= Labour Cost= FOH Cost 280000 320000 224000 824000 224000/320000 0.7 or 70% 176000 40000 136000 95200 40800 Working TMC=DM+Dl+OH TMC=DM+CC CC=DL+FOH 170=100+70 DL=136000/170*100=95200 FOH=136000/170*70=40800 3. Manufacturing Costs Televane Company Cost of goods Manufactured and Sold Statement For the Period ended on 31st, December 19b Description Amount $ $ Direct Material Opening Inventory of Raw Material 75 1 Add Purchases 336 Cost of Material Available for use 411 Less: Closing Inventory of Raw Material 85 Direct Material Used 326 Chapter 3 $ Page 18
  • 19. COST ACCOUNTING 9TH EDITION Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory Cost of Goods 2 manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory Cost of Goods 3 Sold 225 135 686 80 766 30 736 90 826 110 716 4. Manufacturing Costs Krieger Company 1 2 3 4 Material Cost= Direct Labour Cost= Factor Over Head = Molding Department=2.7* 1000= Decorating Department= Estimated Cost to Produce= Mark Up= Bid Price= Estimate Prime Cost= Estimate Coversion Cost= 13000 15000 2700 2100 4800 32800 14760 18040 28000 19800 5. Income Statement Hansford Inc. Income Statement For the Period ended on 30th, September Description Amount $ Sales Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 1 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Chapter 3 $ $ 182000 7000 42300 49300 7400 41900 30000 45000 116900 9600 126500 13000 113500 15000 128500 Page 19
  • 20. COST ACCOUNTING 9TH EDITION Less: Closing Finished Goods Inventory Cost of Goods Sold at Normal FOH Variance Add/Less Cost of Goods Sold at actual Gross Profit Less Operating Expenses Marketing Expenses Admn Expenses Total Expenses Net Profit 17500 111000 3200 114200 67800 14100 22900 37000 30800 6. Job Order cost Sheet. Wadsworth Machine Works Job Order Cost Sheet Direct Material Cost 9/14 Issued 9/20 Issued 9/22 Issued Total 600 331 200 1131 Direct Labour Cost week of Sept 20 90 Hrs week of Sept 26 Total 70 Hrs Factory Overhead week of Sept 20 week of Sept 26 Total @$6.20 Hrs @$7.30 Hrs 558 511 1069 90 Hrs 70 Hrs @$5 Hrs @$5 Hrs 450 350 800 Total Cost of Manufacturing Mark UP 40% Sale Price 3000 1200 4200 7. Job Order Costing Date Description a Work in Process Job 36 Work in Process Job 37 Work in Process Job 38 Material Control Direct Material issued to Production b Work in Process Job 36 Work in Process Job 37 Work in Process Job 38 Chapter 3 P.R Job Cost Sheet Job Cost Sheet Job Cost Sheet Amount Debit($) Credit($) 44000 34000 32000 Store Ledger Card Job Cost Sheet Job Cost Sheet Job Cost Sheet 110000 40000 48000 42000 Page 20
  • 21. COST ACCOUNTING 9TH EDITION Payroll Control Payroll distributed to work in process c Pay roll sheet Job Cost Sheet Job Cost Sheet Job Cost Sheet Work in Process Job 36 Work in Process Job 37 Work in Process Job 38 FOH Applied FOH applied to Production d 130000 24000 28800 25200 FOH analysis Job Cost Sheet Job Cost Sheet Finished Job 36 Finsihed Job 37 78000 144000 128800 Job Cost Sheet Job Cost Sheet Work in Process Job 36 Work in Process Job 37 Job No 36 & 37 Completed 144000 128800 8. Job Order Costing. Date Description Work in Process Job 97 Work in Process Job 98 Work in Process Job 99 Material Control Direct Material issued to Production Work in Process Job 97 Work in Process Job 98 Work in Process Job 99 Payroll Control Payroll distributed to work in process Work in Process Job 97 Work in Process Job 98 Work in Process Job 99 FOH Applied FOH applied to Production Finished Job 97 Finsihed Job 98 Work in Process Job 97 Work in Process Job 98 Job No. 36 & 37 Completed Cost of Sales Job No. 97 Finished Job 97 Cost of Sale of Job No 97 recorded Accounts Receivables a b c d e f Chapter 3 P.R Debit($) Credit($) 36000 30000 40000 106000 72000 70000 80000 222000 36000 35000 40000 111000 240000 135000 240000 135000 240000 240000 300000 Page 21
  • 22. COST ACCOUNTING 9TH EDITION Sales Job No. 97 Sold on account 300000 9. Journal entries for the Cost Accounting cycle: Predetermied Overhead rate Ledger Accounts 1 Opening 2 Finished Goods 40000 CGS Closing WIP O/b Material Labour FOH 375000 55000 430000 390000 430000 3 15000 405000 Factor Over Head Control Applied 120000 117000 3000 CGS Closing 0 120000 120000 6 Cost of Goods Sold at Normal 600000 375000 FOH 5000 WIP 90000 Closing Sundry CGS 10000 95000 100000 5 390000 4 Material O/B Purchases Work in Process 35000 90000 F.Goods 160000 120000 Closing 405000 100000 Applied FOH Opening WIP 400000 120000 O/B F.Goods 520000 Closing 520000 Closing 520000 Closing 975000 6 O/B F.Goods Cost of Goods Sold at actual 600000 foh 375000 Closing Closing 975000 Date Description 3000 972000 975000 P.R Work in Process Control Material Contorl Payroll Control FOH Applied Material Labour & FOH Charged to Production Finished Goods Work in Process Control Work in Process Completed and transferred to Finished goods Cost of Goods Sold Finished Goods Cost of Goods Sold Recorded FOH Applied Cost of Goods Sold Under applied FOH Recorded Material Control a b c d e Chapter 3 Amount Debit($) Credit($) 370000 90000 160000 120000 390000 390000 375000 375000 3000 3000 95000 Page 22 975000 975000
  • 23. COST ACCOUNTING 9TH EDITION Voucher Payable 95000 Problems Chapter 3 3.1 Manufacturing Costs Hulse Company Cost of Goods Sold Statement For the Period ended on 31st, December Description Amount $ Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Grinding Department 8000*5.6 Machining Department 4600*6 Factory over head Cost Grinding Department 8000*6 Machining Department 4600*8 1 Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 2 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory 3 Cost of Goods Sold 4 20000 58000 78000 18000 60000 44800 27600 72400 48000 36800 84800 217200 15000 232200 17600 214600 22000 236600 17000 219600 Coversion Cost 5 $ 157200 Cost of Material Purchased 58000 3.2 Manufacturing Costs Ledger Accounts 1 Opening Finished Goods 70000 CGS (5) Chapter 3 2 O/b 230000 2 FOH app Work in process 50000 75000 F Goods 220000 (4) Page 23
  • 24. COST ACCOUNTING 9TH EDITION WIP 220000 Closing 290000 3 O/B a Material Control 10000 WIP 60000 290000 1 100000 35000 260000 Closing WIP= 5000+15000+20000 4 F.Goods FOH Cont 35000 50000 Closing Payroll material Closing* 5 5000 25000 C/B 235000 235000 60000 Closing Accrued Payroll 140000 Opening Direct Lab 6 Acc Dep Payroll Sundry acc 10000 100000 20000 160000 Payed 50000 150000 Ind Lab FOH Controal 10000 FOH App 50000 20000 CGS FOH Cont 8 FOH Applied 75000 WIP 55000 Closing 75000 80000 Accounts Payables O/B Cash 75000 15000 70000 75000 75000 5000 80000 7 (3) Cost of Goods Sold 230000 235000 60000 40000 260000 Purchases 20000 50000 70000 Problem 3-3 1) Cost of goods sold section Columbus Company Cost of Goods Sold Statement For the Period ended on 31st October Description Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 1 Cost of Goods manufactured Add Opening Finished Goods Inventory Chapter 3 Amount $ $ $ 40700 24800 65500 35700 29800 18600 27450 75850 4070 79920 4440 75480 9800 75180/20400 3.7 Page 24
  • 25. COST ACCOUNTING 9TH EDITION Cost of goods available for sale 85280 Less: Closing Finished Goods Inventory Cost of Goods Sold at Normal 9250 76030 (2800+2040020700) 2500 2. Income Statement for October Columbus Income Statement For the Period ended on 31st October Description Amount $ Sales Less returns Net Sales Cost of Goods Sold at Normal Gross Profit $ 143600 76030 67570 Less Operating Expenses Marketing Expenses Paid Dep Building Dep Equipment Admn Expenses Paid Dep Building Dep Equipment Total Expenses Net Profit 3 $ 144900 1300 25050 360 192 25602 19700 240 288 20228 45830 21740 Over /Under Applied FOH FOH Control Account V/P Material Control Dep on Building Dep on M & Equip Indirect Laobur 20100 3950 1800 9600 4400 FOH Applied 27450 CGS 12400 39850 39850 Problem 3-4 Description Sales Chapter 3 Morrisville Canning Income Statement For the Period ended on 31st, December 19 A Amount $ $ $ 60000 Page 25
  • 26. COST ACCOUNTING 9TH EDITION Direct Material Opening Inventory of Raw Material Add Purchases Cost of Material Available for use Less: Closing Inventory of Raw Material Direct Material Used Direct Labour Cost Factory over head Cost Total Manufacturing Cost Add Opening Work in Process Inventory Cost of goods to be manufactured Less: Closing Work in process Inventory 1 Cost of Goods manufactured Add Opening Finished Goods Inventory Cost of goods available for sale Less: Closing Finished Goods Inventory Cost of Goods Sold at Normal FOH Variance Add/Less Cost of Goods Sold at actual Gross Profit Less Operating Expenses Marketing Expenses Admn Expenses Total Expenses Net Profit 4000 15000 19000 2000 17000 9000 9000 35000 2000 37000 1000 36000 6000 42000 4000 38000 2000 40000 20000 6000 9000 15000 5000 Cash Account O/B Sales 5000 60000 Assets Cash Accounts Receivables Finished Goods Work in Process Materials Prepaid expenses Property Plant etc Less Depreciation Chapter 3 15000 9000 8000 C/B 65000 Material Labour FOH (9000+2000-3000) Admn Exp Marketing Exp 19000 46000 6000 8000 Morrisville Canning Company Balance Sheet As on 31st December, 19A $ Liabilities & Equities 19000 Current Liabilites 10000 Common Stock 4000 Retained Earnings 10000 1000 Profit 5000 2000 500 30000 4000 26000 62500 $ 17500 30000 15000 62500 Page 26
  • 27. COST ACCOUNTING 9TH EDITION Chapter 3 Page 27
  • 28. COST ACCOUNTING 9TH EDITION Chapter 3 Page 28
  • 29. COST ACCOUNTING 9TH EDITION CHAPTER 4 EXERCISES 1. Equivalent Production Department B Cost of Production Report 1 2 Quantity Schedule: Units Received from Last Depatment: Units completed and transferred out: Units still in process(60% Conversion) Total Units Accounted For Cost Charged by the Department Cost received from last department 20000 15000 5000 20000 Total Cost 39000 Cost Added by the department Material Conversion Total Cost Added by department Total Cost to be Accounted for 3 4 Cost Accounted for as follows: Cost of Units completed and transferred out: 2.775 15000 Work in Process Closing Inventor Adjusted cost from preceding Department 1.95 X 5000 Material 0.325 5000 Conversion 0.5 X 3000 Total Cost Accounted For 6500 9000 15500 54500 Unit Cost 1.95 0.325 0.5 2.775 = 41625 = = = 9750 1625 1500 54500 Additional Calculations: Equvilant Production Report Units Completed and transferred out Units still in process Equvilant Production Unit Cost Material 15000 5000 20000 Conversion 15000 3000 18000 0.325 0.5 2. Costing of units transferred; lost units. Rude Inc. Department A Cost of Production Report 1 Quantity Schedule: Units started in process: Units completed and transferred out: Units still in process(100% M, 50% Con) Units Lost in process Total Units Accounted For Chapter 3 10000 7000 2000 1000 10000 Page 29
  • 30. COST ACCOUNTING 9TH EDITION 2 3 4 Total Cost 27000 40000 67000 Cost Added by the department Material Conversion Total Cost Added by department Cost Accounted for as follows: Cost of Units completed and transferred out: 8 x Work in Process Closing Inventor Material 3 x Conversion 5 x Total Cost Accounted For Unit Cost 3 5 8 7000 = 56000 2000 1000 = = 6000 5000 67000 Additional Calculations: Equvilant Production Report Material 7000 2000 9000 Conversion 7000 1000 8000 3 Units Completed and transferred out Units still in process Equvilant Production 5 Unit Cost 3. Cost of Production report; no lost units. A Company Department 2 Cost of Production Report 1 2 3 Quantity Schedule: Units Received from Last Depatment: Units completed and transferred out: Units still in process(M:50%, Con:25%) Total Units Accounted For 12000 7000 5000 12000 Total Cost 16320 Cost Accounted for as follows: Cost of Units completed and transferred out: 19.83 x Work in Process Closing Inventor Cost charged by department 1: 1.36 x Material 4.57 x Labour 6.8 FOH 7.1 x Total Cost Accounted For Chapter 3 7000 5000 2500 1250 1250 Unit Cost 1.36 43415 56100 58575 174410 Cost Charged by the Department Cost received from Department 1: Cost added by Department 2: Material Labour F.O.H Total Cost Added by department 4.57 6.8 7.1 19.83 = 138810 6800 11425 8500 8875 35600 174410 Page 30
  • 31. COST ACCOUNTING 9TH EDITION 4 Additional Calculations: Equvilant Production Report Material 7000 2500 9500 Labour 7000 1250 8250 FOH 7000 1250 8250 4.57 Units Completed and transferred out Units still in process Equvilant Production 6.8 7.1 Unit Cost 4. Cost of Production report; Normal Spoilage. Wade Company Department 1 Cost of Production Report 1 Quantity Schedule: Units Put in to process Units completed and transferred out: Units still in process(90%) Units Lost in process (Up to 525 Normal) Total Units Accounted For 2 Cost Accounted for as follows: Cost of Units completed and transferred out: 12.6 x Work in Process Closing Inventor Material 5.25 x Labour 4.1 FOH 3.25 x Total Cost Accounted For 10500 Total Cost 52500 39770 31525 123795 Cost added by Department 2: Material Labour F.O.H Total Cost Added by department 3 10500 7000 3000 500 4 7000 3000 2700 2700 = Unit Cost 5.25 4.1 3.25 12.6 88200 15750 11070 8775 35595 123795 Additional Calculations: Equvilant Production Report Units Completed and transferred out Units still in process Equvilant Production Unit Cost Material 7000 3000 10000 Labour 7000 2700 9700 FOH 7000 2700 9700 5.25 4.1 3.25 5. Cost of Production report; Normal Loss. Lauren Chemical Inc. Department 2 Cost of Production Report 1 Quantity Schedule: Units Received from Last Depatment: Chapter 3 55000 Page 31
  • 32. COST ACCOUNTING 9TH EDITION Units completed and transferred out: Units still in process(1/3 Conversion) Units Lost in process Total Units Accounted For 2 3 4 Cost Charged by the Department Cost received from Department 1: Adjusted cost from Last Department Cost added by Department 2: Material Labour F.O.H Total Cost Added by department Cost Accounted for as follows: Cost of Units completed and transferred out: 2.98 x 39500 Work in Process Closing Inventor Cost charged by department 1: 1.98 x 10500 Material Labour 0.64 3500 FOH 0.36 x 3500 Total Cost Accounted For 39500 10500 5000 55000 Total Cost 99000 27520 15480 142000 = Unit Cost 1.8 1.98 0.64 0.36 2.98 117710 20790 0 2240 1260 24290 142000 Additional Calculations: Equvilant Production Report Material Unit Cost Labour 39500 3500 43000 FOH 39500 3500 43000 0.64 Units Completed and transferred out Units still in process Equvilant Production 0.36 6. Cost of production report; normal spoilage. Alabama Milling Company Department 2 Cost of Production Report 1 2 Quantity Schedule: Units Received from Last Depatment: Units completed and transferred out: Units still in process(1/4 Conversion) Units Lost in process Total Units Accounted For Cost Charged by the Department Cost received from Department 1: Adjusted cost from Last Department Cost added by Department 2: Material Labour Chapter 3 110000 85000 22000 3000 110000 Total Cost 176000 26245 Unit Cost 1.6 1.6448598 0.29 Page 32
  • 33. COST ACCOUNTING 9TH EDITION F.O.H Total Cost Added by department 3 4 Cost Accounted for as follows: Cost of Units completed and transferred out: 2.07486 x 85000 Work in Process Closing Inventor Cost charged by department 1: 1.64486 x 22000 Material Labour 0.29 5500 FOH 0.14 x 5500 Total Cost Accounted For 12670 214915 = 0.14 2.0748598 176363.08 36186.916 0 1595 770 38551.916 214915 Additional Calculations: Equvilant Production Report Material Unit Cost Labour 85000 5500 90500 FOH 85000 5500 90500 0.29 Units Completed and transferred out Units still in process Equvilant Production 0.14 7. Cost of production report; spoilage at end of process. Norman Company Department 2 Cost of Production Report 1 2 3 Quantity Schedule: Units Received from Last Depatment: Units completed and transferred out: Units still in process(1/2 Conversion) Units Lost in process Total Units Accounted For Cost Charged by the Department Cost received from Department 1: Adjusted cost from Last Department Cost added by Department 2: Material Labour F.O.H Total Cost Added by department Adjusted Cost for Lost Units 2500*2.23/123000 0.045325 Cost Accounted for as follows: Cost of Units completed and transferred out: 0.045325+ 2.23 x 123000 Work in Process Closing Inventor Cost charged by department 1: 1.75 x 34500 Material Labour 0.32 x 17250 Chapter 3 160000 123000 34500 2500 160000 Total Cost 280000 Unit Cost 1.75 45680 22840 348520 0.32 0.16 2.23 = 279865 60375 0 5520 Page 33
  • 34. COST ACCOUNTING 9TH EDITION FOH 0.16 Total Cost Accounted For 4 x 17250 2760 68655 348520 Additional Calculations: Equvilant Production Report Material Unit Cost FOH 123000 2500 17250 142750 0.32 Units Completed and transferred out Units Lost in process Units still in process Equvilant Production Labour 123000 2500 17250 142750 0.16 8. Cost of production report; Units lost at end, all normal. Rogers Milling company Department 2 Cost of Production Report 1 2 3 4 Quantity Schedule: Units Received from Last Depatment: Units completed and transferred out: Units still in process(1/4 Conversion) Units Lost in process Total Units Accounted For Cost Charged by the Department Cost received from Department 1: Adjusted cost from Last Department Cost added by Department 2: Material Labour F.O.H Total Cost Added by department Adjusted Cost for Lost Units 3000*2.02/85000 0.071294 Cost Accounted for as follows: Cost of Units completed and transferred out: 0.056471+ 2.02 x 85000 Work in Process Closing Inventor Cost charged by department 1: 1.6 x 22000 Material Labour 0.28 5500 FOH 0.14 x 5500 Total Cost Accounted For 110000 85000 22000 3000 110000 Total Cost 176000 Unit Cost 1.6 26180 13090 215270 0.28 0.14 2.02 = 177760 35200 0 1540 770 37510 215270 Additional Calculations: Equvilant Production Report Material Units Completed and transferred out Units Lost in process Units still in process Equvilant Production Unit Cost Chapter 3 Labour 85000 3000 5500 93500 FOH 85000 3000 5500 93500 0.28 0.14 Page 34
  • 35. COST ACCOUNTING 9TH EDITION 9. Cost of production report; Abnormal Loss Assembly Department Cost of Production Report 1 2 3 Quantity Schedule: Units Received from Cutting Depatment: Units completed and transferred out: Units still in process(100% M, 2/3 Con) Units Lost in process Total Units Accounted For 50000 9000 1000 60000 Cost Charged by the Department Cost received from Department 1: Adjusted cost from Last Department Cost added by Department 2: Material Labour F.O.H Total Cost Added by department Cost Accounted for as follows: Cost of Units completed and transferred out: 7.04 x 50000 Transferred to FOH (Cost of abnormal Loss) Cost received from Department 1: 3.54 x 1000 Material 0.7 x 500 Labour 1.8 x 500 FOH 1 x 500 Work in Process Closing Inventor Cost charged by department 1: 3.54 x Material 0.7 x Labour 1.8 x FOH 1 x Total Cost Accounted For 4 60000 9000 9000 6000 6000 Total Cost 212400 Unit Cost 3.54 41650 101700 56500 412250 0.7 1.8 1 7.04 = 352000 = = = = 3540 350 900 500 31860 6300 10800 6000 54960 412250 Additional Calculations: Equvilant Production Report Units Completed and transferred out Units Lost in process Units still in process Equvilant Production Unit Cost Material 50000 500 9000 59500 Labour 50000 500 6000 56500 FOH 50000 500 6000 56500 0.7 1.8 1 10. Cost of production report; addition of materials Chapter 3 Page 35
  • 36. COST ACCOUNTING 9TH EDITION Oloroso Inc. Third Department Cost of Production Report 1 2 3 Quantity Schedule: Units Received from Cutting Depatment: Units added by the department Total Units in department Units completed and transferred out: Units still in process(100% M, 50% Con) Total Units Accounted For 32000 8000 40000 Cost Charged by the Department Cost received from Department 2: Adjusted cost from Last Department Cost added by Department 2: Material Labour F.O.H Total Cost Added by department Cost Accounted for as follows: Cost of Units completed and transferred out: 1.40847 x 32000 Work in Process Closing Inventor Cost charged by department 2: 0.75 x Material 0.214634 x Labour 0.246575 x FOH 0.19726 x Total Cost Accounted For 4 20000 20000 40000 8000 9000 4500 4500 Total Cost 30000 8800 9000 7200 55000 = Unit Cost 1.5 0.75 0.2146341 0.2465753 0.1972603 1.4084698 45071.032 6000 1931.7073 1109.589 887.67123 9928.9676 55000 Additional Calculations: Equvilant Production Report Units Completed and transferred out Units Lost in process Units still in process Equvilant Production Unit Cost Material 32000 Labour 32000 FOH 32000 9000 41000 4500 36500 4500 36500 0.2146341 0.2465753 0.19726 11. Cost of Production report; addition of materials: Cresent Corporation Department No. 2 Cost of Production Report 1 Quantity Schedule: Units Received from Cutting Depatment: Units added by the department Total Units in department Chapter 3 20000 10000 30000 Page 36
  • 37. COST ACCOUNTING 9TH EDITION Units completed and transferred out: Units still in process(100% M, 50% Con) Total Units Accounted For 2 3 24000 6000 30000 Total Cost 60000 Cost Charged by the Department Cost received from Department 2: Adjusted cost from Last Department Cost added by Department 2: Material Conversion 6000 6000 3000 1 2 144000 5 = 120000 12000 6000 6000 24000 144000 Total Cost Accounted For 4 3 2 30000 54000 Total Cost Added by department Cost Accounted for as follows: Cost of Units completed and transferred out: 5 x 24000 Work in Process Closing Inventor Cost charged by department 2: 2 x Material 1 x Labour 2 x Unit Cost Additional Calculations: Equvilant Production Report Units Completed and transferred out Units Lost in process Units still in process Equvilant Production Unit Cost Chapter 3 Material 24000 Conversion 24000 6000 30000 3000 27000 1 2 Page 37
  • 38. COST ACCOUNTING 9TH EDITION CHAPTER 4 PROBLEMS 4-1 Equivalent Production: 1) The Number of Equivalent Units of Raw Material in all Inventories. Departments Assembly Fabrication 6000*25% 10000*100% 10000 1500 Packing Shipping 3000*100% 3000 8000*100% 8000 2) The Number of Equivalent units of Fabrication Department direct Labour in all Inventories. Departments Assembly Fabrication 6000*40% 2400 10000*100% 10000 Packing Shipping 3000*100% 3000 8000*100% 8000 3. The Number of equivalent units of Packaging Department Material and Direct Labour in the Packaging Department Inventory/ Material Labour 3000*60% 1800 3000*75% 2250 2) Quantity & Equivalent Production Schedules: Lost Units. Fleming Laboratories Inc. 1) Quantity Schedule for each of the three departments a) Blending Department: Units Started in Process Units Completed & Transferd to Testing Department Units Still in Process( 100% M, 1/3 Labour & FOH) Units Lost in Process Total Units accounted for b) Testing Department: Units received from Blending Department Units Completed & Transferd to Terminal Department Units Still in Process( 100% M, 1/3 Labour & FOH) Units Lost in Process Total Units accounted for c) Terminal Department: Chapter 3 Units Units 8000 5400 2400 200 8000 Units Units 5400 3200 1800 400 5400 Units Units Page 38
  • 39. COST ACCOUNTING 9TH EDITION 3200 Units received from Testing Department Units Completed & Transferd to Finished Goods Store Room Units Still in Process( 100% M, 2/3 Labour & FOH) Units Lost in Process Total Units accounted for 2100 900 200 3200 2) Equvilant Production Schedule for each of the three departments. a) Blending Department: Units Completed and Transferred to Testing Department Units Still in Process( 100% M, 1/3 Labour & FOH) Equivilant Production Quantity b) Labour 5400 800 6200 FOH 5400 800 6200 Material 3200 1800 5000 Labour 3200 600 3800 FOH 3200 600 3800 Material 2100 900 3000 Labour 2100 600 2700 FOH 2100 600 2700 Testing Department Units Completed and Transferred to Terminal Department Units Still in Process( 100% M, 1/3 Labour & FOH) Equivilant Production Quantity c) Material 5400 2400 7800 Terminal Department: Units Completed and Transferred to Store Room Units Still in Process( 100% M, 2/3 Labour & FOH) Equivilant Production Quantity 3) Unit Cost of FOH in Blending Department. Units Completed and Transferred to Testing Department Units Still in Process( 100% M, 1/3 Labour & FOH) Equivilant Production Quantity FOH 5400 800 6200 Cost Added by the Blending Department= Equvillant Prodcution Quantity of Blending Department= Unit Cost = 5580 6200 0.9 4) Adjusted Cost from Proceeding Department in Testing Department if the unit cost transferred in from the Blending Department is $ 5.35 Total Cost received from Blending Department( 5.35 x5400)= No of Good Unist in testing Department= Adjusted Cost in Testing Department= 28890 5000 5.778 4-3. Cost of Production report: Spoilage at end of process, both normal and Abnormal. Dallas Company Department No.1 Cost of Production Report 1 Quantity Schedule: Chapter 3 Page 39
  • 40. COST ACCOUNTING 9TH EDITION Units Started in the Process Units completed and transferred out: Units still in process(100% M, 25% Con) Units Lost in Process Normal Units Lost in process (Abnormal) Total Units Accounted For 2 10000 8000 1200 460 340 10000 Total Cost Cost Charged by the Department Cost added by Department No.1 Material Conversion 50000 45500 Cost Accounted for as follows: Cost of Units completed and transferred out: 0.575+ 10 x Transferred to FOH (Cost of abnormal Loss) 10 x Work in Process Closing Inventor Cost charged by department 1: Material Con 5 5 x x 5 5 95500 0.575 Total Cost Added by department Adjustment for loss: 460*10/8000= 3 10 8000 = 84600 340 = 3400 1200 300 6000 1500 7500 95500 Total Cost Accounted For 4 Unit Cost Additional Calculations: Equvilant Production Report Material 8000 340 460 1200 10000 Units Completed and transferred out Units Lost in process(abnormal) Units Lost in process(normal) Units still in process Equvilant Production Unit Cost 5 Conversion 8000 340 460 300 9100 5 4-4 Cost of production report: normal & abnormal spoilage. Menninger Inc. Department No.2 Cost of Production Report 1 2 Quantity Schedule: Units Received from Department 1 Units completed and transferred out: Units still in process(50%) Units Lost in Process Normal(25000*3%) Units Lost in process (Abnormal) Total Units Accounted For Cost Charged by the Department Chapter 3 30000 25000 4200 750 50 30000 Total Cost Unit Cost Page 40
  • 41. COST ACCOUNTING 9TH EDITION Cost received from Department 1 4.5 Cost added by Department No.1 Material Conversion 12500 139340 0.5 5 Total Cost Added by department 3 135000 286840 10 Cost Accounted for as follows: Cost of Units completed and transferred out: 10 x 25000 Cost of Normmal Loss Charged to Finished Goods Last Dept Cost= 750*4.5= Conversion 720*5= Transferred to FOH (Cost of abnormal Loss) Preceding Dept Cost= 50*4.5= Conversion 5 x 48 Work in Process Closing Inventor Cost charged by department 1: 4200 x 4.5 Material 0.5 x 0 Con 5 x 2100 = 250000 3375 3600 6975 225 240 465 18900 0 10500 29400 286840 Total Cost Accounted For 4 Additional Calculations: Equvilant Production Report Units Completed and transferred out Units Lost in process(abnormal) Units Lost in process(normal) Units still in process Equvilant Production Material 25000 (50*96%) (750*96%) 25000 Unit Cost 0.5 Conversion 25000 48 720 2100 27868 5 4-5 Cost of production report: normal & abnormal spoilage. Yares Company Department No.2 Cost of Production Report 1 2 Quantity Schedule: Units Received from Department 1 Units completed and transferred out: Units still in process(60%) Units Lost in Process Normal(8000*5%) Units Lost in process (Abnormal) Total Units Accounted For Cost Charged by the Department Cost received from Department 1 Cost added by Department No.1 Material Chapter 3 14000 8000 5000 400 600 14000 Total Cost 140000 12000 Unit Cost 10 1.5 Page 41
  • 42. COST ACCOUNTING 9TH EDITION Conversion 89250 241250 Total Cost Added by department 3 Cost Accounted for as follows: Cost of Units completed and transferred out: 19 x 8000 Cost of Normmal Loss Charged to Finished Goods Last Dept Cost= 400*10= Conversion 360*7.5= Transferred to FOH (Cost of abnormal Loss) Preceding Dept Cost= 600*10= Conversion 7.5 x 540 Work in Process Closing Inventor Cost charged by department 1: 5000 x 10 Material 1.5 x 0 Con 7.5 x 3000 7.5 19 = 152000 4000 2700 6700 6000 4050 10050 50000 0 22500 72500 241250 Total Cost Accounted For 4 Additional Calculations: Equvilant Production Report Units Completed and transferred out Units Lost in process(abnormal) Units Lost in process(normal) Units still in process Equvilant Production Material 8000 (600*90%) (400*90%) 8000 Unit Cost 1.5 Conversion 8000 540 360 3000 11900 7.5 4-6 Cost of production report: normal & abnormal spoilage. Neltner Company Department No.1 Cost of Production Report 1 2 Quantity Schedule: Units Started in Process Units completed and transferred out: Units still in process(90%) Units Lost in Process Normal(9000*5%) Units Lost in process (Abnormal) Total Units Accounted For Cost Charged by the Department Cost added by Department No.1 Material A Material B Labour FOH Total Cost Added by department Chapter 3 10000 7000 2000 450 550 10000 Total Cost 13370 4500 37580 46975 102425 Unit Cost 1.337 0.5 3.834694 4.793367 10.46506 Page 42
  • 43. COST ACCOUNTING 9TH EDITION 3 Adjustment for Loss= 450 * 10.46506/7000= Cost Accounted for as follows: Cost of Units completed and transferred out: 0 10.46506 x 7000 Cost of Normal Loss to Finished goods Material A 450 x 1.337 Material B 0 x 0.5 Labour 405 x 3.834694 FOH 405 x 4.793367 Transferred to FOH (Cost of abnormal Loss) Material A 550 x 1.337 Material B 0 x 0.5 Labour 495 x 3.834694 FOH 495 4.793367 Work in Process Closing Inventory: Cost charged by department 1: Material A 2000 x 2000 x Material B Labour 1900 x FOH 1900 Total Cost Accounted For 4 1.337 0.5 3.834694 4.793367 0 = 73255.43 601.65 0 1553.051 1941.314 4096.015 735.35 0 1898.173 2372.717 5006.24 2674 1000 7285.918 9107.398 20067.32 102425 Additional Calculations: Equvilant Production Report Material A 7000 550 450 2000 10000 1.337 Units Completed and transferred out Units Lost in process(abnormal) Unist lost in process (Normal) Units still in process Equvilant Production Unit Cost Material B 7000 2000 9000 Labour 7000 495 405 1900 9800 FOH 7000 495 405 1900 9800 0.5 3.834694 4.793367 4-7 Cost of production report: normal & abnormal spoilage. Farniente Company Department B. Cost of Production Report 1 2 Quantity Schedule: Units Received From Department A: Units completed and transferred out: Units still in process(95% Con, 100% Mat) Units Lost in Process Normal(9000*5%) Units Lost in process (Abnormal) Total Units Accounted For Cost Charged by the Department Cost Received from Department A 12000 9000 2000 450 550 12000 Total Cost 84000 Unit Cost 7 Cost added by Department No.1 Chapter 3 Page 43
  • 44. COST ACCOUNTING 9TH EDITION Material Labour & FOH Total Cost Added by department 3 18000 45200 147200 Cost Accounted for as follows: Cost of Units completed and transferred out: 12.46687 x 9000 Cost of Normal Loss 7 x 450 3.830508 x 405 Transferred to FOH (Cost of abnormal Loss) 550 x Last Dept Cost 7 Conversion 495 x 3.830508 1.636364 3.830508 12.46687 = 112201.8 = = 3150 1551.356 3850 1896.102 5746.102 Work in Process Closing Inventory: Last Deptt: 2000 x Cost Added 2000 x Material Conversion 1900 x Total Cost Accounted For 4 7 14000 1.636364 3.830508 3272.727 7277.966 24550.69 147200 Additional Calculations: Equvilant Production Report Material A 9000 Units Completed and transferred out Units Lost in process(abnormal) Unist Lost in Process (Normal) Units still in process Equvilant Production 2000 11000 Unit Cost 1.636364 Conversion 9000 495 405 1900 11800 3.830508 4-8 Cost of Production Report: addition of material Ferry Inc. Department 1 Cost of Production Report 1 2 Quantity Schedule: Units started in process Units completed and transferred out: Units still in process(1/3 Con, 100% Mat) Units Lost in Process Normal Total Units Accounted For Cost Charged by the Department Cost added by Department No.1 Material Labour FOH Total Cost Added by department Chapter 3 300000 180000 45000 75000 300000 Total Cost 90000 39000 7800 136800 Unit Cost 0.4 0.2 0.04 0.64 Page 44
  • 45. COST ACCOUNTING 9TH EDITION 3 Cost Accounted for as follows: Cost of Units completed and transferred out: 0.64 x 180000 Work in Process Closing Inventory: Cost Added Material 45000 x Labour 15000 FOH 15000 x Total Cost Accounted For 4 = 0.4 0.2 0.04 115200 18000 3000 600 21600 136800 Additional Calculations: Equvilant Production Report Material 180000 45000 225000 Laobur 180000 15000 195000 FOH 180000 15000 195000 0.4 Units Completed and transferred out Units still in process Equvilant Production 0.2 0.04 Unit Cost Ferry Inc. Department 2 Cost of Production Report 1 2 Quantity Schedule: Units Received in Units Added by Department Units completed and transferred out: Units still in process(40% Con, 100% Mat) Total Units Accounted For 180000 45000 195000 30000 225000 Total Cost 115200 Cost Charged by the Department Cost received from Deptt 1 Adjusted Cost from Deptt 1 Cost added by Department No.1 Material Labour FOH Total Cost Added by department 3 Cost Accounted for as follows: Cost of Units completed and transferred out: x 1.112 67500 41400 20700 244800 195000 Work in Process Closing Inventory: Adjusted Cost 30000*0.512= Cost Added Material 30000 x Labour 12000 FOH 12000 x Total Cost Accounted For 4 225000 = Unit Cost 0.64 0.512 0.3 0.2 0.1 1.112 216840 15360 0.3 0.2 0.1 9000 2400 1200 27960 244800 Additional Calculations: Equvilant Production Report Chapter 3 Page 45
  • 46. COST ACCOUNTING 9TH EDITION Unit Cost Chapter 3 Material 195000 30000 225000 Laobur 195000 12000 207000 FOH 195000 12000 207000 0.3 Units Completed and transferred out Units still in process Equvilant Production 0.2 0.1 Page 46
  • 47. COST ACCOUNTING 9TH EDITION Chapter 7 Page 48
  • 48. COST ACCOUNTING 9TH EDITION CHAPTER 7 EXERCISES Exercises 1 Item Pepto Lenco Bilco Total Weight 450 600 750 1800 Total freigh charges $ Cost 1125 1350 1575 4050 Freight Allocated on Weight Cost 40.5 45 54 54 67.5 63 162 162 162 Exercises 2 Date 01-Jan 06-Jan 10-Jan 15-Jan 25-Jan 27-Jan Date 01-Jan 06-Jan 10-Jan Store Ledger Card Under Average Costing Method Received Issued Qty Rate Amount Qty Rate Amount Qty 500 1.2 600 500 200 1.25 250 700 400 1.3 520 1100 560 1.245 697.5 540 500 1.4 700 1040 400 1.32 527.9 640 960 1225 640 Store Ledger Card Under FIFO Costing Method Received Issued Qty Rate Amount Qty Rate Amount Qty 500 1.2 600 500 200 1.25 250 500 200 400 1.3 520 15-Jan 1.2 1.25 600 75 1.2 1.25 1.3 600 250 520 140 400 1.25 1.3 175 875 25-Jan 500 140 400 500 1.25 1.3 1.4 175 175 700 27-Jan 140 1.25 175 140 260 1.3 338 500 960 1188 640 Store Ledger Card Under LIFO Costing Method Received Issued Qty Rate Amount Qty Rate Amount Qty 500 1.2 600 500 200 1.25 250 500 200 1.3 1.4 182 700 882 Date 01-Jan 06-Jan 10-Jan 400 Chapter 7 1.3 700 Balance Rate Amount 1.2 600 1.2 600 1.25 250 500 200 400 500 60 1.4 Balance Rate Amount 1.2 600 1.2143 850 1.2455 1370 1.2455 672.55 1.3198 1372.5 1.3198 844.64 844.64 520 500 200 400 Balance Rate Amount 1.2 600 1.2 600 1.25 250 1.2 1.25 1.3 600 250 520 Page 49
  • 49. COST ACCOUNTING 9TH EDITION 15-Jan 25-Jan 400 160 500 1.4 1.3 1.25 520 200 27-Jan 400 1.4 960 560 1280 1.2 1.25 600 50 500 40 500 700 500 40 1.2 1.25 1.4 600 50 700 500 40 100 640 1.2 1.25 1.4 600 50 140 790 Exercises 3 Date 01-Oct 03-Oct 04-Oct 08-Oct 09-Oct 11-Oct 13-Oct 21-Oct 23-Oct 27-Oct 29-Oct Date 01-Oct 03-Oct 04-Oct 08-Oct Store Ledger Card Under Average Costing Method Received Issued Balance Qty Rate Amount Qty Rate Amount Qty Rate Amount 700 5 3500 700 5 3500 400 5 2000 300 5 1500 300 5.2 1560 600 5.1 3060 300 5.2 1560 900 5.1333 4620 500 5.133 2566.67 400 5.1333 2053.33 300 5.133 1540 100 5.1333 513.333 1000 5.1 5100 1100 5.103 5613.33 400 5.5 2200 1500 5.2089 7813.33 600 5.209 3125.33 900 5.2089 4688 800 5.209 4167.11 100 5.2089 520.889 300 5.6 1680 400 5.5022 2200.89 2600 13399.1 400 2200.89 Store Ledger Card Under FIFO Costing Method Received Issued Balance Qty Rate Amount Qty Rate Amount Qty Rate Amount 700 5 3500 700 5 3500 400 5 2000 300 5 1500 300 5.2 1560 300 5 1500 300 5.2 1560 300 5.2 1560 300 300 300 5 5.2 5.2 1500 1560 1560 09-Oct 300 200 5 5.2 1500 1040 100 300 5.2 5.2 520 1560 11-Oct 100 200 5.2 5.2 520 1040 100 5.2 520 13-Oct 1000 5.1 5100 100 1000 5.2 5.1 520 5100 21-Oct 400 5.5 2200 100 1000 400 5.2 5.1 5.5 520 5100 2200 500 5.1 2550 23-Oct Chapter 7 100 5.2 520 Page 50
  • 50. COST ACCOUNTING 9TH EDITION 500 29-Oct 300 5.6 2550 400 5.5 2200 500 300 27-Oct 5.1 5.1 5.5 2550 1650 100 5.5 550 100 300 400 5.5 5.6 550 1680 2230 1680 2600 Date 01-Oct 03-Oct 04-Oct 08-Oct 13370 Store Ledger Card Under LIFO Costing Method Received Issued Balance Qty Rate Amount Qty Rate Amount Qty Rate Amount 700 5 3500 700 5 3500 400 5 2000 300 5 1500 300 5.2 1560 300 5 1500 300 5.2 1560 300 5.2 1560 300 300 300 5 5.2 5.2 1500 1560 1560 09-Oct 300 200 5.2 5.2 1560 1040 300 100 5.2 5.2 1560 520 11-Oct 100 200 5.2 5.2 520 1040 100 5.2 520 13-Oct 1000 5.1 5100 100 1000 5.2 5.1 520 5100 21-Oct 400 5.5 2200 100 1000 400 5.2 5.1 5.5 520 5100 2200 23-Oct 400 200 5.5 5.1 2200 1020 100 800 5.2 5.1 520 4080 27-Oct 800 5.1 4080 100 5.2 520 5.2 5.6 13460 100 300 400 520 1680 2200 29-Oct 300 5.6 1680 2600 Exercise 7.13 Normal 1 W.I.P 60900 D.M Payroll FOH 2 FOH 24000 18000 18900 2750 WIP 3 1 Spoiled goods WIP Chapter 7 2 2750 2500 3 2500 Abnormal W.I.P 60000 D.M Payroll FOH Spoiled goods 2500 WIP Finished Goods 58400 WIP 24000 18000 18000 2500 58400 Page 51
  • 51. COST ACCOUNTING 9TH EDITION 4 Finished Goods WIP 55650 55650 55650 5500 Per Unit Cost= Per Unit Cost= 10.12 58400 5500 10.62 Exercise 7.14 Normal 1 W.I.P 50000 D.M Payroll FOH 2 FOH 1650 WIP 3 4 1 20000 16000 14000 2 1650 Spoiled goods WIP Finished Goods WIP 2100 3 2100 Abnormal 48000 W.I.P D.M Payroll FOH Spoiled goods WIP Finished Goods WIP 20000 16000 12000 2100 2100 45900 45900 46250 46250 46250 3700 Per Unit Cost= Per Unit Cost= 12.50 45900 3700 12.41 Problem7.7 Normal 1 W.I.P Abnormal 96000 D.M Payroll FOH 2 FOH 1 2 4800 Spoiled goods 4 Finished Goods 4800 2400 WIP 3 2400 90400 40000 32000 18400 240 240 90160 90160 88800 WIP Per Unit Cost= Chapter 7 D.M Payroll FOH Spoiled goods WIP Finished Goods WIP 40000 32000 24000 WIP 3 W.I.P 88800 88800 7400 12.00 Per Unit Cost= 90160 7400 12.18 Page 52
  • 52. Chapter 8 (Revised) 2-May-08 Cost Accounting Page 1 of 10
  • 53. Chapter 8 (Revised) Cost Accounting EXERCISES Exercise 8.1 Jan Production Schedue Feb …………………….. March …………………. Desire Inv Level of March: (75% of Jan (5600)) Total To be Provided Less: Quantity on Hnad On order for jan ……………. Feb Total Qty to order for march Exercise 8.2 1 Forecast Usage Jan Feb March Add: Desired Inv or Safety Stock To be Provided Less: Schedule Supply Jan & Feb Inv Add On oreder for jan & Feb Total Qty to order Units 5,000 4,950 5,550 4,200 Units 19,700 5,600 4,100 5,100 14,800 4,900 Units 4,800 5,000 5,600 Units 15,400 4,800 20,200 6,000 8,400 (14,400) 5,800 2 Add: Less: (a). Add: Less: (b). Exercise 8.3 (K) Jan Inv On order for jan Forecasted use for jan & Feb March 1, Inv To order for March Forecasted usage for march March 31, Inv cc=Annual Cc(20%)*mfg Cst ($50) * Avg Annual Inv. Production Initiation=# of runs * Cost to initiate (300) Current Situation: 2 Production run of 3000 units per run Avg Inv=3000/2=1500 Units Present Cost cc=0.20*$50*1500 Production Initiation=2*300 Proposed Situation: Production Qty=EOQ= (2*Ar*OC/UC*CC)^.5 Avg Inv=600/2 # of run= 6000 / 600 Proposed cost C.C.=0.20*$50*300 Production initaion cost=10*$300 Expected Annual Saving ($1560-$6000) 2-May-08 Units 6,000 8,400 14,400 (9,800) 4,600 5,800 10,400 (5,600) 4,800 15,000 600 15,600 600 300 10 Units run $3,000 $3,000 $9,600 Page 2 of 10
  • 54. Chapter 8 (Revised) Exercise 8.3-f UC $20 AR 48000 Int 10% CC $0.40 OC $10 CC$=CC+INT EOQ= AOC= ACC= Cost Accounting $2.00 633 Units AR*OC/800 400*CC$ (UC*Int%) $600 $960 Answers A B c d e f g h i j k 11 100 300 300 500 633 2500 2000 462 49 9600 15 600 960 26 55.5 360 67.5 Exercise 8.4 Data: Unit cost Monthly usage O.C C.C Reqd: 1 EOQ sqrt(2*AR*OC/UC*CC) 1225 2 $3 1500 $50 40% 1560 Units AR 18000 EOQ (Units) 1225 15 $3 1.20 612 Given (Units) 2000 9 2.85 1.14 1000 $ 54000 735 $ 51300 450 735 55470 1140 52890 Units Order size # of Order per year (=AR/EOQ) Price Per Unit CC=UC*CC% Avg Inv (EOQ/2) Purchase Price ( AR*Purchase Price per Unit) Cost of Placing Order Carrying Cost (avg inv*(UC*40%)) Total Cost Company should place order of 2000 units to avail discount because it minimizes its cost. 2-May-08 Page 3 of 10
  • 55. Chapter 8 (Revised) Exercise 8.5 Data: Unit cost Annual usage O.C C.C Reqd: 2 EOQ sqrt(2*AR*OC/UC*CC) 1510 3 Cost Accounting $5 Given (Units) 3000 1.0 $4.75 $0.95 1500 $ $15,000 755 $ $14,250 380 755 16510 20% Carrying Cost $755 EOQ (Units) 1510 2.0 $5.00 $1.00 755 Units Total CC $250 Q/2*CC Ordering Cost $755 3000 $380 $1 1 Total Odering cost $2,280 AR/Q*OC 1425 16055 Units Order size # of Order per year (=AR/EOQ) Price Per Unit CC$ Avg Inv (EOQ/2) Inventory Cost (AR*UC) Cost of Placing Order Carrying Cost (avg inv*(UC*CC%)) Total Cost Company should order 3000 Units Exercise 8.6 Saftety Stock & Order Point Order point=opening Inv+on order=Lead Time qty (ie.Normal use*LT)+Safety Stock Qty Order point = I+DQ=LTQ+SSQ Normal Usage 7200 Units Daily Usage= 7200/240 Data: Working days 240 days per year 30 Normal LT. 20 days Max LT. 45 days Solution: Units Daily usage 30 LTQ+SSQ=ROP * LT (max) 45 975+X= 1530 1350 X= 375 Order Point 975 a Less: Normal LTQ Normal LT= (Max LT-Min LT)/2 SSQ 375 32.5 Exercise 8.7 1 EOQ= AR= 500*250 2 Less: 2-May-08 1500 125000 Units Units Units 600 500 100 Safety Stock(Max)=100*5 Units Safety Stock: Max use per day Normal ……….. 500 Page 4 of 10
  • 56. Chapter 8 (Revised) Cost Accounting 3 Order Point =(Normal Use * Lead Time)+Safety Stock (500 * 5) + 500 3000 Units 4 Normal Max Inv Order Point Normal Use During L.T (500*5) On Hand @ the ime of order Qty Ordered (EOQ) Normal Max Inv. 5 Absolute Max Inv. Order Point Min Use During L.T (500*5) On Hand @ the ime of order Qty Ordered (EOQ) Absolute Max Inv. 6 Units 3,000 (2,500) 500 1,500 2,000 3,000 (500) 2,500 1,500 4,000 Avg Inv= EOQ / 2 +Safety stock = 1500/2+500 = 1250 Units Exercise 8.8 SSQ 10 20 40 80 Annual # of Orders * Probabilty of Stock out = Expected Annual Stock out 5 * 0.4 = 2 5 * 0.2 = 1 5 * 0.1 = 0.5 5 * 0.05 = 0.25 Recommeded Level of Safety Stock is 40 * * * * = 75 75 75 75 Annual Stock out Cost = = = = * Cost Per Stck out ($) 150 75 37.5 18.75 + Annual Stock out Ordering Cost = Annual Combined Cost + + + + 10 20 40 80 = = = = 160 95 77.5 98.75 Exercise 8.9 Data n = df=n-1 ∑(X-X')2 = ∑(X-X') = LT = 9 8 2888 0 1 Solution ό=√[∑(X-X')2 -(∑(X-X'))2/n]/(n-1) ό= SSQ= = = Order Point=LTQ+SSQ = = 19 (df * ό *L)-(∑(X-X')2 *L/n) (2.306*19*1)-(0*1/9) 43.814 Units 262+44 306 Units Exercise 8.10 ABC PLAN 2-May-08 Page 5 of 10
  • 57. 2-May-08 % of Total Cost 21.44 14.58 10.94 10.52 7.49 6.89 6.78 5.47 5.46 4.99 3.59 1.86 100.00 57.48 Total Cost ($) 58,800 40,000 30,000 28,860 20,550 18,900 18,600 15,000 14,970 13,680 9,840 5,100 274,300 32.09 Unit cost ($) 10.50 20.00 30.00 3.25 2.50 2.50 1.00 0.50 1.50 2.00 2.00 0.25 10.43 % of total Usage 4.52 1.61 0.81 7.16 6.63 6.10 15.00 24.19 8.05 5.52 3.97 16.45 100.00 59.97 Quarterly Usage (Units) 5,600 2,000 1,000 8,880 8,220 7,560 18,600 30,000 9,980 6,840 4,920 20,400 124,000 25.94 Material Stock # 26 24 27 30 35 29 28 33 34 32 31 25 Total Cost Accounting 14.10 Chapter 8 (Revised) Page 6 of 10
  • 58. Chapter 8 (Revised) Cost Accounting PROBLEMS Problem 8-1 AR OC CC 1 QTY 5000 2500 1250 800 500 250 100 EOQ 2 $5,000 $250 $4 OC $250 $250 $250 $250 $250 $250 $250 SQRT(2*AR*OC/CC) Problem 8-2 UC Avg Use Lead Time OC CC 1 2 $12 100 1 $50 25% 791 Annual OC $250 $500 $1,000 $1,563 $2,500 $5,000 $12,500 Annual CC $20,000 $10,000 $5,000 $3,200 $2,000 $1,000 $400 Total $20,250 $10,500 $6,000 $4,763 $4,500 $6,000 $12,900 Units per order units per month month of avg inv EOQ= SQRT(2*AR*OC/CC) 200 units Order Point=Average use during Lead Time 1200*1 1200 Units or 100 units per month Problem 8-3 AR 480,000 1 case contains 24 cans UC $4.80 INT Rate 10% OC $15.00 CC $0.08 1 Units per order per unit per order CC # of Order $4 1 $4 2 $4 4 $4 6 $4 10 $4 20 $4 50 EOQ = 2 cans = 20,000 per case $0.20 per can cases 40% Per Can SQRT(2*480000*15/.08+.1*4.80/24) or 500 Cases 12000 cans 12000 Units EOQ (cans) Order size # of Order per year (=AR/EOQ) Price Per Unit CC$ UC*CC% Add Int UC*INT% Avg Inv (EOQ/2) Inventory Cost (AR*UC) Cost of Placing Carrying Cost Total Cost 2-May-08 12,000 40.0 $0.20 $0.08 $0.02 Given (Cans) 72,000 7 $0.18 $0.10 $0.09 6,000 $ 96,000 600 600 97,200 0.072 0.018 36,000 $ 86,400 100 3,240 89,740 Page 7 of 10
  • 59. Chapter 8 (Revised) Cost Accounting Problem 8-4 1 2 per UC $12 carton AR 15000 cartons Cash Disct 5% in excess of 1000 cartons OC $64.80 CC 20% of avg inv EOQ (without considering disct) EOQ= SQRT(2*AR*OC/CC) 900 cartons 900 Units EOQ Given (CARTONS (CARTONS ) ) Order size 900 5000 # of Order per year (=AR/EOQ) 17 3 Purchase Price Per Unit $12.00 $11.40 CC$=UC*CC% $2.40 $2.28 Avg Inv (EOQ/2) 450 2500 $ Inventory Cost (AR*UC) Cost of Placing Order: (# of ord Carrying Cost=(Avg Inv*CC) Total Cost $ 180,000 1,080 1,080 182,160 * OC) 172,800 194 5,760 178,754 3000*12+12000*11.4 0 500*2.40+2000*2.28 Problem 8-5 AR 15000 units or 1000 Lots OC $20 per order CC 25% UC $5 per unit 1 Annual OC=AR*OC/EOQ $300 Annual CC= UC*CC*EOQ/2 $625 SQRT(2*AR*OC/CC) 3 EOQ= 693 units 2 Ord.Size 250 500 750 1000 1250 1500 4 AR 15000 15000 15000 15000 15000 15000 # of Order 60 30 20 15 12 10 annual OC 1200 600 400 300 240 200 Annual CC 156 313 469 625 781 938 EOQ Inventory Cost 2-May-08 693 $5.00 3000 $4.75 $ 75,000 EOQ Given $ Order size Price Per Unit Total 1356 913 869 925 1021 1138 71,250 Page 8 of 10
  • 60. Chapter 8 (Revised) Cost Accounting Cost of Placing Order 433 100 Carrying Cost 433 1,781 75,866 73,131 Problem 8-6 1 # of Production Run=100,000/X AC=$144(100,000/X)+(.20/2)X AC=144(100,000)X-1+.01X Taking Derivative d(AC)/dx=d/dx (144*100000X-1+0.10X) d/dX (AC)= -144*100000X-2+0.1 where 2 Total CC= Optimum Qty -144(100,000x-2)+0.10=0 144(100,000x-2)=0.10 1/x2 =14400000/.10 x2 = 12000 0.20X/2 Total OC= 144(100,000/X) Units Problem 8-7 1 EOQ=sqrt(2*24000*$1.20/(10*.1)) 240 2 # of Orders=AR/EOQ 24000/240 100 3 Annual OC= 100*$1.20= $120 Annual CC= 10*0.1*240/2 $120 Total Cost= 120+120 $240 4 # days for order= 360/no of order 360/100 3.6 days No days supply left= units in inv*no of days in each order/EOQ 200/240*3.6 3 days left Days before next order should place= supply days left-LT 3days -3 days 0 days 5 Inv usage does not remain constant which is the base of EOQ. EOQ requires estimation of AR, OC,UC, CC which is very difficult to estimate Problem 8-8 AR 400*250 OC $20 1. EOQ 4000 2. 2-May-08 Units Orders 100,000 ROP=Max Usage during LT 600*8 4800 ROP=LTQ+SSQ =Normal Usage During LT+SSQ SSQ=ROP-LTQ =4800-(400*8) =1600 OR Max Usage 600 Normal Usage 400 Page 9 of 10
  • 61. Chapter 8 (Revised) * SS (Max) SSQ 3. Cost Accounting 200 8 . 1600 ROP=d*L+SSQ. 400*8+1600 4800 Order Point Less: Normal usage during LT (400*8) 4. Add: Order Size 5. 4800 -3200 1600 4000 5600 Order Point Less: Minimum Usage During LT (100*8) 4800 - 800 4000 Add: Order Size 4000 8400 Avg Normal Inventory=EOQ/2+SSQ=4000/2+1600 = 3600 Problem 8-9 SSQ (a) 10 20 30 40 50 55 2-May-08 # of Order (b) Probability © 5 5 5 5 5 5 0.5 0.4 0.3 0.2 0.1 0.05 Equvalent Stockout (d=b*c) 2.5 2 1.5 37.5 0.5 0.25 Stockout cost Per Unit (e) 80 80 80 80 80 80 Total Stockout cost (f=d*e) 200 160 120 3000 40 20 Inv Cost (g) 20 40 60 80 100 110 Total Cost (h=f+g) 220 200 180 3080 140 130 Page 10 of 10
  • 62. COST ACCOUNTING 9TH EDITION Chapter 11 Page 63
  • 63. COST ACCOUNTING 9TH EDITION Chapter 11 Exercise 1 Month Machine Hours January February March April May June 2500 2200 2100 2600 2300 2400 1250 1150 1100 1300 1180 1200 Total Average 14100 2350 7180 1196.666667 2600 2100 500 1300 1100 200 High Low Difference Maintenance Expenses ($) Variable Cost Fixed Cost 990 890 840 1040 920 940 260 260 260 260 260 260 1040 840 260 260 Variable Rate= 200/500 0.4 Exercise 3 Veriable Fixed Total Cost of Calles= Variable rate= Fixed Cost= No of Calls in a week= Cost of Calls= Cost of Calls= 500000/6250 87000/1450 80 60 20 200 60*200 20*200 12000 4000 $ 16000 Exercise 4 Month Machine Hours x January 4500 February 4700 March 4000 April 5000 May 4100 June 4600 July 4900 August 3700 September 4700 October 3900 November 3400 December 4100 Total 51600 Average 4300 Variable Rate Fixed Cost 1090 =a+ Chapter 11 Maintenance Expenses ($) xmeanx y-meany Sqrt(xmeanx) Sqrt(ymeany) (xmeanx)(ymeany) Variable Cost Fixed Cost 10 20 -40 110 -30 30 80 -70 40 -50 -90 -10 0 40000 160000 90000 490000 40000 90000 360000 360000 160000 160000 810000 40000 2800000 100 400 1600 12100 900 900 6400 4900 1600 2500 8100 100 39600 2000 8000 12000 77000 6000 9000 48000 42000 16000 20000 81000 2000 323000 506 516 456 606 466 526 576 426 536 446 406 486 594 594 594 594 594 594 594 594 594 594 594 594 y 1100 1110 1050 1200 1060 1120 1170 1020 1130 1040 1000 1080 13080 1090 323000/2800000 200 400 -300 700 -200 300 600 -600 400 -400 -900 -200 0 0.115357 4300*.115357 Page 64
  • 64. COST ACCOUNTING 9TH EDITION 1090 a= Fixed Cost =a+ 593.9643 594 496.0357143 FOH Actual June 9000 0 9000 -800 8200 Budget Budgeted Volume applied 9000 7500 1500 Variable Rate FOH for august Fixed Variable Chapter 11 700 500 200 7.5 July 7500 -500 7000 0 7000 august 5900 850 6750 -750 6000 5250 3750 3750 3750 3750 3000 6750 Page 65
  • 65. COST ACCOUNTING 9TH EDITION Chapter 12 Page 66
  • 66. COST ACCOUNTING 9TH EDITION CHAPTER 12 Exercise 1 Material Labor FOH Ending WIP Less: Material Conversion Cost Less: DL FOH Exercise 2 1 2 $ 23,800 20,160 15,840 59,800 W.I.P Finish Goods Ending Balance 59,800 11,200 (4,560) 6,640 (3,718.43) 2,921.57 Applied Rate=FOH/DL Applied Rate=15840/20160 Applied Rate= 0.7857 CC=DL+FOH 178.57%=100%+78.57% $6,640 Work Force= 150 People Days per week= 5 days Normal Capacity Direct Labur Hours= Work Force= 150 People Days per week= 4 days Normal Capacity Direct Labur Hours= Exercise 3 Expected FOH= Output= Material Cost= Direct Labour Hours= Direct Labour cost= Machine Hours= FOH Based On Output= Material Cost= Direct Labour Hours= Direct Labour cost= Machine Hours= Exercise 4 Normal Capacity= Actual Capacity= expected actual capacity= Fixed Cost= Fixed Rate= 1 Variable Rate= a Foh rate $ Units $ Hours $ Hours $ 48,600 11,200 Hours per day= 8 Hours Total Weeks= 47 weeks 150*8*5*47 = 282000 Hours Hours per day= 10 Hours Total Weeks= 47 weeks 150*10*4*47 = 282000 Hours 276000 47500 400000 28750 276000 23000 276000/47500 276000/400000 276000/28750 276000/276000 276000/23000 50000 43000 40000 $200000 $200000/50000 5.81 Per unit 0.69 Per $ 9.6 Per Hour 1 Per $ 12 Per Hour Direct Labour Hours Hours Hours $4 $ 6.69 $ 10.69 Variable Cost= Total Cost FOH Rate= or $6.69*50000 $200000+$334500 $534500/50000 b Fixed FOH Rate $ 4 per hour c Capacity Variance Foh Budgeted for actual Fixed Cost $ 200000 Variable Cost 6.69*43000 $ 287670 Applied FOH 43000*$ 10.69 Capacity Variance Unfavourable= or Capacity Variance Unfavourable= (50000-43000)*$4 Chapter 12 $ 334500 $ 534500 $ 10.69 $ 487670 $ 459670 $ 28000 $28000 Page 67
  • 67. COST ACCOUNTING 9TH EDITION 2 a Fixed Cost= $ 200000 Fixed Rate= $ 200000/40000 $ 5 Variable Rate= $ 6.69 FOH Rate $ 11.69 or Variable Cost= $6.69*40000 Total Cost $200000+$267600 FOH Rate= $467600/40000 b Fixed FOH Rate $ 267600 $ 467600 $ 11.69 $ 5 per hour Exercise 5 Budgeted FOH= $ 255,000 Budgeted Volume= 100,000 Hours Actual FOH= $ 270,000 Actual Volume= 105,000 Hours Applied FOH Rate= $255000/100000 Applied FOH= 2.55*105000 Actual FOH= FOH Under Applied= $ 2.55 Per Hour $ 267750 270000 $ 2250 Exercise 6 Production Volume= Estimated FOH= Indrect Material= Indirect Labour= Light& Power= Depreciation= Miscellaneous= 30000 $ 220000 240000 30000 25000 55000 $ 570000 FOH applied Rate= 570000/30000 1 Work in process 29000*19 FOH Applied FOH Applied FOH Control 2 Mixers $ 19 per Unit 551000 551000 551000 551000 Actual FOH= 559,600.00 Applied FOH= 551,000.00 FOH Under applied= 8,600.00 Exercise 7 Normal Capacity=60000 Units per Year or 5000 Units per Months Applied Rate= 3.00 Spending Variance Actual FOH $ 15,500 Less: Budgeted FOH @ actual Cap Fixed FOH 2,500 Variable Rate * Act cap 12,000 $ 14,500 4800*2.50 Unfavourable $ 1,000 Idle Capacity Variance Budgeted FOH @ act cap $ 14,500 Less: Applied FOH @ act cap 4800*3 $ 14,400 Unfavourable $ 100 Exercise 8 Normal Capacity=36000 DLH per year or 3000labor hrs per month Chapter 12 Page 68
  • 68. COST ACCOUNTING 9TH EDITION Fix FoH= Total/12= $ 1410 Applied Rate= 2.57 Spending Variance Actual FOH Less: Budgeted FOH @ actual Cap Fixed FOH Variable Rate * Act cap 2700*2.10 Unfavourable Idle Capacity Variance Budgeted FOH @ act cap Less: Applied FOH @ act cap 2700*2.57 Unfavourable $ 7,959 1,410 5,670.00 7,080 879 $7,080 6,939 141 Exercise 9 Normal Capacity=200,000 Applied Rate= $ 3.00 Variable Rate= $1 Fixed FOH= $ 600000*2/3 Spending Variance Actual FOH Less: Budgeted FOH @ actual Cap Fixed FOH Variable Rate * Act cap 210000*1 Unfavourable Idle Capacity Variance Budgeted FOH @ act cap Less: Applied FOH @ act cap 210000*3 favourable Exercise 10 1 Fixed Rate 300000/150000 2 Variable Rate 150000/150000 FOH Rate FOH Applied= =$ 3*140000 FOH Budgeted For actual Fixed Cost= Varable Cost= $ 400,000 $ 631,000 $ 400,000 $ 210,000 $ 610,000 $ 21,000 $ 610,000 $ 630,000 $ (20,000) 2 per hour 1 per hour 3 per hour $ 420000 140000*1 $ 300000 $ 140000 $ 440000 Overall Variance Actual FOH Less: Applied FOH@ actual Cap Applied rate * Act cap 3*140000 Unfavourable Spending Variance Actual FOH Less: Budgeted FOH @ actual Cap Fixed FOH Variable Rate * Act cap 140000*1 favourable Idle Capacity Variance Budgeted FOH @ act cap Less: Applied FOH @ act cap 140000*3 Unfavourable Chapter 12 $ 435,000 420,000.00 $ 420,000 $ 15,000 435,000 300,000 140,000.00 440,000 (5,000) 440,000 420,000 20,000 Page 69
  • 69. COST ACCOUNTING 9TH EDITION Exercise 11 Spending Variance Actual FOH (2) Less: Budgeted FOH @ actual Cap Unfavourable Idle Capacity Variance Budgeted FOH @ act cap (1) Less: Applied FOH @ act cap favourable Overall Variance Actual FOH Less: Applied FOH@ actual Cap favourable Chapter 12 15,847 14,968 879 14,968 16,234 1,266 15,847 16,234 (387) Page 70
  • 70. COST ACCOUNTING 9TH EDITION Problems Problem 12.6 June: capacity variance= Spending Variance= Actual FOH= Capacity Level or actual cap= July: capacity variance= Spending Variance= Actual FOH= August: Capacity Level or actual cap= Capacity Level or actual cap= Actual FOH= Budgeted FOH= JUNE( capacity level of 700 Tons) Spending Variance Actual FOH Less: Budgeted FOH $800 0 $9,000 700 $0 $500 $7,500 500 400 $5,900 $6,000 Favourable Tons Unfav Tons Tons $ 9,000. 9,000 0.00 Idle Capacity Variance Budgeted FOH Less: Applied FOH favourable 9,000 9,800 $800 JULY ( capacity level of 500 Tons) Spending Variance Actual FOH Less: Budgeted FOH Unfavourable $ 7,500 7,000 500 Idle Capacity Variance Budgeted FOH Less: Applied FOH 7,000 7,000 $0 AUGUST ( capacity level of 400 Tons) Spending Variance $ Actual FOH 5,900 Less: Budgeted FOH 6,000 favourable 500 Idle Capacity Variance Budgeted FOH 6,000 Less: Applied FOH (400*$14) 5,600 Unfavourable $400 Note: when idle capacity vaiance is zero it means actual and normal capacities are the same, Thus Budgeted and applied FOH will be equal implies that applied rate is equal to actual rate Working Calculation of applied rate Since july idle cap variance is zero, implies that june normal cap and actual cap are equal. applied rate = budgeted FOH/Normal capacity = 7,000.00 / 500 = $ 14 Problem 12.7 June: July: Chapter 12 capacity variance= Spending Variance= Actual FOH= $0 $600 $7,000 Capacity Level or actual cap= 800 capacity variance= $800 Spending Variance= $0 Actual FOH= $5,600 Capacity Level or actual cap= 600 Unfav Tons Unfav Tons Page 71
  • 71. COST ACCOUNTING 9TH EDITION August: Capacity Level or actual cap= 900 Actual FOH= JUNE( capacity level of 800 Tons) Spending Variance Actual FOH Less: Budgeted FOH Unfav Idle Capacity Variance Budgeted FOH Less: Applied FOH Tons $7,100 $ 7,000 6,400 600 6,400 6,400 0 JULY ( capacity level of 600 Tons) Spending Variance Actual FOH Less: Budgeted FOH Unfavourable Idle Capacity Variance Budgeted FOH Less: Applied FOH Unfav $ 5,600 5,600 0 5,600 4,800 800 AUGUST ( capacity level of 900 Tons) Spending Variance $ Actual FOH 7,100 Less: Budgeted FOH (3200+(900*4) 6,800 Unfav 300 Idle Capacity Variance Budgeted FOH 6,800 Less: Applied FOH (900*$8) 7,200 favourable (400) Note: when idle capacity vaiance is zero it means actual and normal capacities are the same, Thus Budgeted and applied FOH will be equal implies that applied rate is equal to actual rate .however, we need budgeted FOH and actual are given: Working Calculation of Budgeted FOH Capacity Expanse June 800 $ 6,400 V.FOH Rate=$800/200 =$4 July 600 $ 5,600 (800) (600) 200 $ 800 FOH $6400 $ 5600 V.OH $3200 $ 2400 Fix FOH $3200 $ 3200 Budgeted FOH for Aug = Fix FOH + (Actual Capacity*Variable Rate) = $3200+(900*$4) = $6800 Applied Rate = $ 6400/800 = $ 8 As the idle cap variance for June is zero thus applied rate is computed on that basis. Chapter 12 Page 72
  • 72. COST ACCOUNTING 9TH EDITION Chapter 15 Page 73
  • 73. COST ACCOUNTING 9TH EDITION CHAPTER 15 EXERCISES EXERCISE 1 Whatley Borthers Sales Budget For the period 19 A Average Sales Total Sale Cost of Cost of (In Pound) 10000 7500 7500 25000 Product Barb Shir Bett Sale Price Per Pound 30 18 23 Price 300000 135000 172500 607500 Sale/Pound 21 16 21 Sales 210000 120000 157500 487500 Gross Profit Per Pound 9 2 2 Total Gross Profit 90000 15000 15000 120000 Whatley Borthers Sales Budget For the period 19 B Average Sale Price Sales Product Barb Shir Bett (In Pound) 20000 10500 7500 38000 Per Pound 37 18.72 23.92 Total Sale Cost of Cost of Gross Profit Price 740000 196560 179400 1115960 Sale/Pound 28 18 23.1 Sales 560000 189000 173250 922250 Per Pound 9 0.72 0.82 Total Gross Profit 180000 7560 6150 193710 Exercise 2 Swisher Company Sales Budget For the Period Year 5 Press Model Number 222 333 444 Year1 100 100 100 Year2 110 120 95 Sales in Units Year3 Year4 120 130 160 240 85 70 Year5 140 400 50 Swisher Company Production Budget For the Period Year 5 Press Model Number 222 333 444 Sales 140 400 50 Units Opening Inventory Desired Ending Inventory 4 5 5 Production Required 2 5 4 142 400 51 Exercise 3 Schwankenfelder Company Production Budget Chapter 15 Page 74
  • 74. COST ACCOUNTING 9TH EDITION Product Model Sales Ceno Nepo Teno 21000 37500 54300 For the Next Year Units Desired Opening Ending Inventory Inventory 6200 5800 10500 11000 12200 14500 Production Required 21400 37000 52000 Exercise 4 Product Model Sales Moon Glow Enchanting Day Dream 250000 175000 300000 Magic Enterprises Production Budget For the Next Year Units Finished Goods Desired Opening Production Ending Inventory Required Inventory 15000 16000 249000 10000 12000 173000 20000 25000 295000 Work in process Ending Opening Production Required 4200 2000 6000 2000 1800 6400 251200 173200 294600 Exercise 5 Product Model Sales 1001 1002 1003 2001 2002 2003 Product Model 1001 1002 1003 2001 2002 2003 Total 200 150 425 175 325 215 Magic Enterprises Production Budget For Next six months Units Desired Opening Ending Inventory Inventory 40 25 60 20 35 20 Production Required 50 25 75 15 35 20 Magic Enterprises Material Purchase requirement For Next six months Material x Units Material Production in Total Production Required 1 Unit Material Required 190 150 410 180 325 215 5 7 10 4 6 8 950 1050 4100 720 1950 1720 10490 190 150 410 180 325 215 190 150 410 180 325 215 y Material in 1 Unit 2 2 3 1.5 2 2.5 Total Material 380 300 1230 270 650 537.5 3367.5 Units Chapter 15 Page 75
  • 75. COST ACCOUNTING 9TH EDITION Material X Y Production Requirement 10490 3367.5 Desired Ending Inventory 7000 1500 Opening Inventory Purchase Required 5000 2000 12490 2867.5 Exercise 6 Provence Company Production Budget Product Model Sales Tribolite Polycal Powder X Units Opening Inventory Desired Ending Inventory 80000 40000 100000 6000 2000 8000 Production Required 5000 4000 10000 81000 38000 98000 Provence Company Material Purchase requirement Material A Product Model Tribolite Polycal Powder X Total Production Required Material B Material in 1 Unit 81000 38000 98000 1 2 0 Production Require- 81000 76000 0 157000 Units Opening Inventory Desired Ending ment 157000 260000 A B Units Total Production Material Required Inventory 12000 15000 10000 12000 Material in 1 Unit 81000 38000 98000 2 0 1 1 2 0 x x x 0.2 0.2 0.2 Unist to be manufactured Cost of Material A in Total B 159000 263000 Unist to be manufactured Chapter 15 x x x 0.1 0.1 0.1 Total Purchase Price 31800 26300 58100 Unit Cost 0.2 0.1 Polycal Pwdr X 0.2 0.4 81000 16200 2 0 1 162000 0 98000 260000 Purchase Required Provence Company Manufacturing Cost Budget Tribolite Material A Total Material 38000 15200 0 98000 0 0.2 0 81000 38000 0.1 98000 Page 76
  • 76. COST ACCOUNTING 9TH EDITION Cost of Material A in Total Total Cost of Material 16200 32400 0 15200 9800 9800 Hour per Unit Units to be produced Labour Hours 0.05 81000 4050 0.125 38000 4750 0.0125 98000 1225 Rate per Hour Direct Labour Cost 8 32400 8 38000 8 9800 4050 6 24300 89100 4750 6 28500 81700 1225 6 7350 26950 Labour Cost FOH Cost Labour Hours Required FOH Rate Total Cost by Products Total Variable Manufacturing Cost Fixed manufacturing cost (Not allocted to products) Total Manufacturing Cost 197750 40000 237750 Exercise 7 Sandersen Inc. Projected Cost of Goods Sold Statement For the Period Ended on Materials: Add Less Add Add Add Less Add Less Beginning Inventory Purchases Material Available for use Ending Inventory Cost of Material Used Labour Factory Overhead Total Factory Cost Beginning Work in process inventory Cost of Goods to be manufactured Ending work in process inventory Cost of goods Manufactured Opening Finished Goods inventory Cost of Goods available for Sale Closing Finished Goods Inventory Cost of Goods Sold (5) $ 500000 2400000 2900000 400000 $ 2500000 4340000 1840000 8680000 100000 8780000 300000 8480000 800000 9280000 1000000 8280000 Workings; Earnings(6% of $20000000= $1200000) Chapter 15 10 % of Sales Page 77
  • 77. COST ACCOUNTING 9TH EDITION Marketing, administrative, and financial expenses 21 31 Cost of goods sold($8280000) 69 100 Cost of Goods sold + Cost of goods manufactured+ 8480000 Total manufacturing cost- 8680000 Cost of materials consumed+ 2500000 Ending Finished Goods InventoryEnding Work in process inventory- Beginning Finished goods Inventory $800000 Beginning work in process inventory 300000 Cost of materials consumed 4340000 Cost of goods Manufactured = = 100000 Labour(50% of manufacturing cost)- 2500000 Ending materials inventory400000 Beginning Materials Inventory % of Sales % of Sales % of Sales % of Sales 8480000 total manufacturing cost(materials, labour,and factor overhead) 8680000 = factory ovehed 1840000 = 500000 Material purchases 2400000 Exercise 8 Starnes Company Budgeted Income Statement For the Second Quarter $ Less Sales (70%) Cost of Goods Sold Gross Profit Operating Expneses Marketing Expenses 72000 Variable Bad Debts 14400 Total Variable Marketing expe Fixed Marketing 48000 Expenses Depreciation 5000 Total Fixed Marketing Expenses Total Marketing Expenses Admn Expenses Variable 34200 Fixed Admn expenses Depreciation 5000 Total Admn Expenses Total Expenses Net profit before taxes Chapter 15 $ 720000 504000 216000 86400 53000 139400 21600 39200 60800 200200 15800 Page 78
  • 78. COST ACCOUNTING 9TH EDITION Exercise 9 Sales CGS Assumed Units 1 1.05 Units Price 1 1.1 1 1.155 1.155 1 1.04 1 1.092 1.092 Price 1 1.05 Calcor Company Income Statement For the Year ended 19B $ Net Sales Expenses $ 8400*1.155 Cost of Goods Sold 6300*1.092 Marketing expenses 780+420 Administrative Expneses Interest Expenses 140+30 Total Expenses Income before Income Tax Income Tax Net Income Chapter 15 9702 6879.6 1200 900 170 9149.6 552.4 220.96 331.44 Page 79
  • 79. COST ACCOUNTING 9TH EDITION Chapter 16 Page 80
  • 80. COST ACCOUNTING 9TH EDITION CHAPTER 16 EXERCISES Problem 16-1 1 _______________Co Cash Disbursement Budget For the Month June $ June Payments May Payments 54% 46% 38,000 wages and Salaries 15% of sale Marketing exp 51,300 Less: Dep (2,000) $342000 * CGS $20 6,840,000 6,927,300 Total Cash Disbursement 2 49,300 _______________Co Cash Collection Budget For the Month May $ 60% April Collection 25% 90,750 9% 31,860 March Collection 97% 211,266 April Collection 333,876 Total Cash Receipt 3 _______________Co Purchase Budget For the Month July Units 11,400 Production reqd for july Add: end inv for july 15,860 130% of Aug 27,260 Inv needed Less: op Inv (15,600) 130% of july 11,660 Purchase Required Problem 16-2 1 _______________Co Cash Collection Budget For the Month July $ July Collection 80% June Collection 18% 98% 548,800 108,000 Total Cash Receipt 2 656,800 Cash Collection For Sep from Aug Sale 126,000 Chapter 16 Page 81
  • 81. COST ACCOUNTING 9TH EDITION 3 Aug Ending Inv=25% next month Sale 4 100,000 _______________Co Purchase Budget For the Month June Units CGS 80% of sales 480,000 Add: end inv for july 25% of july sale 175,000 655,000 Inv needed Less: op Inv 25% of june sale (150,000) 505,000 Purchase Required Problem 16-4 _______________Co Cash Budget For the Month of Sep $ 13,000 Op Cash Bal Add: Expected Cash Receipts 40,000 cash Sales ON ACCOUNT Current Month Sales Aug month Sale 38750 48000 July Sales 10000 Total cash available Less: Expected Cash Payements cash Purchases Payment to ON ACCOUNT expanses Paid 96,750 149,750 20000 92000 46500 Total 158,500 Financing Required (8,750) _______________Co Cash Budget For the Month of OCT $ (8,750) Op Cash Bal Add: Expected Cash Receipts cash Sales ON ACCOUNT Current Month Sales Sep month Sale Aug Sales Total cash available Less: Expected Cash Payements cash Purchases Chapter 16 60,000 47500 31000 12000 90,500 141,750 20000 Page 82
  • 82. COST ACCOUNTING 9TH EDITION Payment to ON ACCOUNT expanses Paid 86000 10000 Total 116,000 Expected cash Balance After Payments 25,750 Sep A/P opening 10000 purchases 100000 ending (12,000) disct (6,000) Payments 92000 Chapter 16 OCT A/P 12000 80000 (9,000) 3,000 86000 Page 83
  • 83. COST ACCOUNTING 9TH EDITION CHAPTER 16 EXERCISES Exercise 16.1 Salvey Company Budgeted Cash Receipts for April $ Feburary Sales( 40000 x 12%)= March Sales (70000x97% x 60%) March Sales (70000x x 25%) Total= Exercise 16.2 1 Budgeted Cash Collections in May May Sales(150000 x 20%) April Sales(180000 x 50%) March Sales( 100000 x 25%) Total Cash Collections 4800 407404.7 17500 429704.7 30000 90000 25000 145000 2 Balance of Accounts Receivable on April 30th April Receivable(180000 x 80%) 1440000 March Receivable(100000 x 30%) 30000 Less Bad Debts (100000 x 5%) -5000 Receivalbes on April 30th 1465000 3 Balance of Accounts Receivable on May 31st May Receivable(150000 x 80%) April Receivable(180000 x 30%) Less Bad Debts (180000 x 5%) Receivalbes on April 30th Exercise 16.3 Marketing, General, and Admn Expenses Fixed (71000-40000) Variable (700000*15%)-(700000*1%) 1200000 54000 -9000 1245000 $ 31000 98000 129000 490000 10000 629000 Cost of Goods Sold(700000*70%) Increase in Inventory during the month Estimated June cash disbursement Exercise 16.4 Production requriement of Par in July July Sale Requirement= Closing Stock requried= Total Stock needed= Opening Stock= Units to be produced Units of Tee required for production of par in july= 30000 3000 33000 3000 30000 30000*3= 90000 Purchase requirment of Tee Chapter 16 Page 84
  • 84. COST ACCOUNTING 9TH EDITION Production requirement in july= Closing inventory required= Total Inventory required= Less available opening Stock Units to be purchaes Cost of July Purchases 90000 11000 101000 14000 87000 87000*5= 435000 Dollars Production requriement of Par in June June Sale Requirement= Closing Stock requried= Total Stock needed= Opening Stock= Units to be produced 50000 3000 53000 5000 48000 Units of Tee required for production of par in july= 48000*3= Purchase requirment of Tee Production requirement in june= Closing inventory required= Total Inventory required= Less available opening Stock Units to be purchaes Cost of July Purchases 144000 144000 14000 158000 20000 138000 138000*5= 690000 Cash required in July for purchase of Tee Payment of June Purchases= 690000*98%*1/3 Payment of July Purchases=435000*98%*2/3 Total Cash required Dollars 225400 284200 509600 Exercise 16.5 Crockett Company Cash Budget For the Month of July Opening Balance Exepected Receipts Current Receivalbe Last Month Receivable Total Cash Available Expected Payments Income Tax Payment of Payables Chapter 16 5000 20000 14700 34700 39700 1600 Page 85
  • 85. COST ACCOUNTING 9TH EDITION Current payable Last Month Payable Marketing & Admn Expenses Dividneds Total Expected Payments Balance after payments Fianacing required Desired Closing Balance 3750 7500 11250 10000 15000 36250 3450 1550 5000 Direct Materials Direct Laobur Supervision Indirect materials Property tax Maintenance Power Insurance Depreciation Flexible Budget at 100% Capacity Fixed Variable Total cost Cost Cost 20000 20000 11250 11250 500 0 500 250 1500 1750 300 0 300 600 1000 1600 200 100 300 175 0 175 1600 0 1600 Direct Materials Direct Laobur Supervision Indirect materials Property tax Maintenance Power Insurance Depreciation Flexible Budget at 192% Capacity Variable Total Cost Fixed Cost 18400 18400 10350 10350 500 0 500 250 1380 1630 300 0 300 600 920 1520 200 92 292 175 0 175 1600 0 1600 Exercise 16.12 Exercise 16.13 The Birch Company Assembly department Flexible Budget for one month Units 3800 Direct Labour Hours 3200 Direct Material Direct Labour Fixed Factor Overhead Supplies Indrect labour Other Charges Total Chapter 16 60% Capcity 2280 75% Capacity 2850 1920 2400 2856 17280 670 441 2160 345 23752 3570 21600 670 552 2700 432 29524 Page 86
  • 86. COST ACCOUNTING 9TH EDITION Cost per Unit 10.42 10.36 Exercise 16.14 Units Albanese Inc. Flexible Budget for one month 60% of N.C 1440 80% of N.C 1920 960 1280 1600 2880 6048 960 240 1008 432 11568 8.03 3840 8064 960 320 1344 576 15104 7.87 4800 10080 960 400 1680 720 18640 7.77 Direct labour Hours Direct Material Direct Labour Fixed Factor Overhead Supplies Indrect labour Other Charges Total manufacturing Cost Manufacturing cost per unit Chapter 16 Normal Capacilty (N.C) 2400 Page 87
  • 87. COST ACCOUNTING 9TH EDITION Chapter 17 Page 88
  • 88. COST ACCOUNTING 9TH EDITION CHAPTER 17 EXERCISES Exercise 1 Std Cost Per Unit Actual Qty Purchased Actual Puchase Price Actual Qty Used Std Qty $13.50 4500 Pounds $60,975 3900 Pounds 3800 Pounds $ 13.55 Actual Rate Material Purhase Price Variance Actual Qty Purchased @ actual Rate $60,975 Actual Qty Purchased @ Std Rate Unfav Variance $60,750 $225 Less: Price Usage Variance Actual Qty Used @ actual Rate $ 52,845 Less: Actual Qty Used @ Std Rate Unfav Variance $ 52,650 $ 195 Quantity Variance Actual Qty Usd @ Std Rate $ 52,650 Less: Std Qty Used @ Std Rate Unfav Variance $51,300 $1,350 Exercise 2 Labor Rate Variance Actual Hrs @ Std Rate Act Hrs @ actual Rate Favorable $ 6,500 $ 6,435 $ 65 Efficiency Variance Actual Hrs used @ std rate Std Hrs Used @ Std Rate Unfavorable $ 6,500 $ 6,000 $ 500 Overall Labor Variance Actual Hrs @ Act Rate Std Hrs used @ std rate Unfav Chapter 17 $ 6,435 $ 6,000 $ Page 89
  • 89. COST ACCOUNTING 9TH EDITION 435 Exercise 3 Material Purhase Price Variance Actual Qty Purchased @ actual Rate $5,700 Actual Qty Purchased @ Std Rate fav Variance $6,000 $300 Less: Price Usage Variance $ 5,130 Actual Qty Used @ actual Rate Less: $ 5,400 Actual Qty Used @ Std Rate fav Variance 270 Quantity Variance $ 5,400 Actual Qty Usd @ Std Rate Less: Std Qty Used @ Std Rate Unfav Variance $4,080 $1,320 Labor Rate Variance $ 3,720 $ 3,751 $ (31) Actual Hrs @ Std Rate Act Hrs @ actual Rate unFavorable Labor Efficiency Variance $ 3,720 $ 4,080 Actual Hrs used @ std rate Std Hrs Used @ Std Rate favorable Exercise 4 Normal Capacity Std Rate Budgeted FIX FOH Variable Rate Actual Capacity Actual FOH Std Capacity Attained 12000 $12.50 $96,000 $4.50 12500 $166,000 11000 CONTROLBLE VARIANCE ACTUAL FOH Less: Budgeted@ std Fix FOH $96,000 Variable FOH Std cap*v.rate 11000*4.50 $49,500 Unfavaorable Chapter 17 360 MHR Per MHR Per MHR MHR MHR $166,000 $145,500 $20,500 Page 90
  • 90. COST ACCOUNTING 9TH EDITION VOLUME VARIANCE Normal Capacity Less: Std Capacity Capacity not utilized * FIX RATE UNFAVORABLE 12000 11000 1000 $8 $8,000 MHR MHR MHR Reconciliation of Variances Actual FOH $166,000 Less:Std Cap*Std Rate $137,500 Unfav $28,500 20500+8000 $28,500 EXERCISE 4 Normal Cap Std Rate Budgeted FIX 16000 $10.40 $64,000 Variable Rate Actual Cap Actual FOH Std Cap Attained $6.40 15000 $157,000 15300 Spending Variance Actual FOH Less: Budgeted FOH@ Act Cap FIX FOH $64,000 Variable $96,000 Fav Idle Capacity Variance Normal Cap Less: Actual Cap Excess of std overactual * Fix Rate Unfav Overall Variance Actual FOH Std cap * Std Rate 15300*10.4 Fav DLH Per DLH PER DLH DLH DLH $157,000 $160,000 $3,000 16000 15000 DLH DLH 1000 $4 $4,000 DLH $157,000 $159,120 $2,120 Exercise 17.10 Mix Variance Material A B C Total Chapter 17 Pounds 20 5 25 50 Std Cost 14 2 5 Amount 280 10 125 415 Page 91
  • 91. COST ACCOUNTING 9TH EDITION Price of Input 415/50 8.3 Price of Out put 415/40 10.375 Input/Output ratio 40/50 4/5 Actual quantities at standard price Std Cost Material Pounds A 230000 14 B 50000 2 C 220000 5 Total 500000 Amount 3220000 100000 1100000 4420000 Actual Quantity at weighted average price 500000*8.3 4150000 Mix Variance 270000 unfaverable Yield Varience Actual input quantity at weighted average of standard material cost= Actual output quantity at weignther average of standard material cost= 390000*10.375 or 390000*5/4*8.3 4046250 Exercise 17.11 1 Tone= 1 Tonne= 1 Kg= 1 Ton= Mix Variance Material Cocoa Milk Sugar Total Out Put 1000 0.9842 2.2046 2170 Pounds 800 3700 500 5000 2170 4150000 4046250 103750 kg Ton lbs lbs Std Cost 0.45 0.5 0.25 Amount 360 1850 125 2335 lbs Price of Input 2335/5000 0.467 Price of Out put 2335/2170 1.076037 Input/Output ratio 2170/5000 217/500 Actual quantities at standard price Std Cost Material Pounds A 225000 0.45 B 1400000 0.5 C 250000 0.25 Total 1875000 Actual Quantity at weighted average price 1875000*.467 Chapter 17 Amount 101250 700000 62500 863750 875625 Page 92 Unfaverable
  • 92. COST ACCOUNTING 9TH EDITION Mix Variance 11875 faverable Out Put 387*2170 839790 lbs Yield Varience Actual input quantity at weighted average of standard material cost= Actual output quantity at weignther average of standard material cost= 839790*1.076037 875625 903645 28020 Chapter 17 Page 93 Faverable
  • 93. COST ACCOUNTING 9TH EDITION Chapter 20 Page 94
  • 94. COST ACCOUNTING 9TH EDITION CHAPTER 20 EXERCISES Exercise 20.1 Woliver Company Fixed Cost C.M Per Unit 2*60% 6000 1.2 Break Even in Units= 6000/1.2 5000 Break Even in Dollars= 6000/.6 10000 Exercise 20.2 Sales Variable Cost 1 Contribution Margin Fixed Cost Profit Units Dollars $ 7640000 4736800 2903200 2451000 452200 2 Contribution Margin Ratio 2903200/7640000 3 Break Even point in Dollars 2451000/.38 % 6E+06 Exercise 20.3 Sale Price per unit Variable Cost Contribution Margin Contribution Margin Ratio Fixed Cost 2.5 1.675 0.825 .825/2.5 4290 1 Break Even Point in Dollars= 4290/.33 13000 2 Break Even Pint in Units= 4290/.825 5200 3 Target Sales= 4290+8250/.825 Exercise 20.4 Sale Price per unit Variable Cost Contribution Margin Contribution Margin Ratio Fixed Cost 38 33 38000 % Dollars Units Dollars 5 3 2 2/5 0.4 % 26000 1 Break Even Point in Dollars= 26000/.4 65000 Dollars 2 Break Even Pint in Units= 26000/2 13000 Units 3 Target Units to be sold= 26000+10000/2 18000 Units 4 Target Sales= 26000+10000/.4 90000 Dollars Exercise 20.9 At 100 Capacity Units= Variable Cost= Chapter 20 350 742 Page 95
  • 95. COST ACCOUNTING 9TH EDITION Variable Cost at 90%= Fixed Cost Total Cost 667.8 1008 1675.8 Unit Cost 5.32 315 Units per Unit Exercise 20.10 Fixed Cost Fixed FOH Fixed Marketing Exp Fixed Admn Exp Total Fixed Cost 990 1000 1000 Direct Labour Direct Material Variable FOH Variable Marketing Variable Admin Total Variable Cost 1500 1400 1000 1000 500 2990 Variable Cost 5400 Sales 10000 Contribution 4600 C.M Ratio 46 % 65 Units 1 Break Even Point in Units 2990/46 2 Incrase in Sales Increase in Variable Cost Contribution Margin Fixed Cost Profit 10000*125% 5400*125% 12500 6750 5750 2990 2760 3 Break Even Point in Dollars 2990+690/.46 8000 Exercise 20.5 Margin of Safety= Margin of Safety Ratio 2000000-1500000 Dollars 500000 (20000001500000)/2000000*100 Exercise 20.6 Fixed Cost= CM Ratio= 25 Dollars % 9300 62% Break Even Sales= 9300/.62 15000 Dollars Actual Sales= 15000*100/75 20000 Dollars Profit For The Month= Sales Variable Cost Chapter 20 20000 7600 Page 96
  • 96. COST ACCOUNTING 9TH EDITION Contribution Margin Fixed Cost Profit 12400 9300 3100 Or Profit Ratio= Margin of safety Ratio* CM Ratio 20000*15.5% 3100 Exercise 20.7 Fixed Cost= CM Ratio= 15.500% 30000 60% Break Even Sales= 30000/.6 50000 Dollars Actual Sales= 50000*100/80 62500 Dollars Profit For The Month= Sales 62500 Variable Cost 25000 Contribution Margin 37500 Fixed Cost 30000 Profit 7500 Or Profit Ratio= Margin of safety Ratio* CM Ratio 62500*12% 7500 Exercise 20.8 Sales Variable Cost Contribution Margin Fixed Cost Planned Profit 12.000% A 100000*4 B 400000 280000 200000*3 600000 480000 Total 1000000 760000 240000 100000 140000 Exercise 20.11 Table Sale Price of Package 60*1 Variable Cost of Package 35*1 Contribution Margin of Package Total Fixed Cost C.M Ratio 45/120 Break Even Point in Dollars 60 35 37.5 675000/.375 Break Even point in Units Chair 675000/45 Tables Chairs 30*2 20*2 % 1800000 15000 30000 60 40 Total 120 75 45 675000 15000 60 30 Dollars Package 900000 900000 1800000 Exercise 20.12 L Sale Price of Package 20*2 Variable Cost of Package 12*2 Contribution Margin of Package Total Fixed Cost Chapter 20 M 40 24 15*3 10*3 Total 45 30 85 54 31 372000 Page 97
  • 97. COST ACCOUNTING 9TH EDITION C.M Ratio 31/85 36.47059 0.364706 1 Break Even Point in Dollars 372000/.3647 2 Break Even point in Units 372000/31 L M 3 Target Sales Target Units 372000+93000/31 L M 1020000 24000 36000 372000+93000/.364 4 Chapter 20 % 12000 20 15 1275000 30000 45000 15000 20 15 Dollars Package 480000 540000 1020000 Dollars Packages 600000 675000 1275000 Page 98
  • 98. COST ACCOUNTING 9TH EDITION Chapter 21 Page 99
  • 99. COST ACCOUNTING 9TH EDITION CHAPTER 21 EXERCISES Exercise 21.1 1 Normal Capaciity Fixed Cost Variable cost 75000 225000 10 Cost at 90 % of Normal Capacity Fixed Cost Variable Cost Total Cost Cost at 80 % of Normal Capacity Fixed Cost Variable Cost Total Cost Units Dollars per Units 67500 225000 675000 900000 60000 225000 600000 825000 Differential Cost between 80% &90 of Capacilty 75000 2 a b The differntial Production cost of 5000 Units Fixed Cost 10000 Variable Csot 50000 Total Cost Per Unit total Production cost Fixed Cost Actual 225000 Extended 10000 Total Variable Cost 80000*10 Total Cost of Production 60000 235000 800000 1035000 Unit Cost of Production(80000) c Per Unit differential Cost of 5000 Units Cost Units Differential Cost 12.9375 60000 5000 12 Exercise 21.2 Saugus Insecticide Company Income Statement for New Business For the Month Ended---Sales(1.8*5000) Cost to Manufacture Direct Material (.6+.01)*5000 Direct Labour(.5*5000) Factory Over Head Indrect labour(.2*5000) Power(600/30000)*5000 Supplies(.02*5000) Maintenance and Repair(.027*5000) Depreciation(3000/24) Chapter 21 9000 3050 2500 1000 100 100 135 125 Page 100
  • 100. COST ACCOUNTING 9TH EDITION Insurance (.007*5000) 35 Payroll Taxes 210 Total FOH Total Manufacturing Costs Gross Profit Contribution Administrative Expenses Profit Contribution form accepting new business Exercise 21.4 Mininum Selling Price Direct Material Direct Labour Variable Factory over head Shipping expneses Minimum Selling Prince should be greater than or equal to $13 1705 7255 1745 150 1595 4 5 2 2 13 Exercise 21.5 Current Cost of Manufacturing 10000 Units Cost of Purchasing 10000 Units Cost Purchase Fixed Cost 190000 10000*18 Less Saving in Cost Rent of facilities Cost of Purchasing 10000 Units Loss on Purchase 180000 30000 210000 15000 195000 5000 Exercise 21.3 Income statement at 10000 units level Sales 10000*15 Cost of Sales Direct Material Direct Labur Variable FOH Fixed FOH Varialbe Marketing & Admn Exp Fixed Marketing & Admn Exp Total Cost of sales Profit 1 150000 10000*2 10000*3.5 10000*1.5 15000*1 20000 35000 15000 24000 10000 13000 117000 33000 The company should accept the special order because the proposed $9 sale price covers all variable Sale Price Direct material Direct Labour Variable factory overhead Total Chapter 21 9 2 3.5 1.5 7 Page 101
  • 101. COST ACCOUNTING 9TH EDITION Less Variable Marketing & Admn Expenses Current Special order 1 0.3 1.3 Profit per unit on special order Total Profit on accepted order 5000*.7 8.3 0.7 3500 Combined Income statement will be as follows Sales 10000*15 5000*9 Total Sales Cost of Sales Direct Material Direct Labur Variable FOH Fixed FOH Varialbe Marketing & Admn Exp Fixed Marketing & Admn Exp Special order Marketing & Admin Exp Total Cost of sales Profit 2 150000 45000 195000 15000*2 15000*3.5 15000*1.5 15000*1 30000 52500 22500 24000 15000 13000 1500 158500 36500 If Total Plant Capacity is 13000 Units Sales 8000*15 5000*9 120000 45000 Total Sales 165000 Cost of Sales Direct Material 15000*2 30000 Direct Labur 15000*3.5 52500 Variable FOH 15000*1.5 22500 Fixed FOH 24000 Varialbe Marketing & Admn Exp 15000*1 15000 Fixed Marketing & Admn Exp 13000 Special order Marketing & Admin Exp 1500 Total Cost of sales 158500 Profit 6500 So there is loss of profit if the total plant capacity is 13000 units and 5000 units are accepted at 9 per unit Exercise 21.6 Current Cost of Manufacturing 100000 Direct Material 260*1000 Direct Labour 100*1000 Varialbe FOH 120*1000 Fixed FOH 160*1000 Total Cost Cost of Purchasing 100000 Units Cost Purchase 1000*600 Fixed Cost(160000-90000-50000) Profit on Purchase Chapter 21 260000 100000 120000 160000 640000 600000 20000 620000 20000 Page 102

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