Managerial Accounting 8ed Chapter3

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CHAPTER 3

PROBLEM 3-43 (35 MINUTES)
1.Predetermined overhead rate = budgeted overhead ÷ budgeted direct-labor cost = $2,730,000 ÷ $2,100,000 = 130% of direct labor cost 2.Additions (debits) total $7,802,500 [$2,800,000 + $2,175,000 + ($2,175,000 x 130%)]. 3.The finished-goods inventory consisted of job no. 3154, which cost $175,750 [$78,000 + $42,500 + ($42,500 x 130%)]. 4.Since there is no work in process at year-end, all amounts in the Work-in-Process account must be transferred to Finished-Goods Inventory. Thus: Finished-Goods Inventory7,880,900*

Work-in-Process Inventory7,880,900

*Beginning balance in Work-in-Process Inventory + additions to the account: $78,400 + $7,802,500 = $7,880,900

5.BBBC’s applied overhead totals 130% of direct-labor cost, or $2,827,500 ($2,175,000 x 130%). Actual overhead was $2,777,000, itemized as follows, resulting in overapplied overhead of $50,500.

Indirect materials used $ 32,500
Indirect labor 1,430,000
Factory depreciation 870,000
Factory insurance 29,500
Factory utilities 415,000
Total $2,777,000

Manufacturing Overhead 50,500
Cost of Goods Sold 50,500

PROBLEM 3-43 (CONTINUED)
6.The company’s cost of goods sold totals $7,654,650:
Finished-goods inventory, Jan. 1…………….$ 0 Add: Cost of goods manufactured………….. 7,880,900
Cost of goods available for sale……………...$ 7,880,900 Less: Finished-goods inventory, Dec. 31….. 175,750
Unadjusted cost of goods sold……………….$ 7,705,150 Less: Overapplied overhead…………………. 50,500 Cost of goods sold……………………………...$ 7,654,650

7.No, selling and administrative expenses are operating expenses of the firm and are treated as period costs rather than product costs. Such costs are unrelated to manufacturing overhead and cost of goods sold.

PROBLEM 3-46 (35 MINUTES)
1.Predetermined overhead rate = budgeted overhead ÷ budgeted machine hours = $1,680,000 ÷ 32,000 = $52.50 per machine hour 2.(a)Work-in-Process Inventory 160,000*Raw-Material Inventory 160,000

Work-in-Process Inventory 261,600**Wages Payable261,600
* $42,000 + $88,000 + $30,000 = $160,000** $70,000 + $44,000 + $130,000 + $17,600 = $261,600
(b)Manufacturing Overhead 477,000Accumulated Depreciation 68,000Wages Payable120,000Manufacturing Supplies Inventory 10,000Miscellaneous Accounts279,000

(c)Work-in-Process Inventory 462,000*Manufacturing Overhead 462,000 * (2,400 + 1,400 + 4,000 + 1,000) x $52.50 = $462,000
(d)Finished-Goods Inventory 630,500*Work-in-Process Inventory 630,500 * Job 101: $168,000 + $42,000 + $70,000 + (2,400 x $52.50) = $406,000 Job 102: $107,000 + $44,000 + (1,400 x $52.50) = $224,500

$630,500 = $406,000 + $224,500

(e)Accounts Receivable 293,900*
Sales Revenue 293,900

* $224,500 + $69,400 = $293,900

Cost of Goods Sold 224,500
Finished-Goods Inventory 224,500
3.Job no. 103 and no. 104 are in production as of March 31:
Job 103: $88,000 + $130,000 + (4,000 x $52.50)$428,000
Job 104: $30,000 + $17,600 + (1,000 x $52.50) 100,100
Total$528,100

4.Finished-goods inventory increased by $406,000 ($630,500 - $224,500). 5.The company’s actual overhead amounted to $477,000, whereas applied overhead totaled $462,000. Thus, overhead was underapplied by $15,000.

PROBLEM 3-48 (30 MINUTES)
1.Traceable costs total $3,750,000, computed as follows:

Total CostPercent
TraceableTraceable
Cost

Professional staff salaries………$3,750,000 80%$3,000,000 Administrative support staff…… 450,000 60 270,000 Photocopying…………………….. 75,000 90 67,500 Travel………………………………. 375,000 90 337,500...
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