Week 5 Practice Text Exercises Acc 561

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Practice Text Exercises
Karen V. Lawrence, Charita Dixon, Brian Swift, Javon Lewis, Cecelia Byrd ACC 561
June 21, 2011
Michael T. Bradford

Practice Text Exercises
Excel 12-59 Allocating Costs Using Direct and Step-Down Methods (p. 584) Goal: Create an Excel spreadsheet to allocate costs using the direct method and the stepdown method. Use the results to answer questions about your findings.

Scenario: Antonio Cleaning has asked you to help them determine the best method for allocating costs from their service departments to their producing departments. Additional background information for your spreadsheet appears in Fundamental Assignment Material 12-B2. Exhibit 12-4 on page 532 illustrates the types of calculations that are used for allocating costs using the direct method and the step-down method.

Chapter 12: Cost Allocation 585
When you have completed your spreadsheet, answer the following questions: 1. What are the total costs for the Residential department using the direct method? $300,158
What are the total costs for the Commercial department using the direct method?
$467,105
2. What are the total costs for the Residential department using the step-down method? $302,921
3. What are the total costs for the Commercial department using the step-down method? $471,711
4. Which method would you recommend that Antonio Cleaning use to allocate their service departments’ costs to their producing departments? Why?

I would recommend that Antonio Cleaning Services allocates the costs using the step-down method as it recognizes that some service departments provide services to other service departments as well as to producing departments

12-59 Excel Spreadsheet:
See attachment at the end of team C paper.

13-B3 Comparison of Variable Costing and Absorption Costing (p. 617) Consider the following information pertaining to a year’s operations of Youngstown Manufacturing: Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800
There are no work-in-process inventories.

1. What is the ending finished-goods inventory cost under absorption costing? 2. What is the ending finished-goods inventory cost under variable costing?

13-B3 Answer:

1. What is the ending finished-goods inventory cost under absorption costing? Direct labor| $4,200|
Direct materials used| 3,500|
Fixed manufacturing overhead| 2,200|
Variable manufacturing overhead| 300|
Total manufacturing cost| 10,200|
Cost per unit=Total manufacturing cost 10,200/Units produced 1,600| $6.375| Units produced 1,600 – Units sold 1,400| 200 units|
Inventory cost of ending finished goods: 200 units x $6.375| $1,275|

Solution: Add the direct materials used, direct labor, variable manufacturing overhead, and fixed manufacturing overhead = $10,200. Multiply $10,200 x 200 (difference of units produced and those sold) /units produced (1,600)

2. What is the ending finished-goods inventory cost under variable costing? Direct Labor| $4,200|
Direct materials used| 3,500|
Variable manufacturing overhead| 300|
Total manufacturing cost| $8,000|
Cost per unit=Units produced 1,600 x Total Manufacturing cost 8,000| $5.00| Units produced 1,600 – Units sold 1,400| 200 units|
Inventory cost of ending finished goods 200 units x $5.00| $1,000|

Solution: Add the direct materials used, direct labor, and variable manufacturing overhead ( and no fixed manufacturing overhead) = $8,000. Multiply $8,000 x 200 /units produced (1,600). 13-45 Variable and Absorption Costing (p. 621)

Chan Manufacturing Company data for 20X7 follow:
Sales: 12,000 units at $17 each
Actual production 15,000 units
Expected volume of production 18,000...
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