Problem 2-19B (45 minutes)

1. / Mullen / Chu / Johnson
Designer-hours...... / 60 / 45 / 25
Predetermined overhead rate...... / ×$50 / ×$50 / ×$50
Manufacturing overhead applied... / $3,000 / $2,250 / $1,250
2. / Mullen / Chu
Direct materials...... / $ 2,600 / $1,900
Direct labor...... / 5,000 / 4,700
Overhead applied..... / 3,000 / 2,250
Total cost...... / $10,600 / $8,850
Completed Projects*...... / 19,450
Work in Process...... / 19,450

* $10,600 + $8,850 = $19,450

3.The balance in the Work in Process account will consist entirely of the costs associated with the Johnson project:

Direct materials...... / $1,100
Direct labor...... / 2,000
Overhead applied...... / 1,250
Total cost in work in process. / $4,350

4.The balance in the Overhead account can be determined as follows:

Overhead
Actual overhead costs / 7,000 / Applied overhead costs / 6,500
Underapplied overhead / 500

As indicated above, the debit balance in the Overhead account is called underapplied overhead.

Problem 2-20B (30 minutes)

1.Cutting Department:

Finishing Department:

2.

Overhead Applied
Cutting Department: 100 MHs × $8.50 per MH.. / $850
Finishing Department: $60 × 200%...... / 120
Total overhead cost applied...... / $970

3.Yes; if some jobs required a large amount of machine time and little labor cost, they would be charged substantially less overhead cost if a plantwide rate based on direct labor cost were being used. It appears, for example, that this would be true of job G21-A which required considerable machine time to complete, but required only a small amount of labor cost.

Problem 2-21B (75 minutes)

1. / a. / Raw Materials...... / 150,000
Cash...... / 150,000
b. / Work in Process...... / 135,000
Manufacturing Overhead...... / 23,000
Raw Materials...... / 158,000
c. / Work in Process...... / 100,000
Manufacturing Overhead...... / 40,000
Sales Commissions Expense...... / 22,000
Salaries Expense...... / 35,000
Cash...... / 197,000
d. / Manufacturing Overhead...... / 30,000
Rent Expense...... / 6,000
Cash...... / 36,000
e. / Manufacturing Overhead...... / 90,000
Cash...... / 90,000
f. / Advertising Expense...... / 88,000
Cash...... / 88,000
g. / Manufacturing Overhead...... / 66,000
Depreciation Expense...... / 14,000
Accumulated Depreciation...... / 80,000
h. / Work in Process...... / 250,000
Manufacturing Overhead...... / 250,000

Rmb100,000 actual direct labor cost × 250% = Rmb250,000.

Problem 2-21B (continued)

i. / Finished Goods...... / 490,000
Work in Process...... / 490,000
j. / Cash...... / 995,000
Sales...... / 995,000
Cost of Goods Sold...... / 550,000
Finished Goods...... / 550,000

2.

Raw Materials / Work in Process
Bal. / 13,000 / (b) / 158,000 / Bal. / 30,000 / (i) / 490,000
(a) / 150,000 / (b) / 135,000
Bal. / 5,000 / (c) / 100,000
(h) / 250,000
Bal. / 25,000
Finished Goods / Manufacturing Overhead
Bal. / 65,000 / (j) / 550,000 / (b) / 23,000 / (h) / 250,000
(i) / 490,000 / (c) / 40,000
Bal. / 5,000 / (d) / 30,000
(e) / 90,000
(g) / 66,000
Bal. / 1,000
Cost of Goods Sold
(j) / 550,000

3.Manufacturing overhead is overapplied by Rmb1,000 for the year. The entry to close this balance to Cost of Goods Sold would be:

Manufacturing Overhead...... / 1,000
Cost of Goods Sold...... / 1,000

Problem 2-21B (continued)

4.

Gilder Corporation
Income Statement
Sales...... / Rmb995,000
Less cost of goods sold (Rmb550,000 – Rmb1,000) / 549,000
Gross margin / 446,000
Less selling and administrative expenses:
Sales commissions...... / Rmb22,000
Administrative salaries...... / 35,000
Rent expense...... / 6,000
Advertising expense...... / 88,000
Depreciation expense...... / 14,000 / 165,000
Net operating income...... / Rmb281,000

Problem 2-22B (90 minutes)

1. / a. / Raw Materials...... / 55,000
Accounts Payable...... / 55,000
b. / Work in Process...... / 45,500
Manufacturing Overhead...... / 19,500
Raw Materials...... / 65,000
c. / Work in Process...... / 60,000
Manufacturing Overhead...... / 35,000
Salaries Expense...... / 30,000
Salaries and Wages Payable... / 125,000
d. / Manufacturing Overhead...... / 21,000
Accounts Payable...... / 21,000
e. / Advertising Expense...... / 33,000
Accounts Payable...... / 33,000
f. / Manufacturing Overhead...... / 6,800
Insurance Expense...... / 1,200
Prepaid Insurance...... / 8,000
g. / Manufacturing Overhead...... / 54,000
Depreciation Expense...... / 6,000
Accumulated Depreciation.... / 60,000
h. / Work in Process...... / 138,000
Manufacturing Overhead..... / 138,000

$60,000 actual direct labor cost × 230% = $138,000 overhead applied.

i. / Finished Goods...... / 230,000
Work in Process...... / 230,000
j. / Accounts Receivable...... / 350,000
Sales...... / 350,000
Cost of Goods Sold...... / 237,000
Finished Goods...... / 237,000

Problem 2-22B (continued)

2. / Raw Materials / Finished Goods
Bal. / 10,700 / (b) / 65,000 / Bal. / 16,000 / (j) / 237,000
(a) / 55,000 / (i) / 230,000
Bal. / 700 / Bal. / 9,000
Work in Process / Manufacturing Overhead
Bal. / 6,500 / (i) / 230,000 / (b) / 19,500 / (h) / 138,000
(b) / 45,500 / (c) / 35,000
(c) / 60,000 / (d) / 21,000
(h) / 138,000 / (f) / 6,800
Bal. / 20,000 / (g) / 54,000
Bal. / 1,700
Cost of Goods Sold
(j) / 237,000

3.Overhead overapplied by $1,700 for the year. The entry to close this balance to Cost of Goods Sold would be:

Manufacturing Overhead...... / 1,700
Cost of Goods Sold...... / 1,700
4. / Williams Products, Inc.
Income Statement
For the Year Ended March 31
Sales...... / $350,000
Less Cost of Goods Sold ($237,000 - $1,700)... / 235,300
Gross margin...... / 114,700
Less selling and administrative expenses:
Salaries expense...... / $ 30,000
Advertising expense...... / 33,000
Insurance expense...... / 1,200
Depreciation expense...... / 6,000 / 70,200
Net operating income...... / $ 44,500

Problem 2-23B (75 minutes)

1.a.

b.Before the underapplied or overapplied overhead can be computed, we must determine the amount of direct materials used in production for the year.

Raw materials inventory, beginning...... / $ 10,000
Add, Purchases of raw materials...... / 260,000
Raw materials available...... / 270,000
Deduct: Raw materials inventory, ending.... / 45,000
Raw materials used in production...... / $225,000

Since no indirect materials are identified in the problem, these would all be direct materials. With this figure, we can proceed as follows:

Actual manufacturing overhead costs:
Indirect labor...... / $ 80,000
Property taxes...... / 9,800
Depreciation of equipment...... / 150,000
Maintenance...... / 34,200
Insurance...... / 2,000
Rent, building...... / 59,000
Total actual costs...... / 335,000
Applied manufacturing overhead costs:
$225,000 × 140%...... / 315,000
Underapplied Overhead...... / $ 20,000

Problem 2-23B (continued)

2.

Colby Company
Schedule of Cost of Goods Manufactured
Direct materials:
Raw materials inventory, beginning..... / $ 10,000
Add purchases of raw materials...... / 260,000
Total raw materials available...... / 270,000
Deduct raw materials inventory, ending.. / 45,000
Raw materials used in production...... / $225,000
Direct labor...... / 80,000
Manufacturing overhead applied to work in process / 315,000
Total manufacturing costs...... / 620,000
Add: Work in process, beginning...... / 240,000
860,000
Deduct: Work in process, ending...... / 27,000
Cost of goods manufactured...... / $833,000
3. / Cost of goods sold:
Finished goods inventory, beginning...... / $150,000
Add cost of goods manufactured...... / 833,000
Goods available for sale...... / 983,000
Deduct finished goods inventory, ending... / 280,000
Cost of goods sold...... / $703,000
4. / Direct materials...... / $ 5,500
Direct labor...... / 3,300
Overhead applied ($5,500 × 140%)...... / 7,700
Total job cost...... / $16,500

$16,500 × 116% = $19,140 price to the customer.

Problem 2-23B (continued)

5.The amount of overhead cost in Work in Process would be:

$10,000 direct materials cost × 140% = $14,000.

The amount of direct labor cost in Work in Process would be:

Total ending work in process...... / $27,000
Deduct: Direct materials...... / $10,000
Manufacturing overhead... / 14,000 / 24,000
Direct labor cost...... / $ 3,000

The completed schedule of costs in Work in Process would be:

Direct materials...... / $10,000
Direct labor...... / 3,000
Manufacturing overhead.... / 14,000
Total work in process...... / $27,000

Problem 2-24B (45 minutes)

1.Molding Department predetermined overhead rate:

Painting Department predetermined overhead rate:

2. / Molding Department overhead applied:
180 machine-hours × $10.10 per machine-hour.. / $1,818
Painting Department overhead applied:
$1,520 direct labor cost × 150%...... / 2,280
Total overhead cost...... / $4,098

3.Total cost of Job 205:

Department
Molding / Painting / Total
Direct materials...... / $ 200 / $ 144 / $ 344
Direct labor...... / 460 / 1,520 / 1,980
Manufacturing overhead applied. / 1,818 / 2,280 / 4,098
Total cost...... / $2,478 / $3,944 / $6,422

Cost per unit for Job 205:

4. / Department
Molding / Painting
Manufacturing overhead incurred...... / $500,000 / $1,000,000
Manufacturing overhead applied:
49,000 machine-hours × $10.10 per machine-hour / 494,900
$660,000 direct labor cost × 150%.... / 990,000
Underapplied (or overapplied) overhead.. / $ 5,100 / $ 10,000

Problem 2-25B (75 minutes)

1. The cost of raw materials put into production would be:

Raw materials inventory, 1/1...... / $ 50,000
Debits (purchases of materials)...... / 350,000
Materials available for use...... / 400,000
Raw materials inventory, 12/31...... / 40,000
Materials requisitioned for production...... / $360,000

2.Of the $360,000 in materials requisitioned for production, $310,000 was taken into Work in Process as direct materials. Therefore, the difference of $50,000 would have been debited to Manufacturing Overhead as indirect materials.

3. / Total factory wages accrued during the year (credits to the Factory Wages Payable account) / $520,000
Less direct labor cost (from Work in Process)..... / 500,000
Indirect labor cost...... / $ 20,000

4.The cost of goods manufactured would have been $1,600,000—the credits to the Work in Process account.

5.The Cost of Goods Sold for the year would have been:

Finished goods inventory, 1/1...... / $ 100,000
Add: Cost of goods manufactured
(from Work in Process)...... / 1,600,000
Goods available for sale...... / 1,700,000
Finished goods inventory, 12/31..... / 200,000
Cost of goods sold...... / $1,500,000

6.The predetermined overhead rate would have been:

Problem 2-25B (continued)

7.Manufacturing overhead would have been underapplied by $15,000, computed as follows:

Actual manufacturing overhead cost for the year (debits) / $765,000
Applied manufacturing overhead cost (from Work in Process—this would have been the credits to the Manufacturing Overhead account) / 750,000
Underapplied overhead...... / $ 15,000

8.The ending balance in Work in Process is $60,000. Direct materials make up $10,000 of this balance, and manufacturing overhead makes up $30,000. The computations are:

Balance, Work in Process, 12/31...... / $60,000
Less: Direct labor cost (given)...... / 20,000
Manufacturing overhead cost ($20,000 × 150%). / 30,000
Direct materials cost (remainder)...... / $10,000