Chapter ThreeSolutions
CHAPTER3SOLUTIONS
Part IPart II
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2.F7.T12.T2.i9.q16.o
3.T8.F13.F3.h10.s17.j
4.T9.T14.T 4.p11.b 18. n
5.T10.T15.T5.m12.e19.k
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7.a14.f
Part III
1.(c)A modified wage plan directs management’s attention to the employees who were unable to meet quotas because it is likely those employees would be paid the make-up guarantee more often than other, more productive employees.
2.(a)The labor time recordis needed to provide evidence of the employee’s presence in the plant from the time of entry to departure, and shows the employee’s time spent on each job.
3.(d)Fringe costs form a substantial element of labor cost to the employer and include such items as the employer portion of the FICA tax, holiday pay, overtime premium pay, and pension costs.
4.(c)A piece-rate plan is an incentive wage plan that bases earnings on the employee’s quantity of production.
5.(b)Theoretically, the employer’s share of the payroll taxes should be charged to the same accounts as the direct and indirect labor. However, due to the additional expense and time required for such allocation, all factory payroll taxes are usually charged to Factory Overhead.
6.(d)In determining whether the overtime premium should be charged to a specific job or spread over all jobs via the factory overhead rate, the key consideration is whether the job was worked on during the overtime period because it was a rush order or merely as a result of random scheduling.
$800 × 4 weeks
7.(d)= $66.67
48 weeks
8.(b)To spread the bonus cost over production throughout the year via the predetermined factory overhead rate, the weekly entry would include a debit to Factory Overhead for the ratable portion of the bonus pay.
9.(c)Employee withholdings are not included in the payroll accrual because they do not affect the employer’s income or total liabilities.
10.(b)The overtime premium (8 hours x $10 = $80) and the time spent maintaining machinery (12 hours x $20 = $240) would have been charged to Factory Overhead (Total of $320).
Part IV
Earnings atPiece-rateMake-upDailyLabor Cost
Day$10 per HourEarningsGuaranteeEarningsper Unit
Monday$80$75$5$80 $2.67
Tuesday$8080–80 2.50
Wednesday$80115 –115 2.50
Thursday$80701080 2.86
Friday$8085–85 2.50
Part V
1.
Frease / Redford / McLean / Love / TotalHours worked...... / 40 / 46 / 40
Piecework...... / 780
Rate (hourly/piece).... / $.50 / $7.00 / $8.80 / $12.20
Direct labor...... / $390.00 / $404.80 / $794.80
Indirect labor...... / $280.00 / $488.00 / $768.00
Overtime premium.... / 26.40 / 26.40
Gross pay...... / $390.00 / $280.00 / $431.20 / $488.00 / $1,589.20
Income tax (15%)..... / $58.50 / $42.00 / $64.68 / $73.20 / $ 238.38
FICA tax (8%)...... / 31.20 / 22.40 / 34.50 / 39.04 / 127.14
Health insurance (3%).. / 11.70 / 8.40 / 12.94 / 14.64 / 47.68
Total deductions...... / $101.40 / $72.80 / $112.12 / $126.88 / $ 413.20
Net pay...... / $288.60 / $207.20 / $319.08 / $361.12 / $1,176.00
2.(a)Payroll...... 1,589.20
FICA Tax Payable...... 127.14
Employees Income Tax Payable...... 238.38
Health Insurance Premiums Payable...... 47.68
Wages Payable...... 1,176.00
(b)Wages Payable...... 1,176.00
Cash...... 1,176.00
(c)Work in Process...... 794.80
Factory Overhead*...... 794.40
Payroll...... 1,589.20
(d)Factory Overhead...... 206.60
FICA Tax Payable...... 127.14
Federal Unemployment Tax Payable**...... 15.89
State Unemployment Tax Payable***...... 63.57
*$280.00 + 488.00+ $26.40
**Federal unemployment tax = $1,589.20 × 1% = $15.89
***State unemployment tax = $1,589.20 × 4% = $63.57
Part VI
1.Work in Process*...... 1,100
Payroll...... 1,100
2.Work in Process**...... 1,000
Factory Overhead***...... 100
Payroll...... 1,100
*(50 hrs. x $20) + (10 hrs. x $10)
** 50 hrs. x $20
*** 10 hrs. x $10
Part VII
Work in Process...... 4,400.00
Factory Overhead (Bonus)*...... 400.00
Factory Overhead (Vacation)**...... 400.00
Factory Overhead (Holiday Pay)***...... 184.62
Payroll...... 4,400.00
Bonus Liability...... 400.00
Vacation Pay Liability...... 400.00
Holiday Pay Liability...... 184.62
*$4,400 ÷ 11 months
**$4,400 ÷ 11 months
***$4,400 x 12 months = $52,800/52 weeks = $1,015.38
$1,015.38 x 2 weeks = $2030.77 holiday pay / 11 months = $184.62
S–1