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Fundamentals of Cost Accounting 3rd Edition William Lanen, Shannon Anderson, Michael Maher - Solutions

Mark Corporation estimates its manufacturing overhead to be $90,000 and its direct labor costs to be $200,000 for year 1. The actual direct labor costs were $50,000 for Job 301, $75,000 for Job 302, and $100,000 for Job 303 during year 1; the actual manufacturing overhead was $97,000. Manufacturing
Refer to the information in Exercise 7-23. Prepare an entry to allocate the under- or over-applied overhead. Overhead applied in each of the inventory accounts is as follows:Work-in-process inventory . . . . . . . . . . . . . . $10,125Finished goods inventory . . . . . . . . . . . . . . . .
Aspen Company estimates its manufacturing overhead to be $625,000 and its direct labor costs to be $500,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $195,000. Job 2-2, which was completed, but not sold at the end of
Refer to the information in Exercise 7-25. Prepare an entry to allocate over- or under-applied overhead to:a. Work in Process.b. Finished Goods.c. Cost of Goods Sold.
Mary€™s Landscaping uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for August:Mary€™s applies overhead to production at a predetermined rate of 80 percent based on direct labor cost. Job 3318, which was started during August
Turco Products uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for September:Turco applies overhead to production at a predetermined rate of 120 percent based on direct labor cost. Job 9-27, the only job still in process at the end of September,
Tony’s Textiles uses a predetermined factory overhead rate based on machine-hours. For May, Tony’s budgeted overhead was $210,000 based on a budgeted volume of 35,000 machine-hours. Actual overhead amounted to $227,500 with actual machine-hours totaling 38,500.RequiredWhat was over- or
At the beginning of the month, Arthur's Olde Consulting Corporation had two jobs in process that had the following costs assigned from previous months:During the month, Jobs SY-400 and SY-403 were completed but not billed to customers.The completion costs for SY-400 required $25,200 in direct
For August, Royal Consulting and Mediation Practice (RCMP) worked 900 hours for Alberta Company and 2,100 hours for Ontario Corporation. RCMP bills clients at the rate of $300 per hour; labor cost for its consulting staff is $150 per hour. The total number of hours worked in September was 3,000,
Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 440 hours for Massive Airframes and 660 hours for Gigantic Drydocks. AB bills clients at the rate of $500 per hour; labor cost for its
Sydney Corporation estimated that machine-hours for the year would be 20,000 hours and overhead (all fixed) would be $80,000. Sydney applies its overhead on the basis of machine-hours.During the year, all overhead costs were exactly as planned ($80,000). There was $11,000 in over-applied
Valley Corporation estimated that direct labor for the year would be 58,500 hours. Valley’s overhead (all fixed) is applied on the basis of direct labor-hours. The company estimates its overhead costs at $234,000. During the year, all overhead costs were exactly as planned ($234,000). There was
The following T-accounts represent September activity.RequiredCompute the missing amounts indicated by the letters (a) through(i).
The following T-accounts represent November activity.Additional Dataâ€¢ Materials of $113,600 were purchased during the month, and the balance in the Materials Inventory account increased by $11,000.â€¢ Overhead is applied at the rate of 150 percent of direct labor cost.â€¢ Sales are
Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different volumes for the current year as follows:The
UCD Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to apply overhead to individual jobs. An estimate of overhead costs at different volumes was prepared for the current year as follows:The expected volume is
A new computer virus (AcctBGone) destroyed most of the company records at BackupsRntUs. The computer experts at the company could recover only a few fragments of the company€™s factory ledger for February as follows:Further investigation and reconstruction from other sources yielded the
Youth Athletic Services (YAS) provides adult supervision for organized youth athletics. It has a president, William Mayes, and five employees. He and one of the other five employees manage all marketing and administrative duties. The remaining four employees work directly on operations. YAS has
For the month of January, Bay Accountants worked 2,000 hours for Lake Lumber, 600 hours for Marty’s Marina, and 1,000 hours for the State Prison System. Bay bills clients at $120 an hour; its labor costs are $45 an hour. A total of 4,000 hours were worked in January with 400 hours not billable to
On September 1, two jobs were in process at Pete's Patios. Details of the jobs follow:Materials Inventory on September 1 totaled $11,040, and $1,392 worth of materials was purchased during the month. Indirect materials of $192 were withdrawn from materials inventory. On September 1, finished goods
The following transactions occurred in January at Dungan Cabinetry, a furniture maker that uses job costing:1. Purchased $53,700 in materials on account.2. Issued $1,500 in supplies from the materials inventory to the production department.3. Paid for the materials purchased in (1).4. Issued
Brighton Services repairs locomotive engines. It employs 100 full-time workers at $20 per hour. Despite operating at capacity, last year's performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs:Direct materials . .
Kim€™s Asphalt does driveway and parking lot resurfacing work for large commercial clients as well as small residential clients. An inventory of materials and equipment is on hand at all times so that work can start as quickly as possible. Special equipment is ordered as required. On May
A tornado struck the only manufacturing plant of Toledo Farm Implements (TFI) on June 1. All work-in-process inventory was destroyed, but a few records were salvaged from the wreckage and from the company’s headquarters. If acceptable documentation is provided, the loss will be covered by
IYF Corporation manufactures miscellaneous parts for building construction and maintenance. IYF uses a normal job costing system. The system applies manufacturing overhead on the basis of direct labor cost. For managerial purposes, over- or underapplied overhead is written off to Cost of Goods Sold
Chelsea Household Renovations (CHR) is a rapidly growing company that has not been profitable despite increases in sales. It has hired you as a consultant to find ways to improve profitability. You believe that the problem results from poor cost control and inaccurate cost estimation on jobs. The
Old Port Shipyards does work for both the U.S. Navy and private shipping companies. Old Port€™s major business is renovating ships, which it does at one of two company dry docks referred to by the names of the local towns: Old Town and Newton.Data on operations and costs for the two dry
Chuck Moore supervises two consulting jobs for the firm of Price and Waters, LLP, which is a consulting firm that helps organizations become more efficient. One of the consulting jobs is for the U.S. Department of Defense and the other is for General Motors, Inc. Chuck received the monthly cost
O€™Leary Corporation manufactures special purpose portable structures (huts, mobile offices, and so on) for use at construction sites. It only builds to order (each unit is built to customer specifications).O€™Leary uses a normal job costing system. Direct labor at
What are the characteristics of industries most likely to use process costing?
A manufacturing company has records of its activity during the month in work-in-process inventory and of its ending work-in-process inventory; however, the record of its beginning inventory has been lost. What data are needed to compute the beginning inventory? Express them in equation form.
If costs increase from one period to another, will costs that are transferred out of one department under FIFO costing be higher or lower than costs transferred out using weighted average costing? Why?
What is the distinction between equivalent units under the FIFO method and equivalent units under the weighted-average method?
It has been said that a prior department’s costs behave similarly to direct materials costs. Under what conditions are the costs similar? Why account for them separately?
The more important individual unit costs are used for decisions, the more likely it is that process costing will be preferred to job costing. Do you agree?
Assume that the number of units transferred out of a department is unknown. What is the formula to solve for units transferred out using the basic cost flow model?
The management of a liquid cleaning product company is trying to decide whether to install a job or process costing system. The manufacturing vice president has stated that job costing gives the best control because it is possible to assign costs to specific lots of goods. The controller, however,
We have discussed two methods for process costing, weighted average and FIFO. Your colleague recommends last-in, first-out (LIFO) process costing to the controller as a new system. The controller is concerned about the recommendation because the cost records are maintained on a FIFO basis. Indeed,
A friend owns and operates a consulting firm that works for a single client under one consulting agreement. The consulting firm bills the client monthly for charges incurred. She asks you whether you would recommend a job costing or process costing system for her business. What would you recommend?
Under which of the following conditions will the first-in, first-out (FIFO) method of process costing produce the same cost of goods manufactured as the weighted-average method?a. When goods produced are homogeneous.b. When there is no beginning inventory.c. When there is no ending inventory.d.
By mistake, the production supervisor transposed the digits on the production report and reported a higher percentage of completion for each inventory component. Assume that there was no beginning inventory. What is the effect of this error on the following:a. The computation of total equivalent
In computing the cost per equivalent unit, the weighted-average method considersa. Current costs only.b. Current costs plus costs in beginning WIP inventory.c. Current costs plus the cost of ending WIP inventory.d. Current costs less costs in beginning WIP inventory.
When using the weighted-average method of process costing, total equivalent units produced for a given period equal:a. The number of units started and completed during the period plus the number of units in beginning work in process plus the number of units in ending work in process.b. The number
Clean Corporation manufactures liquid window cleaner. The following information concerns its work in process:• Beginning inventory, 8,000 partially complete gallons.• Transferred out, 42,000 gallons.• Ending inventory (materials are 10 percent complete; conversion costs are 20 percent
Refer to the data in Exercise 8-15. Assume that beginning inventory is 50 percent complete with respect to materials and 30 percent complete with respect to conversion costs.Requireda. Compute the equivalent units for materials using FIFO.b. Compute the equivalent units for conversion costs using
Missouri Corporation shows the following information concerning the work in process at its plant:• Beginning inventory was partially complete (materials are 100 percent complete; conversion costs are 60 percent complete).• Started this month, 180,000 units.• Transferred out, 150,000 units.•
Refer to the data in Exercise 8-17.Requireda. Compute the equivalent units for materials using FIFO.b. Compute the equivalent units for conversion costs using FIFO.
Bears, Inc., adds materials at the beginning of the process in Department MO. The following information on physical units for Department MO for the month of July is available:Work in process, July 1 (75% complete with respect to conversion) . . . . 27,000Started in July . . . . . . . . . . . . . .
Aaron Company has a process costing system. All materials are introduced when conversion costs reach 50 percent. The following information is available for physical units during March.Work in process, March 1 (60% complete as to conversion costs) . . . 150,000Units started in March . . . . . . . .
The following information pertains to the Davenport plant for the month of May (all materials are added at the beginning of the process):RequiredCompute the cost per equivalent unit for materials using the weighted-averagemethod.
Refer to the data in Exercise 8-21.RequiredCompute the cost per equivalent unit for materials using the FIFO method.
Materials are added at the beginning of the production process at Santiago Company, which uses a FIFO process costing system. The following information on the physical flow of units is available for the month of April:Beginning work in process (40% complete) . . . . . . . . . . 45,000Started in
Refer to the data in Exercise 8-23. Cost data for April show the following:Beginning WIP inventoryDirect materials costs . . . . . . . $ 24,300Conversion costs . . . . . . . . . . 38,700Current period costs . . . . . . . . . .Direct materials costs . . . . . . . $ 280,950Conversion costs . . . . .
The Matsui Lubricants plant uses the weighted-average method to account for its work-in-process inventories. The accounting records show the following information for a particular day:Beginning WIP inventoryDirect materials . . . . . . . . . . . . . . . . $ 976Conversion costs . . . . . . . . . . .
Refer to the data in Exercise 8-25. Compute the cost of goods transferred out and the ending inventory using the weighted-average method.
Using the data in Exercise 8-25, compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method.
Refer to the data in Exercises 8-25 and 8-27. Compute the cost of goods transferred out and the ending inventory using the FIFO method.
Pacific Ink had beginning work-in-process inventory of $372,480 on October 1. Of this amount, $152,460 was the cost of direct materials and $220,020 was the cost of conversion. The 48,000 units in the beginning inventory were 30 percent complete with respect to both direct materials and conversion
Refer to the data in Exercise 8-29. Compute the costs of goods transferred out and the ending inventory using the weighted-average method.
Refer to the data in Exercise 8-29. Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method.
Refer to the data in Exercise 8-29. Compute the cost of goods transferred out and the cost of ending inventory using the FIFO method. Is the ending inventory higher or lower under the weighted-average method compared to FIFO? Why?
Assume that El Paso Corporation provides you with the following information for one of its department€™s operations for September (no new material is added in Department B):RequiredPrepare a production cost report usingFIFO.
Refer to the information in Exercise 8-33.Requireda. Prepare a production cost report using the weighted-average method.b. Is the ending inventory higher using FIFO or the weighted-average method? Why?c. Would you recommend that El Paso use the FIFO method or the weighted-average method? Explain.
Brokia Electronics manufactures three cell phone models, which differ only in the components included: Basic, Photo, and UrLife. Production takes place in two departments, Assembly and Special Packaging. The Basic and Photo models are complete after Assembly. The UrLife model goes from Assembly to
Ferdon Watches, Inc., makes four models of watches, Gag-Gift, Commuter, Sport, and Retirement. Ferdon manufactures the watches in four departments: Assembly, Polishing, Special Finishing, and Packaging. All four models are started in Assembly where all material is assembled. The Gag-Gift is
Select the best answer for each of the following independent multiple-choice questions.a. Adams Company's production cycle starts in Department A. The following information is available for July:UnitsWork in process, July 1 (60% complete) . . . . 150,000Started in July . . . . . . . . . . . . . . .
The following pertains to the Cereal Division of McKenzie Corporation. Conversion costs for this division were 80 percent complete as to beginning work-in-process inventory and 50 percent complete as to ending work-in-process inventory. Information about conversion costs for July is as follows:The
Douglas Toys is a manufacturer that uses the weighted-average process costing method to account for costs of production. It produces a plastic toy in three separate departments: Molding, Assembling, and Finishing. The following information was obtained for the Assembling Department for the month of
Refer to the facts in Problem 8-39.a. Prepare a production cost report using FIFO.b. Answer requirement (b) in Problem 8-39.
Elmhurst Parts’s initial and unaudited records show the following ending inventory balances, which must be adjusted to actual costs:As the auditor, you have learned the following information. Ending work-in-process inventory is 40 percent complete with respect to conversion costs. Materials are
In its Department R, Recyclers, Inc., processes donated scrap cloth into towels for sale in local thrift shops. It sells the products at cost. The direct materials costs are zero, but the operation requires the use of direct labor and overhead. The company uses a process costing system and tracks
Pantanal, Inc., manufactures car seats in a local factory. For costing purposes, it uses a first-in, first-out (FIFO) process costing system. The factory has three departments: Molding, Assembling, and Finishing. Following is information on the beginning work-in-process inventory in the Assembling
For each of the following independent cases, use FIFO costing to determine the information requested.a. The ending inventory included $87,000 for conversion costs. During the period, 42,000 equivalent units were required to complete the beginning inventory, and 60,000 units were started and
For each of the following independent cases, determine the units or equivalent units requested (assuming weighted-average costing).a. The WIP Inventory account had a beginning balance of $11,400 for conversion costs on items in process and, during the period, $108,600 in conversion costs were
Washington, Inc., makes three models of motorized carts for vacation resorts, X-10, X-20, and X-40. Washington manufactures the carts in two assembly departments: Department A and Department B. All three models are processed initially in Department A, where all material is assembled. The X-10 model
Miller Outdoor Equipment (MOE) makes four models of tents. The model names are Rookie, Novice, Hiker, and Expert. MOE manufactures the tents in two departments: Stitching and Customizing. All four models are processed initially in Stitching where all material is assembled and sewn into a basic
Pacific Siding Incorporated produces synthetic wood siding used in the construction of residential and commercial buildings. Pacific Siding€™s fiscal year ends on March 31, and the weighted-average method is used for the company€™s process costing system.Financial results for
Vermont Company uses continuous processing to produce stuffed bears and FIFO process costing to account for its production costs. It uses FIFO because costs are quite unstable due to the volatile price of fi ne materials it uses in production. The bears are processed through one department.
Bouwens Corporation manufactures a solvent used in airplane maintenance shops. Bouwens sells the solvent to both U.S. military services and commercial airlines. The solvent is produced in a single plant in one of two buildings. Although the solvent sold to the military is chemically identical to
Give examples of cost drivers commonly used to allocate overhead costs to products and services.
The product costs reported using either plant wide or department allocation are the same. The only difference is in the number of cost drivers used. True or false? Explain.
Why do companies commonly use direct labor-hours or direct labor cost but not the number of units to allocate overhead?
What are the costs of moving to an activity-based cost system? What are the benefits?
What are the basic steps in computing costs using activity-based costing?
Cost allocation allocates only a given amount of costs to products. The total allocated is the same; therefore the choice of the system does not matter. True or false? Explain.
What type of organization is most likely to benefit from using activity-based costing for product costing? Why?
In what ways is implementing an activity-based costing system in a manufacturing firm’s personnel department the same as implementing it in the plant? In what ways is it different?
Why are cost drivers based on direct labor widely used?
Activity-based costing does a better job of allocating both direct and indirect cost than traditional methods do.” Is this statement true, false, or uncertain? Explain.
Activity-based costing could not be applied in a business school.” Do you agree? Explain.
Activity-based costing is the same as department costing.” Is this true, false, or uncertain? Explain.
Jim, the vice president of marketing, says the company should not adopt activity-based costing because it will result in the costs of some of the products going up but the market will not allow for raising prices. How would you respond?
It is clear after reading this chapter that activity-based costing is the best system. Whenever someone asks, I’ll recommend its adoption.” Do you agree? Explain.
One of the lessons learned from activity-based costing is that all costs are really a function of volume of output.” Is this true, false, or uncertain? Explain.
Activity-based costing breaks down the indirect costs into several activities that cause costs (cost drivers). These should be the same for each department in an organization.” Is this true, false, or uncertain? Explain.
You have been asked to determine whether a company uses an activity-based cost system. What information would you look for to answer the question?
We all know that cost allocation can distort decision making. We should stop doing this and just report direct costs.” Do you agree? Explain.
“Activity-based costing is just another inventory valuation method. It isn’t relevant for making operating decisions.” Do you agree with this statement? Explain.
Select an administrative function commonly found in a firm. Examples include personnel, accounts payable, purchasing, and so on. Outline an activity-based costing system for the function, including major activities, potential cost drivers, and relevant cost objects.
Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plant wide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used

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