Solutions Guide: Please reword the answers to essay type parts so as to guarantee that

your answer is an original. Do not submit as is

Chapter 2 Exercise 3-28 The controller for Tender Bird Poultry, Inc. estimates that the
companys fixed overhead is $150,000 per year. She also has determined that the variable
overhead is approximately $.15 per chicken raised and sold. Since the firm has a single
product, overhead is applied on the basis of output units, chickens raised and sold.
Required: 1. Calculate the predetermined overhead rate under each of the following
output predictions: 100,000 chickens, 200,000 chickens, and 300,000 chickens. 2. Does
the predetermined overhead rate change in proportion to the change in predicted
production? Why? Exercise 3-31 Selected data concerning the past years operations of
the Lone Star Leather Company are as follows: Inventories Beginning Ending Raw
material..................................................................................................... $142,000 $
162,000 Work in process .................................................................................................
160,000 60,000 Finished
goods ................................................................................................... 180,000 220,000
Other data: Direct material used ....................................................................................... $
652,000 Total manufacturing costs charged to production during the year (includes direct
material, direct labor, and manufacturing overhead applied at a rate of 60% of directlabor cost) ............................................... 1,372,000 Cost of goods available for
sale....................................................................... 1,652,000 Selling and administrative
expenses ................................................................ 63,000 Required: 1. What was the cost
of raw materials purchased during the year? 2. What was the direct-labor cost charged to
production during the year? 3. What was the cost of goods manufactured during the year?
4. What was the cost of goods sold during the year?
Exercise 3-35 The following information pertains to Paramus Metal Works for the year
just ended. Budgeted direct-labor cost: 77,000 hours at $17 per hour Actual direct-labor
cost: 79,000 hours at $18 per hour Budgeted manufacturing overhead: $993,300
Budgeted selling and administrative expenses: $417,000 Actual manufacturing overhead:
Depreciation...........................................................................................................................
.............. $225,000 Property
taxes ......................................................................................................................................
. 19,000 Indirect
labor.......................................................................................................................................
.. 79,000 Supervisory
salaries ...............................................................................................................................
210,000
Utilities ..................................................................................................................................
............... 58,000
Insurance ...............................................................................................................................
.............. 32,000 Rental of
space .....................................................................................................................................
295,000 Indirect material (see data
below) ............................................................................................................ 79,000

Indirect material: Beginning inventory, January

1 ................................................................................................................ 46,000 Purchases
during the year.......................................................................................................................
95,000 Ending inventory, December
31 ............................................................................................................... 62,000
Required: 1. Compute the firms predetermined overhead rate, which is based on directlabor hours. 2. Calculate the over applied or under applied overhead for the year. 3.
Prepare a journal entry to close out the Manufacturing Overhead account into Cost of
Goods Sold. 4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements
(1) and (2) above. Show how the solution will change if the following data change:
budgeted manufacturing overhead was $990,000, property taxes were $25,000 and
purchases of indirect material amounted to $97,000.
Exercise 4-18 Andromeda Glass Company manufactures decorative glass products. The
firm employs a process costing system for its manufacturing operations. All direct
materials are added at the beginning of the process, and conversion costs are incurred
uniformly throughout the process. The companys production schedule for August
follows. Units Work in process on August 1 (60% complete as to
conversion) ...................................................................... 2,000 Units started during
August ......................................................................................................................... 3,500
Total units to account
for ..................................................................................................................... 5,500 Units
from beginning work in process, which were completed and transferred out during
August ..................... 2,000 Units started and completed during
August ................................................................................................... 1,800 Work in
process on August 31 (20% complete as to
conversion).................................................................... 1,700 Total units accounted
for ..................................................................................................................... 5,500
Required: Calculate each of the following amounts using weighted-average process
costing. 1. Equivalent units of direct material during August. 2. Equivalent units of
conversion activity during August.
Exercise 4-24 The November production of MVPs Minnesota Division consisted of
batch P25 (2,000 professional basketballs) and batch S33 (4,000 scholastic basketballs).
Each batch was started and finished during November, and there was no beginning or
ending work in process. Costs incurred were as follows: Direct material: Batch P25,
$42,000, including $2,500 for packaging material; batch S33, $45,000. Conversion costs:
Preparation Department, predetermined rate of $7.50 per unit; Finishing Department,
predetermined rate of $6.00 per unit; Packaging Department, predetermined rate of $.50
per unit. (Only the professional balls are packaged.) Required: 1. Draw a diagram
depicting the divisions batch manufacturing process. Refer to Exhibit 410 for guidance.
2. Compute the November product cost for each type of basketball. 3. Prepare journal
entries to record the cost flows during November.
Problem 4-37 Plastic sheets ....................... 10,000 $ 90,000 Standard model ....................
12,000 108,000 $36,000 Deluxe model ....................... 6,000 54,000 18,000 $13,500

Executive model .................... 4,000 36,000 12,000 9,000 $18,000

Total ..................................... 32,000 $288,000 $66,000 $22,500 $18,000 Operation
Costing; Unit Costs Direct labor ................................................ $228,000 $ 90,000
$45,000 $27,000 Manufacturing overhead .............................. 360,000 108,000 58,500
36,000 Required: 1. For each product produced by Plattsburg Plastics Corporation during
the month of March, determine the ( a ) unit cost and ( b ) total cost. Be sure to account
for all costs incurred during the month.(Carry out unit costs to three decimal places, i.e., a
tenth of a cent.) 2. Prepare journal entries to record the flow of production costs during
March. . Chapter 3 .

Asisngment 1
a) Chapter 3, p. 115 - Complete exercise 3-28

1.

Predetermined overhead rate =

(a)

At 100,000 chicken volume:

Overhead rate =

(b)

$150,000 +($.15)(100,000)
100,000

= $1.65 per chicken

At 200,000 chicken volume:

Overhead rate =

(c)

budgeted overhead
budgeted production volume

$150,000 +($.15)(200,000)
200,000

= $.90 per chicken

At 300,000 chicken volume:

Overhead rate =

$150,000 +($.15)(300,000)
300,000

= $.65 per chicken

2. The predetermined overhead rate does not change in proportion to the change in
production volume. As production volume increases, the $150,000 of fixed
overhead is allocated across a larger activity base. When volume rises by 100%,
from 100,000 to 200,000 chickens, the decline in the overhead rate is 45.45%
[($1.65 $.90)/$1.65]. When volume rises by 50%, from 200,000 to 300,000
chickens, the decline in the overhead rate is 27.78% [($.90 $.65)/$.90].

b) Chapter 3, p. 117 - Complete exercise 3-31

1.

2.

Raw material:
Beginning inventory...................................................................................
Add: Purchases..........................................................................................
Deduct: Raw material used........................................................................
Ending inventory........................................................................................

$142,000
?
652,000
$162,000

Therefore, purchases for the year were....................................................

$672,000

Direct labor:
Total manufacturing cost...........................................................................
Deduct: Direct material..............................................................................
Direct labor and manufacturing overhead................................................

3.

4.

$1,372,000
652,000
$ 720,000

Direct labor + manufacturing overhead

Direct labor + (60%) (direct labor)
(160%) (direct labor)

=
=
=

$720,000
$720,000
$720,000

Direct labor

$720,000
1.6

Direct labor

$450,000

Cost of goods manufactured:

Work in process, beginning inventory..................................................
Add: Total manufacturing costs............................................................
Deduct: Cost of goods manufactured...................................................
Work in process, ending inventory.......................................................

$ 160,000
1,372,000
?
$ 60,000

Therefore, cost of goods manufactured was.......................................

$1,472,000

Cost of goods sold:

Finished goods, beginning inventory.......................................................
Add: Cost of goods manufactured............................................................
Deduct: Cost of goods sold.......................................................................
Finished goods, ending inventory............................................................

$ 180,000
1,472,000
?
$ 220,000

Therefore, cost of goods sold was...........................................................

$1,432,000

c) Chapter 3, p. 118 - Complete exercise 3-35

1.

Predetermined overhead rate = $993,300 / 77,000 hours = $12.90 per hour

2.

To compute actual manufacturing overhead:

Depreciation................................................................................................
Property taxes............................................................................................
Indirect labor...............................................................................................
Supervisory salaries..................................................................................
Utilities........................................................................................................
Insurance....................................................................................................
Rental of space...........................................................................................
Indirect material:
Beginning inventory, January 1......................................
$46,000
Add: Purchases................................................................
95,000
Indirect material available for use..................................
$141,000
Deduct: Ending inventory, December 31.......................
62,000
Indirect material used......................................................
Actual manufacturing overhead.............................................
Overapplied
overhead

actual
manufacturing
overhead

$997,000 ($12.90 79,000*) = $22,100

$225,000
19,000
79,000
210,000
58,000
32,000
295,000

79,000
$997,000

applied
manufacturing
overhead

*Actual direct-labor hours.

3.

Manufacturing Overhead.......................................................
Cost of Goods Sold.....................................................

22,100
22,100

d) Chapter 4, p. 155 - Complete exercise 4-18

1.

5,500 equivalent units (refer to (a) in the following table)

2.

4,140 equivalent units (refer to (b) in the following table)

CALCULATION OF EQUIVALENT UNITS: ANDROMEDA GLASS COMPANY
Weighted-Average Method
Percentage
of
Equivalent Units
Completion with
Physical
Respect to
Direct
Units
Conversion
Material
Conversion

Work in process, August 1......

Units started during August....
Total units to account for........

2,000
3,500
5,500

60%

Units completed and transferred

out during August............
Work in process, August 31....
Total units accounted for........
Total equivalent units..............

3,800
1,700
5,500

100%
20%

3,800
1,700
_____
(1) 5,500

3,800
340
____
(2) 4,140

e) Chapter 4, p. 157 - Complete exercise 4-24

1. Diagram of production process:

Work-in-Process Inventory:
Preparation Department
Batch P25 Batch S33

Accumulated
by
department

Conversion costs:
Direct-labor
Manufacturing
overhead
Work-in-Process Inventory:
Finishing Department
Batch P25

Accumulated
by
batch

Batch S33

Directmaterial
costs
Work-in-Process Inventory:
Packaging Department
Batch P25

Finished-Goods Inventory
2. The product cost for each basketball is computed as follows:
Professional
Direct material:....................................................................
Batch P25 ($42,000 2,000)...........................................
Batch S33 ($45,000 4,000)...........................................

Conversion: Preparation Department...............................

Conversion: Finishing Department...................................

*Conversion: Packaging Department................................

Total product cost..............................................................

$21.00
-07.50
6.00
.50
$35.00

Scholastic
-0-
$11.25
7.50
6.00
-0-
$24.75

*The two production departments each worked on a total of 6,000 balls, but the
Packaging Department handled only the 2,000 professional balls.
3.

Journal entries:
Work-in-Process Inventory: Preparation Department..........
Raw-Material Inventory..................................................

39,500*
39,500

*$39,500 = $42,000 of direct material

for batch P25 $2,500 of packaging material
Work-in-Process Inventory: Preparation Department..........
Raw-Material Inventory..................................................

45,000*
45,000

*Direct-material cost for batch S33.

Work-in-Process Inventory: Preparation Department..........
Applied Conversion Costs............................................

45,000*
45,000

*$45,000 = 6,000 units $7.50 per unit

Work-in-Process Inventory: Finishing Department..............
Work-in-Process Inventory: Preparation Department
*$129,500 = $39,500 + $45,000 + $45,000

129,500*
129,500

Work-in-Process Inventory: Finishing Department..............

Applied Conversion Costs............................................

36,000*
36,000

*$36,000 = 6,000 units $6.00 per unit

Work-in-Process Inventory: Packaging Department............
Finished-Goods Inventory......................................................
Work-in-Process Inventory: Finishing Department.....

66,500*
99,000
165,500

*$66,500 = $39,500 + (2,000 $7.50) + (2,000 $6.00).

These are the costs accumulated for batch P25 only.
$99,000 = $45,000 + (4,000 $7.50) + (4,000 $6.00).
These are the costs accumulated for batch S33 only.

Work-in-Process Inventory: Packaging Department............

Raw-Material Inventory..................................................
Applied Conversion Costs............................................

3,500
2,500*
1,000

*Cost of packaging material for batch P25.

$1,000 = 2,000 units $.50 per unit

Finished-Goods Inventory......................................................
Work-in-Process Inventory: Packaging Department...

70,000*
70,000

*$70,000 = $66,500 + $3,500

f) Chapter 4, p. 164 - Complete problem 4-37

1.

The unit costs and total costs for each of the products manufactured by Plattsburg
Plastics Corporation during the month of March are calculated as follows:
Units produced.....................
Material costs.......................
Unit material cost..........
Conversion costs*................
Unit conversion cost.....

Extrusion
32,000
$288,000
9.00
588,000
18.375

Form
22,000
$ 66,000
3.00
198,000
9.00

Trim
10,000
$22,500
2.25
103,500
10.35

Finish
4,000
$18,000
4.50
63,000
15.75

*Direct labor and manufacturing overhead.

Unit Costs
Material costs:
Extrusion........................
Form...............................
Trim................................
Finish..............................
Conversion costs:
Extrusion........................
Form...............................
Trim................................
Finish..............................
Total unit cost.......................
Units produced.....................
Total product cost*...............

Plastic
Sheets

Standard
Model

Deluxe
Model

Executive
Model

$9.00

$9.00
3.00

$9.00
3.00
2.25

$9.00
3.00
2.25
4.50

18.375

18.375
9.00

_
$27.375
10,000
$273,750

_
$39.375
12,000
$472,500

18.375
9.00
10.35
_
$51.975
6,000
$311,850

18.375
9.00
10.35
15.75
$72.225
4,000
$288,900

*Total costs accounted for:

Product
Plastic sheets
Standard model
Deluxe model
Executive model
Total
2.

Total
Product Costs
$ 273,750
472,500
311,850
288,900
$1,347,000

Journal entries:
Work-in-Process Inventory: Extrusion..............................
Raw-Material Inventory............................................
Applied Conversion Costs.......................................

876,000

Finished-Goods Inventory.................................................
Work-in-Process Inventory: Extrusion...................

273,750

Work-in-Process Inventory: Forming................................

Work-in-Process Inventory: Extrusion...................
Raw-Material Inventory............................................
Applied Conversion Costs.......................................

866,250

288,000
588,000
273,750
602,250
66,000
198,000

Finished-Goods Inventory.................................................
Work-in-Process Inventory: Forming.....................

472,500

Work-in-Process Inventory: Trimming..............................

Work-in-Process Inventory: Forming.....................
Raw-Material Inventory............................................
Applied Conversion Costs.......................................

519,750

Finished-Goods Inventory.................................................
Work-in-Process Inventory: Trimming....................

311,850

Work-in-Process Inventory: Finishing..............................

Work-in-Process Inventory: Trimming....................
Raw-Material Inventory............................................
Applied Conversion Costs.......................................

288,900

Finished-Goods Inventory.................................................
Work-in-Process Inventory: Finishing....................

288,900

472,500
393,750
22,500
103,500
311,850
207,900
18,000
63,000
288,900