Introduction To Managerial Accounting
8th Edition
ISBN: 9781259917066
Author: BREWER, Peter C., Garrison, Ray H., Noreen, Eric W.
Publisher: Mcgraw-hill Education,
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Chapter 9.B, Problem 5P
Transaction Analysis; Income Statement Preparation
Wallis Company" manufactures only one product and uses a
The company's standard cost card for its only product is as follows:
During the year Wallis completed the following transactions:
a. Purchased (with cash) 230.000 pounds of raw material at a price of $29.50 per pound.
b. Added 215.000 pounds of raw material to work in process to produce 95.000 units.
c. Assigned direct labor costs to work in process, The direct laborers (who were paid in cash) worked 245.000 hours at an average cost of S16.00 per hour to manufacture 95.000 units.
d. Applied fixed overhead to work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed to manufacture 95.000 units. Actual fixed overhead costs for the year were $2,740,000. Of this total, $1,340,000 related to items such as insurance, utilities, and pase 463 salaried indirect laborers that were all paid in cash and $1,400,000 related to depreciation of equipment.
e. Transferred 95.000 units from work in process to finished goods.
f. Sold (for cash) 92,000 units to customers at a price of $170 per unit,
g. Transferred the standard cost associated with the 92,000 units sold from finished goods to cost of goods sold.
h. Paid $2,120,000 of selling and administrative expenses. i. Closed all standard cost variances to cost of goods sold.
Required:
1. Compute all direct materials, direct labor, and fixed overhead variances for the year.
2. Using Exhibit 9B-3 as a guide, record transactions a through i for Wallis Company.
3. Compute the ending balances for Wallis Company's balance sheet, Using Exhibit 9B−5 as a guide, prepare Wallis Company's income statement for the year.
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Puvo, Incorporated, manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:
Standard Quantity
Standard Price or Rate
Standard Cost
Direct materials
7.0
pounds
$ .80
per pound
$ 5.60
Direct labor
0.7
hours
$ 45.50
per hour
$ 31.85
Variable manufacturing overhead
0.7
hours
$ 9.70
per hour
$ 6.79
During March, the following activity was recorded by the company:
The company produced 3,600 units during the month.
A total of 20,600 pounds of material were purchased at a cost of $14,780.
There was no beginning inventory of materials on hand to start the month; at the end of the month, 4,820 pounds of material remained in the warehouse.
During March, 1,210 direct labor-hours were worked at a rate of $42.50 per hour.
Variable manufacturing overhead costs during…
Patricio Corp. uses ABC to compute the product cost for external reports. The company has three activity pools and applies manufacturing overhead costs using predetermined overhead rates for each activity cost pool. Estimated costs and activities for the current year are presented below for the three activity cost pools:
Estimated OH Cost
Expected Activity
Activity 1
$180,144
14,400
Activity 2
$175,968
7,200
Acitivity 3
$390,702
13,200
The actual cost and activities for the current year are presented below:
Actual OH Cost
Actual Activity
Activity 1
$179,394
14,490
Activity 2
$175,428
7,110
Acitivity 3
$390,702
13,350
a. What is the activity rate under the ABC system for activity 3 would be?
b. What would be the total overhead applied to Work in Process account during the year?
c. What would be the total overhead debited to the manufacturing account during the year?
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation
system, product A has been assigned overhead of $26.87 per unit, while product B has been assigned $7.62 per unit. Management
feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and
cost driver information:
Cost Pools
Activity Costs
$ 415,000
120,000
44,000
The following cost information pertains to the production of A and B, just two of Hakara's many products:
Machine setup
Materials handling
Electric power
Number of units produced
Direct materials cost
Direct labor cost
Number of setup hours
Pounds of materials used
Kilowatt-hours
Product A
Product B
A
5,000
$ 22,000
$ 39,000
Cost per Unit
Cost Drivers
Setup hours
Pounds of materials
Kilowatt-hours
200
2,000
4,000
B
20,000
$ 26,000
$ 37,000
Activity Driver
Consumption
5,000
15,000
22,000
200
2,000
4,000
Required:
1. Use…
Chapter 9 Solutions
Introduction To Managerial Accounting
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