Statement of Cost of Goods
Manufactured from Percent Relationships
Information about NuWay Products Company for the year ending December 31, 2010, follows:
Sales equal $500,000.
Direct materials used total $56,000.
Manufacturing overhead is 150 percent of direct labor dollars.
The beginning inventory of finished goods is 20 percent of the cost of goods sold.
The ending inventory of finished goods is twice the beginning inventory.
The gross profit is 20 percent of sales.
There is no beginning or ending work-in-process.
Prepare a statement of cost of goods manufactured for 2010. (Hint: Prepare an analysis of changes in Finished Goods Inventory.)
Manufacturing Cost Flows with Machine Hours Allocation
On November 1, Robotics Manufacturing Company's beginning balances in manufacturing accounts and finished goods inventory were as follows:
During November, Robotics Manufacturing completed the following manufacturing transactions:
Purchased raw materials costing $61,000 and manufacturing supplies costing $3,000 on account. (Single Transaction)
Requisitioned raw materials costing $50,000 to the factory.
Incurred direct labor costs of $26,000 and indirect labor costs of $4,800.
Used manufacturing supplies costing $3,000.
Recorded manufacturing depreciation of $15,000.
Miscellaneous payables for manufacturing overhead totaled $3,900.
Applied manufacturing overhead, based on 2,100 machine hours, at a predetermined rate of $10 per machine hour.
Completed jobs costing $84,000.
Finished goods costing $89,000 were sold.
(a) Prepare "T" accounts showing the flow of costs through all manufacturing accounts, Finished Goods Inventory, and Cost of Goods Sold.
(b) Calculate the balances at the end of November for Work-in-Process Inventory and Finished Goods Inventory. (Enter transactions in the T-accounts in the order they appear, including the beginning balances, if available. Compute the final balance, if requested.)
Cost of Production Report: No Beginning Inventories
Oregon Paper Company produces newsprint paper through a special recycling process using scrap paper products. Production and cost data for October 2009, the first month of operations for the company's new Portland plant, follow:
Units of product started in process during October
Units completed and transferred to finished goods
Machine hours operated
Direct materials costs incurred
Direct labor costs incurred
Raw materials are added at the beginning of the process for each unit of product produced, and labor and manufacturing overhead are added evenly throughout the manufacturing process. Manufacturing overhead is applied to Work-in-Process at the rate of $24 per machine hour. Units in process at the end of the period were 65 percent converted.
Prepare a cost of production report for Oregon Paper Company for October. (Round answers to the nearest whole number unless otherwise noted.)
Absorption and Variable Costing Income Statements: Production Exceeds Sales
Glendale Company sells its product at a unit price of $12.00. Unit manufacturing costs are direct materials, $2.00; direct labor, $3.00; and variable manufacturing overhead, $1.50. Total fixed manufacturing costs are $25,000 per year. Selling and administrative expenses are $1.00 per unit variable and $14,000 per year fixed. Though 25,000 units were produced during 2009, only 17,000 units were sold. There was no beginning inventory.
(a) Prepare a functional income statement using absorption costing. (Do not use negative numbers with your answers.)
(b) Prepare a contribution income statement using variable costing. (Do not use negative numbers with your answers.)
Tempe Manufacturing Company makes a single product that is produced on a continuous basis in one department. All materials are added at the beginning of production. The total cost per equivalent unit in process in March 2009 was $4.60, consisting of $3.00 for materials and $1.60 for conversion. During the month, 9,300 units of product were transferred to finished goods inventory; on March 31, 2,500 units were in process, 10 percent converted. The company uses weighted average costing.
(a) Determine the cost of goods transferred to finished goods inventory.
(b) Determine the cost of the ending work-in-process inventory.
(c) What was the total cost of the beginning work-in-process inventory plus the current manufacturing costs?
(a) Prepare a functional income statement for the quarter using absorption costing. (Do not use negative signs with your answers, EXCEPT if you calculate a net loss.)
(b) Prepare a contribution income statement for the quarter using variable costing. (Do not use negative signs with your answers, EXCEPT if you calculate a net loss.)
(c) What is the value of ending inventory under absorption costing?
(d) What is the value of ending inventory under variable costing?
(e) The difference in the value of ending inventory in parts (c) and (d) is explained by the following difference between absorption an variable costing:
Absorption costing treats fixed costs as period costs while variable costing treats fixed costs as product costs.
Variable costing treats all manufacturing costs as variable costs while absorption costing treats only variable manufacturing costs as variable costs.
Absorption costing treats all manufacturing costs as period costs while variable costing treats only variable manufacturing costs as period costs.
Variable costing assigns only variable manufacturing costs to products while absorption costing assigns both variable and fixed manufacturing costs to products.
Weighted Average Process Costing
Minot Processing Company manufactures one product on a continuous basis in two departments, Processing and Finishing. All materials are added at the beginning of work on the product in the Processing Department. During December 2009, the following events occurred in the Processing Department:
Units completed and transferred to Finishing Department
Costs assigned to processing:
Raw materials (one unit of raw materials
for each unit of product started)
Manufacturing supplies used
Direct labor costs incurred
Other production labor costs
Depreciation on equipment
Other production costs
Additional information follows:
Minot uses weighted average costing and applies manufacturing overhead to Work-in-Process at the rate of 100 percent of direct labor cost.
Ending inventory in the Processing Department consists of 3,000 units that are one-third converted.
Beginning inventory contained 2,000 units, one-half converted, with a cost of $41,500 ($29,900 for materials and $11,600 for conversion).
(a) Prepare a cost of production report for the Processing Department for December.
Minot Processing Company: Processing DepartmentCost of Production ReportFor the Month Ending December 31, 2009
Summary of units in process:
(b) Prepare an analysis of all changes in Work-in-Process.
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