1.  During the year, Coronado Boat Yard has incurred manufacturing costs of 420,000 in building three large sailboats.  At year end, each boat is about 70 percent complete.  How much of these manufacturing costs should be recognized as expense in Coronado Boat Yards income statement for the current year?  Explain?

2.  During the current year, the cost of direct materials purchased by a manufacturing firm was $340,000, and the direct materials inventory increased by $20,000.  What was the cost of direct materials used during the year?

3.  A company that assembles trucks produces 60 trucks during the current year and incurs $3 million of material, labor, and overhead costs.  Fifty-three trucks were sold during the year and each is allocated the same amount of costs.  How much of the $3 million assembly costs should appear on the company’s income statement for the current year?

4.  Hula’s Heavyweights, Inc., is a company that manufactures forklifts.  During the year, Hulas purchased $1,450,000 of direct materials and placed $1,525,000 worth of direct materials into production.  Hula’s beginning balance in the materials inventory account was 320,000.  What is the ending balance in Hula’s Materials inventory account?

5.  A.J.’s Cooling Systems, Inc., assigns $230,000 of direct labor costs to production during the current period.  A.J.’s also pays employees $200,000 during the period.  What are the two journal entries used to record these transactions?

6.  During the Current year, Cherry Electronics incurred $350,000 of indirect labor costs, $10,000 of indirect material costs, $130,000 of rent costs, and $260,000 of other overhead costs.  How much did Cherry Electronics assign to the work in process Inventory account from the Manufacturing Overhead Account?

7.  Ardvark Pets, Inc., has three stores in the state.  The owner, Ms. Perkins, is having trouble tracking inventory costs in the three pet stores.  Ms. Perkins knows about your skill in tracking and understanding costs flows and asks you to find the following missing items for the three stores:

8.  The work in process inventory account had a beginning balance of $16,200 on April 1.  During April, the cost of direct materials used was 408,000 and direct labor cost assigned to production was $56,000.  A total of $72,000 of overhead was assigned to production in April.  If the costof finished goods manufactured was $523,500 what was the balance in the work in process inventoryaccount on April 30?

        Midwest Ardvark                     Northern Ardvark                     Eastern Ardvark

Beg Inventory            $30,000                                ?                                               ?

Transferred in             $100,000                            $200,000                                   $160,000

Transferred out          $110,000                              $180,000                                  $150,000

Ending Inventory         ?                                         $60,000                                    $40,000

9.  Hapless Repairs Co. does all the repair work for a medium sized manufacturer of handheld computer games.  The games are sent directly to Hapless, and after the games are repaired, Hapless bills the game manufacturer for costs plus a 30 percent makeup.  In the month of February, purchases of parts (replacement parts) by Hapless amounted to $90,000, the beginning inventory of parts was $40,500, and the ending inventory of parts was $15,250.  Payments to repair technicians during the month of February totaled $63,000.  Overhead incurred was $113,000.

a.        What was the cost of materials used for repair work during the month of February?

b.      What was the prime cost for February?

c.       What was the conversion cost for February?

d.      What was the total repair cost for February?

10.  At the end of the year, Johnson’s Manufacturing Corporation had the following balances:

 

Work in process………………………………………..$52,000

Cash and cash equivalents………………………..$346,000

Finished Goods…………………………………………. $85,600

Raw materials……………………………………………. $33,000

Accounts Receivable…………………………………..$237,000

 

Prepare a partial balance sheet for Johnson’s showing the above accounts.

4 Exercises

 

1.       Listed below are eight technical accounting terms introduced or emphasized in the reading

 

Work in process Inventory                  Cost of finished goods manufactured

Conversion Costs                                Cost of Goods sold

Period Cost                                         Management Accounting

Product Cost                                       Manufacturing Overhead

 

Each of the following statements may or may not describe one of these technical terms.  For each statement, indicate the accounting term described or answer None if the statement does not describe any of the terms

 

a.        The preparation and use of accounting information designed to assist managers in planning and controlling the operations of a business

b.      All manufacturing costs other than direct materials used and direct labor

c.       Direct materials and direct labor used in manufacturing a product

d.      A manufacturing cost that can be traced conveniently and directly to manufactured units of a product.

e.       The account debited at the time that the manufacturing overhead account is credited

f.       The amount transferred from the work in process Inventory account to the finished goods Inventory account.

Costs that are debited directly to expense accounts when the costs are incurred

4.  The following information was taken from the accounting Records of Reliable Tool Corporation:

Work in process inventory, beginning of year………………………….$35,000

Cost of direct materials used…………………………………………………….245,000

Direct labor costs applied to production…………………………………..120,000

Cost of finished goods manufactured……………………………………….675,000

 

Overhead is assigned to production at $300,000.  Compute the amount of work in process inventory on hand at year-end.

5.  The Accounting records of NuTronics, Inc., include the following information for the year ended Dec. 31, 2009.

                                                                                                            Dec.31    Jan 1

Inventory of materials…………………………………………………………………………… $24,000     20,000

Inventory of work in process…………………………………………………………………  8,000          12,000

Inventory of finished goods………………………………………………………………….. 90,000         80,000

Direct materials used……………………………………………………………………………. 210,000

Direct labor……………………………………………………………………………………………. 120,000

Selling Expenses……………………………………………………………………………………. 170,000

General and administrative expenses…………………………………………………… 140,000

 

Overhead is assigned to production at $192,000.

a.        Prepare a schedule of the cost of finished goods manufactured.  (not all the data given above are used in this schedule)

b.      Assume that the company manufactures a single productand that 20,000 units were completed during the year.  What is the average per-unit costs of manufacturing this product?

6.  Stone Tools, Inc., had the following account balances as of Jan. 1

Direct Materials inventory………………………………………$8,700

Work in Process Inventory………………………………………76,500

Finished Goods inventory………………………………………..53,000

Manufacturing overhead…………………………………………. -0-

 

During the month of Jan. all of the following occurred:

1.       Direct labor costs were $42,000 for 1,800 hours worked

2.      Direct materials costing $25,750 and indirect materials costing $3,500 were purchased

3.      Sales commissions of $16,500 were earned by the sales force

4.      $26,000 worth of direct materials were used in production

5.      Advertising costs of $6,300 were incurred

6.      Factory supervisors earned salaries of $12,000

7.      Indirect labor costs for the month were $3,000

8.      Monthly depreciation on factory equipment was $4,500

9.      Utilities expense of $7,800 was incurred in the factory

10.  Tools with manufacturing costs of $69,000 were transferred to finished goods

11.  Monthly insurance costs for the factory were $4,200

12.  $3,000 in property taxes on the factory were incurred and paid

13.  Tools with manufacturing costs of $89,000 were sold for $165,000

 

Instructions:

a.        If stone assigns manufacturing overhead of $32,400 what will the balance in the Direct Materials, Work in Process, and finished Goods inventory accounts at the end of January?

b.      As of January 31, what will be the balance in the manufacturing Overhead account?

c.       What was stones operating income for January?

9.  Mayville Company, a sole proprietorship, reports the following information pertaining to its operating activities:

                                                                                                Ending Balance                       Beg. Bal

Material Inventory………………………………………………………………………..$20,000               $40,000

Work in process Inventory…………………………………………………………….$29,000                    $60,000

Finished Goods Inventory………………………………………………………………$52,000                 $42,000

 

During the year, the company purchased $30,000 of direct materials and incurred $21,000 of direct labor costs.  Total manufacturing overhead costs for the year amounted to 18,000.  Selling and administrativeexpenses amounted to $60,000, and the companies annual sales amounted to $200,000.

a.        Prepare a Mayvilles schedule of the costs of finished goods manufactured.

b.      Prepare Mayvilles income statement (ignore income taxes)