In: Accounting
Problem 7-52 Cost Flows through Accounts (LO 7-2, 3, 4)
Brighton Services repairs locomotive engines. It employs 100 full-time workers at $18 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 Material | 1038400.00 |
Direct Labor | 4140000.00 |
Manufacturing Ovhd | 1035000.00 |
Of the $1,035,000 manufacturing overhead, 40 percent was variable overhead and 60 percent was fixed.
This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow:
JOb | Direct Materials | Direct Labor |
101 | 137500 | 510000 |
102 | 96000 | 312600 |
103 | 94300 | 197900 |
Total Man Ohd | 271500 | |
Total Marketing & Admin Cost | 100000 |
You are a consultant associated with Lodi Consultants, which Brighton Services has asked for help. Lodi's senior partner has examined Brighton Services's accounts and has decided to divide actual factory overhead by job into fixed and variable portions as follows:
Job | Variable | Fixed |
101 | 30200.00 | 104300.00 |
102 | 27800.00 | 88500.00 |
103 | 4900.00 | 15800.00 |
Total | $62900.00 | $208600.00 |
Required:
a. Present in T-accounts the actual manufacturing cost flows for the three jobs in the first quarter of this year.
A table like this for Materials Inventory, Wages Payable, Variable Manufacturing Overhead, Fixed Manufacturing Overhead, Work In Process Inventory, Finished Good Inventory, Cost of Goods Sold and Under-or Over-Applied Overhead
Materials Inventory | |
---|---|
Beginning Bal | |
JOb 101 | |
Job 102 | |
Job 103 | |
Ending Bal |
b. Using last year's overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead. (Round your answers to 2 decimal places.)
c. Present in T-accounts the normal manufacturing cost flows for the three jobs in the first quarter of this year. Use the overhead rates derived in requirement (b). (Do not round intermediate calculations.) Same T Accounts as above needed.
d. Calculate operating profit (loss) for the first quarter of this year under actual and normal costing systems.
Operating Profit or Loss | Actual | Normal |
a. Actual manufacturing cost flows for the three jobs in the first quarter of this year | Materials Inventory | Wages payable | VMOH | FMOH | Total actual cost accumulated | WIP Inventory | Finished goods |
Beginning Bal | 0 | 0 | 0 | 0 | |||
JOb 101 | 137500 | 510000 | 30200 | 104300 | 782000 | 782000 | |
Job 102 | 96000 | 312600 | 27800 | 88500 | 524900 | 524900 | |
Job 103 | 94300 | 197900 | 4900 | 15800 | 312900 | 312900 | |
Ending Bal | 327800 | 1020500 | 62900 | 208600 | 1619800 | 312900 | 1306900 |
b.Using last year's overhead costs and direct labor-hours as this year's estimate, and fixed overhead | |||
Predetermined overhead rates per direct labor-hour for variable &Fixed MOHs | |||
Total D/L hrs. | OH Rate/DL hr. | ||
1 | 2 | 1/2 | |
VMOH Costs(40%*1035000) | 414000 | 230000 | 1.8 |
FMOH Costs(60%*1035000) | 621000 | 230000 | 2.7 |
Note: | |||
Total D/L hrs.= 4140000/18=230000 hrs. |
c. Normal manufacturing cost flows for the three jobs in the first quarter of this year. | Materials Inventory | Wages payable | VMOH at $ 1.8/hr. | FMOH at $ 2.7/hr. | Total actual cost accumulated | WIP Inventory | Finished goods |
Beginning Bal | 0 | 0 | 0 | 0 | |||
JOb 101 | 137500 | 510000 | 50999 | 76499 | 774999 | 774999 | |
Job 102 | 96000 | 312600 | 31261 | 46891 | 486752 | 486752 | |
Job 103 | 94300 | 197900 | 19789 | 29684 | 341673 | 341673 | |
Ending Bal | 327800 | 1020500 | 102049 | 153074 | 1603423 | 341673 | 1261750 |
Direct labor hours workings: | |||||||
JOb | Direct Labor ($ ) | D/L hrs. at $ 18/hr. | |||||
101 | 510000 | 28333 | |||||
102 | 312600 | 17367 | |||||
103 | 197900 | 10994 |
ACTUAL | NORMAL | Under/(over applied OH) | Net OH | ||||
Under-Over applied MOH | VMOH | FMOH | VMOH at $ 1.8/hr. | FMOH at $ 2.7/hr. | VMOH | FMOH | |
Beginning Bal | 0 | 0 | 0 | 0 | |||
JOb 101 | 30200 | 104300 | 50999 | 76499 | -20799 | 27801 | 7001 |
Job 102 | 27800 | 88500 | 31261 | 46891 | -3461 | 41609 | 38149 |
Job 103 | 4900 | 15800 | 19789 | 29684 | -14889 | -13884 | -28773 |
Ending Bal | 62900 | 208600 | 102049 | 153074 | -39149 | 55526 | 16377 |
Total | 271500 | 255123 | 16377 |
d. | Actual | Normal |
JOb 101 | 782000 | 774999 |
Job 102 | 524900 | 486752 |
Mktg. costs | 100000 | 100000 |
Add: Net Under-applied MOH | 16377 | |
COGS | 1423277 | 1361750 |
Sale value of 2 jobs (856000+556000) | 1412000 | 1412000 |
Profit/(Loss) | -11277 | 50250 |