Job order cost accounting for a service company
The Fly Company provides advertising services for clients across the nation. The Fly Company is presently working on four projects, each for a different client. The Fly Company accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs. The direct costs include the charged time of professional personnel and media purchases (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The The rate used to apply factory overhead costs to the goods manufactured. The rate is determined by dividing the budgeted overhead cost by the estimated activity usage at the beginning of the fiscal period.predetermined overhead rate is 40% of media purchases.
On August 1, the four advertising projects had the following accumulated costs:
| August 1 Balances | ||
| Vault Bank | $64,600 | |
| Take Off Airlines | 19,400 | |
| Sleepy Tired Hotels | 45,200 | |
| Tastee Beverages | 27,800 | |
| Total | $157,000 | |
During August, The Fly Company incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts:
| Direct Labor | Media Purchases | |||
| Vault Bank | $42,900 | $168,200 | ||
| Take Off Airlines | 19,100 | 148,000 | ||
| Sleepy Tired Hotels | 84,300 | 108,100 | ||
| Tastee Beverages | 96,000 | 80,700 | ||
| Total | $242,300 | $505,000 | ||
At the end of August, both the Vault Bank and Take Off Airlines campaigns were completed. The costs of completed campaigns are debited to the cost of services account.
a. Journalize the summary entry to record the direct labor costs for the month.
| a. | Work in Process
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Salaries Payable
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Feedback
a. Increase the work in process for the direct costs and the applied overhead. Applied overhead should be based on media purchases. Transfer the cost of completed jobs out of work-in-process and into the cost of services account.
b. Journalize the summary entry to record the media purchases for the month.
| b. | Work in Process
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Accounts Payable
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Feedback
b. Increase the work in process for the direct costs and the applied overhead. Applied overhead should be based on media purchases. Transfer the cost of completed jobs out of work-in-process and into the cost of services account.
c. Journalize the summary entry to record the overhead applied for the month.
| c. | Work in Process
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Agency Overhead
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Feedback
c. Increase the work in process for the direct costs and the applied overhead. Applied overhead should be based on media purchases. Transfer the cost of completed jobs out of work-in-process and into the cost of services account.
d. Journalize the summary entry to record the completion of Vault Bank and Take Off Airlines for the month.
| d. | Cost of Services
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Work in Process
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In: Accounting
The Production Department of Hruska Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |
| Units to be produced | 10,400 | 9,400 | 11,400 | 12,400 |
Each unit requires 0.25 direct labor-hours and direct laborers are paid $12.00 per hour.
In addition, the variable manufacturing overhead rate is $1.70 per direct labor-hour. The fixed manufacturing overhead is $84,000 per quarter. The only noncash element of manufacturing overhead is depreciation, which is $24,000 per quarter.
Required:
1. Calculate the company’s total estimated direct labor cost for each quarter of the upcoming fiscal year and for the year as a whole. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the estimated number of units produced.
2&3. Calculate the company’s total estimated manufacturing overhead cost and the cash disbursements for manufacturing overhead for each quarter of the upcoming fiscal year and for the year as a whole
| 1. | |||||||||||||
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2&3
Calculate the company’s total estimated manufacturing overhead cost and the cash disbursements for manufacturing overhead for each quarter of the the upcoming fiscal year and for the year as a whole.
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In: Accounting
Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 30 |
| Direct labor | $ | 13 |
| Variable manufacturing overhead | $ | 7 |
| Variable selling and administrative | $ | 6 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 320,000 |
| Fixed selling and administrative expenses | $ | 60,000 |
During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $58 per unit.
Required:
1. Assume the company uses variable costing:
a. Compute the unit product cost for year 1 and year 2.
b. Prepare an income statement for year 1 and year 2.
2. Assume the company uses absorption costing:
a. Compute the unit product cost for year 1 and year 2.
(Round your answers to 2 decimal places.)
b. Prepare an income statement for year 1 and year 2. (Round your intermediate calculations to 2 decimal places)
3. Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2.
In: Accounting
Texas Rex sells t-shirts. Expected sales for each quarter is 1000, 1200, 1500, and 2000 t-shirts at $10.00 each. They anticipate no price change.
The Direct Materials Budget tells management how much must be bought to support production and the cost of those purchases.
Plain t-shirts cost $3.00 each, and ink (for the screen printing) cost $0.20 per ounce. The factory needs one plain t-shirt and five ounces of ink for each logoed t-shirt that it produces. Texas Rex’s policy is to have 10% of the following quarter’s needs in ending inventory. The factory has 58 plain t-shirts and 390 ounces of ink on hand on January 1. At the end of the year, the desired ending inventory is 106 plain t-shirts and 530 ounces of ink.
Texas Rex, Inc.
Direct Materials Budget
For the year ending December 31, 2018
Plain t-shirts: Q1 Q2 Q3 Q4 Total
Units to be Produced
Direct Materials per unit_______ _______ ________ _______ ________
Production Needs
Desired Ending Inv. _______ _______ ________ _______ ________
Total Needs
Less Beginning Inv. _______ _______ ________ _______ ________
Direct Materials
To be Purchased
Cost per t-shirt _______ _______ ________ _______ ________
Total T-shirt Purchase
Cost
Ink: Q1 Q2 Q3 Q4 Total
Units to be Produced
Direct Materials per unit_______ _______ ________ _______ ________
Production Needs
Desired Ending Inv. _______ _______ ________ _______ ________
Total Needs
Less Beginning Inv. _______ _______ ________ _______ ________
Direct Materials
To be Purchased
Cost per ounce _______ _______ ________ _______ ________
Total Ink Purchase Cost
Total Cost of
All Direct Materials
In: Accounting
Paul’s Pool Service provides pool cleaning, chemical
application, and pool repairs for residential customers. Clients
are billed weekly for services provided and usually pay 50 percent
of their fees in the month the service is provided. In the month
following service, Paul collects 40 percent of service fees. The
final 10 percent is collected in the second month following
service. Paul purchases his supplies on credit, and pays 50 percent
in the month of purchase and the remaining 50 percent in the month
following purchase. Of the supplies Paul purchases, 80 percent is
used in the month of purchase, and the remainder is used in the
month following purchase.
The following information is available for the months of June,
July, and August, which are Paul’s busiest months:
Required:
1. Compute budgeted cash receipts and budgeted cash
payments for each month.
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2. Compute the balances necessary to prepare a budgeted balance sheet for August 31 for each of the following accounts:
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In: Accounting
Julio and Maria are planning for their children to continue
their education after
grade 12. They would like to know the types of tuition fees that
are eligible for
the tuition fees tax credit and whether they can claim this credit
if they pay for
their children's education.(In Canada)
In: Accounting
COVID-19: The impact on Audits The Corona Virus (COVID-19) is already impacting South Africa in various ways and many businesses are faced with operational difficulties. However, entities must remember that the restrictions resulting from the virus, will also impact financial reporting requirements and increase the focus on certain areas during audits. Going concern Management of an entity are required to provide the auditor with their assessment of the entity’s ability to continue as a going concern. The assessment should take into account all available information about the future and cover at least 12 months from the end of the reporting period. It may be difficult to make a meaningful Base Case economic forecast, let alone a plausible downside economic scenario. In this highly uncertain environment, going concern assessments will be more difficult for entities to make, and more companies will need to report a material uncertainty related to going concern. The objectives of the auditor are: • to obtain sufficient appropriate audit evidence regarding, and conclude on, the appropriateness of management’s use of the going concern basis of accounting in the presentation of financial statements; and • to conclude on whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern. The conclusion reached by the auditor may have a significant impact on the audit opinion.
Required:
Discuss the potential impact of Covid-19 on the possible audit
opinions that can be issued by external auditors.
[25 marks]
In: Accounting
Indicate for each transaction below the account(s) and amount(s)
that should be debited and credited. Use abbreviated account
titles.
| Item | Accounts | Amounts |
| (a) Jan. 1, 2001 purchased land with a usable office building thereon for cash of $200,000. Tax assessment values: Land $20,000; building $60,000 | ||
| (b) Jan. 1, 2001 purchased land for future building site for a cash cost of $40,000; an old building on this site, appraised at $2,000 at the date of purchase, is to be torn down immediately. | ||
| (c) Net cash cost of demolishing the old building in (b) above amounted to $2,000. | ||
| (d) Cash cost of excavation for basement of the new building (b above) was $6,000. | ||
| (e) Lawyers' fees paid in connection with purchase of real estate in (b) $900. | ||
| (f) Taxes paid on land purchased in (b) assessed before completion of building, $300. | ||
| (g) Factory superintendent's salary for 2001 was $24,000. During 2001, the superintendent spent the first six months supervising construction of the new building; the next three months supervising installation of productive machinery in the new building, and the last three months supervising operations in the new building. | ||
| (h) Cost of grading and paying parking space and walks behind new building, $9,500. |
In: Accounting
You have borrowed a loan of $20,000 from a bank to buy a car from Chase at the interest rate of
7.5% each year. You have promised the Chase to make mortgage style payments.
16. If you want to borrow this loan for three years, what is the total payment in each year?
A) $6,191
B) $1,500
C) $ 7,691
D) $ 7,154
E) None of the above
17. If you want to borrow this loan for three years, what is the principal payment in year one?
A) $6,191
B) $1,500
C) $ 7,691
D) $ 7,154
E) None of the above
18. If you want to borrow this loan for three years, what is the principal payment in year two?
A) $6,191
B) $1,500
C) $ 7,691
D) $ 7,154
E) None of the above
19. If you want to borrow this loan for three years, what is the principal payment in year three?
A) $6,191
B) $1,500
C) $ 7,691
D) $ 7,154
E) None of the above
20. If you want to borrow this loan for three years, what is the interest payment in year one?
A) $6,191
B) $1,500
C) $ 7,691
D) $ 7,154
E) None of the above
21. If you want to borrow this loan for one year, what is the total payment?
A) $21,500
B) $20,000
C) $1,500
D) $7,691
E) None of the above
22. If you want to borrow this loan for one year, what is the principal payment in this year?
A) $21,500
B) $20,000
C) $1,500
D) $7,691
E) None of the above
23. If you want to borrow this loan for one year, what is the interest payment in this year?
A) $21,500
B) $20,000
C) $1,500
D) $7,691
E) None of the above
24. If you want to borrow this loan for one year, what is the beginning balance in this year?
A) $21,500
B) $20,000
C) $1,500
D) $7,691
E) None of the above
25. If you want to borrow this loan for one year, what is the ending balance in this year?
A) $21,500
B) $20,000
C) $1,500
D) $7,691
E) None of the above
In: Accounting
Lehman Pottery Company manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.
Data for the Assembly Department for August 2019 are:
Work in process, beginning inventory: 0 units
Units started during August 450 units
Work in process, ending inventory: 300 units
Direct materials (100% complete)
Conversion costs (60% complete)
Costs for August: Costs for Assembly:
Direct materials $58,000
Conversion costs $45,000
Using the 5 step format in the Textbook and solutions manual, prepare the Production Cost Worksheet using the Weighted Average Method.
Round to 2 digits when calculating the Cost per Equivalent Unit (Example $28.58)
In: Accounting
Countywide Cable Services, Inc. is organized with three segments: Metro, Suburban, and Outlying. Data for these segments for the year just ended follow.
|
Metro |
Suburban |
Outlying |
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Service revenue |
$ |
1,030,000 |
$ |
830,000 |
$ |
430,000 |
|||
|
Variable expenses |
166,000 |
116,000 |
66,000 |
||||||
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Controllable fixed expenses |
374,000 |
294,000 |
124,000 |
||||||
|
Fixed expenses controllable by others |
196,000 |
166,000 |
56,000 |
||||||
In addition to the expenses listed above, the company has $85,000 of common fixed expenses. Income-tax expense for the year is $285,000.
Required:
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In: Accounting
what is the rationale for recognising a deferred tax asset or deferred tax liability?
In: Accounting
| Information pertaining to ABC Company's sales budget is as follows: | ||||||
| October | November | December | ||||
| Unit sales | 1,800 | 2,000 | 2,800 | |||
| Unit sale price | $ 10.00 | |||||
| Credit card sales | 60% | |||||
| Cash sales | 40% | |||||
| Fees paid to credit card companies | 3% | |||||
| Cost of goods sold | 40% | of net sales | ||||
| Note: Net sales is gross sales less fees paid to credit card companies. | ||||||
| Required: | ||||||
| Compute the budgeted sales revenue, cost of goods sold and | ||||||
| gross margin for the month of November. | ||||||
In: Accounting
In: Accounting
Conlon Chemicals manufactures paint thinner. Information on the work in process follows:
• Beginning inventory, 42,700 partially complete gallons.
• Transferred out, 210,000 gallons.
• Ending inventory (materials are 19 percent complete; conversion costs are 10 percent complete).
• Started this month, 244,100 gallons.
Required:
a. Compute the equivalent units for materials using the weighted-average method.
Equivalent units (Gallons)
b. Compute the equivalent units for conversion costs using the weighted-average method.
Equivalent units (Gallons)
In: Accounting