Identify and describe each step in the Accounting Cycle.

Forest Components makes aircraft parts. The following transactions occurred in July.

1. Purchased $16,960 of materials on account.

2. Issued $16,790 in direct materials to the production department.

3. Issued $1,290 of supplies from the materials inventory.

4. Paid for the materials purchased in transaction (1) using cash.

5. Returned $2,020 of the materials issued to production in (2) to the materials inventory.

6. Direct labor employees earned $32,300, which was paid in cash.

7. Purchased miscellaneous items for the manufacturing plant for $17,330 on account.

8. Recognized depreciation on manufacturing plant of $36,200.

9. Applied manufacturing overhead for the month.

Forest uses normal costing. It applies overhead on the basis of direct labor costs using an annual, predetermined rate. At the beginning of the year, management estimated that direct labor costs for the year would be $435,000. Estimated overhead for the year was $430,650.

The following balances appeared in the inventory accounts of Forest Components for July.

	Beginning			Ending
Materials Inventory		?		$	12,510
Work-in-Process Inventory		?			10,550
Finished Goods Inventory	$	2,670			6,910
Cost of Goods Sold		?			73,700

Required:

a. Prepare journal entries to record these transactions.

b. Prepare T-accounts to show the flow of costs during the period from Materials Inventory through Cost of Goods Sold.

The following represents the financial information for Domingo Corporation for two months.

	March			April
Sales revenue	$	540,000		$	430,000
Costs
Process inspection	$	1,500		$	1,840
Scrap		1,940			1,870
Quality training		19,500			13,500
Warranty repairs		4,200			5,100
Product testing equipment		6,600			7,100
Customer complaints		2,900			3,100
Rework		16,000			19,500
Preventive maintenance		12,700			10,200
Materials inspection		7,400			5,000
Field testing		8,600			11,600

Required:

a. Classify these items into Prevention, Appraisal, Internal failure, or External failure costs.

The following represents the financial information for Domingo Corporation for two months.

	March			April
Sales revenue	$	540,000		$	430,000
Costs
Process inspection	$	1,500		$	1,840
Scrap		1,940			1,870
Quality training		19,500			13,500
Warranty repairs		4,200			5,100
Product testing equipment		6,600			7,100
Customer complaints		2,900			3,100
Rework		16,000			19,500
Preventive maintenance		12,700			10,200
Materials inspection		7,400			5,000
Field testing		8,600			11,600

Required:

a. Classify these items into Prevention, Appraisal, Internal failure, or External failure costs.

b. Calculate the ratio of the prevention, appraisal, internal failure, and external failure costs to sales for March and April.

Identify the purposes and types of adjusting entries that an entity might make.

The Welding Department of Healthy Company has the following production and manufacturing cost data for February 2020. All materials are added at the beginning of the process.

Manufacturing Costs						Production Data
Beginning work in process						Beginning work in process		15,500	units, 1/10 complete
Materials		$ 18,200				Units transferred out		54,800
Conversion costs		14,460		$ 32,660		Units started		51,500
Materials				206,250		Ending work in process		12,200	units, 1/5 complete
Labor				67,700
Overhead				69,526

Prepare a production cost report for the Welding Department for the month of February. (Round unit costs to 2 decimal places, e.g. 2.25 and all other answers to 0 decimal places, e.g. 1,225.)

HEALTHY MANUFACTURING COMPANY Welding Department Production Cost Report For the Month Ended February 28, 2020
				Equivalent Units
Quantities		Physical Units		Materials		Conversion Costs
Units to be accounted for
Work in process, February 1
Started into production
Total units
Units accounted for
Transferred out
Work in process, February 28
Total units
Costs				Materials		Conversion Costs		Total
Unit costs
Total Costs				$		$		$
Equivalent units
Unit costs				$		$		$
Costs to be accounted for
Work in process, February 1								$
Started into production
Total costs								$
Cost Reconciliation Schedule
Costs accounted for
Transferred out								$
Work in process, February 28
Materials						$
Conversion costs
Total costs								$

26)

In December 2016, Shire Computer’s management establishes the 2017 predetermined overhead rate based on direct labor cost. The information used in setting this rate includes estimates that the company will incur $780,000 of overhead costs and $520,000 of direct labor cost in year 2017. During March 2017, Shire began and completed Job 13-56.

  
1. What is the predetermined overhead rate for 2017?
2. Using the information on the following job cost sheet, determine the total cost of the job.

Complete this question by entering your answers in the tabs below.

Required 1 Required 2

What is the predetermined overhead rate for 2017?

Overhead Rate

Choose Numerator / Choose Denominator = Overhead Rate

Required 2

Using the information on the following job cost sheet, determine the total cost of the job. (Round your answers to the nearest dollar amount.)

Job Cost Sheet: Job No. 13-56

Direct Materials Direct Labor Overhead Total Cost

Date Requisition No. Amount Time- Ticket No. Amount Costs Applied

Mar.8 4-129 $7,000 T-306 $600

Mar.11 4-142 $6,950 T-432 $1,310

Mar.18 4-167 $3,450 T-456 $1,300

1) Modern Décor Furniture began June with merchandise inventory of 40 sofas that cost a total of $28,000. During the month, Modern Décor purchased and sold merchandise on account as follows:  

June 7	Purchase	30 sofas @ $700 each
14	Sale	30 sofas @ 1,100each
18	Purchase	50 sofas @ $750 each
27	Sale	40 sofas @ $1,150each

Prepare a perpetual inventory record, using the LIFO inventory costing method, and determine the company's cost of goods sold (COGS), ending merchandise inventory, and gross profit. (20pts)

   

Date	Purchase			Cost of Goods Sold			Inventory On Hand
	Cost	Number	Total	Cost	Number	Total	Cost	Number	Total

2) Taco Hell Inc. had the following balances and transactions during 2017:

Beginning Merchandise Inventory	30 units at $80
March 10	Sold 25 units
June 10	Purchased 40 units at $87
October 30	Sold 30 units

What is the amount of the company's Merchandise Inventory and COGS, as disclosed in the December 31, 2017 balance sheet, using the periodic FIFO inventory costing method? (10pts)

3) Magras Gas uses a perpetual inventory system. Journalize the following sales transactions. (20pts)

June 10	Sold $15,000 of merchandise on account, credit terms are 3/10, n/30. Cost of goods is $8,000.
June 14	Received a $600 sales return from the customer. Cost of the goods is $550.
June 23	Magras Gas receives payment for the customer for the amount due from the June 10 sale.

Date	Transaction	Debit	Credit

Direct Method, Reciprocal Method, Overhead Rates

Macalister Corporation is developing departmental overhead rates based on direct labor hours for its two production departments—Molding and Assembly. The Molding Department employs 19 people, and the Assembly Department employs 75 people. Each person in these two departments works 1,910 hours per year. The production-related overhead costs for the Molding Department are budgeted at $239,000, and the Assembly Department costs are budgeted at $99,000. Two support departments—Engineering and General Factory—directly support the two production departments and have budgeted costs of $221,000 and $379,000, respectively. The production departments’ overhead rates cannot be determined until the support departments’ costs are properly allocated. The following schedule reflects the use of the Engineering Department’s and General Factory Department’s output by the various departments.

	Engineering	General Factory	Molding	Assembly
Engineering hours	—	2,500	2,200	7,800
Square feet	88,200	—	388,080	111,720

For all requirements, round allocation ratios to four significant digits and round allocated costs to the nearest dollar.

Required:

1. Calculate the overhead rates per direct labor hour for the Molding Department and the Assembly Department using the direct allocation method to charge the production departments for support department costs. Round final answers to the nearest cent.

	Overhead rate per DLH
Molding
Assembly

2. Calculate the overhead rates per direct labor hour for the Molding Department and the Assembly Department using the reciprocal method to charge support department costs to each other and to the production departments. Round final answers to the nearest cent. Round your intermediate calculations to four decimal places.

	Overhead rate per DLH
Molding
Assembly

Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under the label Maletin Elegant and a leather briefcase produced largely through automation and sold under the label Maletin Fina. The two products use two overhead activities, with the following costs: Setting up equipment $ 6,000 Machining 19,000 The controller has collected the expected annual prime costs for each briefcase, the machine hours, the setup hours, and the expected production. Elegant Fina Direct labor $9,000 $3,000 Direct materials $3,000 $3,000 Units 3,000 3,000 Machine hours 500 4,500 Setup hours 100 100 Required: 1. Conceptual Connection: Do you think that the direct labor costs and direct materials costs are accurately traced to each briefcase? Explain. 2. Calculate the consumption ratios for each activity. Round your answers to one decimal place. Elegant Fina Machining Setups Calculate the overhead cost per unit for each briefcase by using a plantwide rate based on direct labor costs. Round to the nearest cent. (Note: Do not round intermediate calculations.) Elegant $ per briefcase Fina $ per briefcase ased on your calculations above which of the following statements is correct? More machine and setup costs are assigned to Elegant than Fina. T or F? Conceptual Connection: Calculate the overhead cost per unit for each briefcase by using overhead rates based on machine hours and setup hours. Round your answers to the nearest cent. Elegant $ per unit Fina $ per unit

Pull the annual report from Mergent Online for one of the following Fortune 500 Companies:

• Apple
• Microsoft
• Amazon

Using the Excel Template in the Course Materials folder, calculate the following ratios from 2014-2016.

• Total Debt to Equity Ratio
• Current Ratio
• Return on Equity (ROE)

What do the ratios tell you about your selected company?

Problem 23-5A (Part Level Submission) Hart Labs, Inc. provides mad cow disease testing for both state and federal governmental agricultural agencies. Because the company’s customers are governmental agencies, prices are strictly regulated. Therefore, Hart Labs must constantly monitor and control its testing costs. Shown below are the standard costs for a typical test. Direct materials (2 test tubes @ $1.80 per tube) $3.60 Direct labor (1 hour @ $30 per hour) 30.00 Variable overhead (1 hour @ $7.00 per hour) 7.00 Fixed overhead (1 hour @ $13.00 per hour) 13.00 Total standard cost per test $53.60 The lab does not maintain an inventory of test tubes. As a result, the tubes purchased each month are used that month. Actual activity for the month of November 2017, when 800 tests were conducted, resulted in the following: Direct materials (1,664 test tubes) $2,746 Direct labor (840 hours) 24,360 Variable overhead 5,280 Fixed overhead 10,080 Monthly budgeted fixed overhead is $17,160. Revenues for the month were $52,000, and selling and administrative expenses were $4,100. (a) Your answer is correct. Compute the price and quantity variances for direct materials and direct labor. (Round answers to 0 decimal places, e.g. 5,275.) Materials price variance $ Materials quantity variance $ Labor price variance $ Labor quantity variance $ Click if you would like to Show Work for this question: Open Show Work Show Solution Show Answer Link to Text Link to Text Link to Text Attempts: 1 of 3 used (b) Compute the total overhead variance. Total Overhead variance $

Variable and Absorption Costing—Three Products

Winslow Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows:

Winslow Inc. Product Income Statements—Absorption Costing For the Year Ended December 31, 20Y1
	Cross Training Shoes		Golf Shoes		Running Shoes
Revenues	$396,100		$229,700		$199,800
Cost of goods sold	206,000		112,600		133,900
Gross profit	$190,100		$117,100		$65,900
Selling and administrative expenses	163,500		84,300		110,100
Income (loss) from operations	$26,600		$32,800		$(44,200)

In addition, you have determined the following information with respect to allocated fixed costs:

	Cross Training Shoes		Golf Shoes		Running Shoes
Fixed costs:
Cost of goods sold	$63,400		$29,900		$28,000
Selling and administrative expenses	47,500		27,600		28,000

These fixed costs are used to support all three product lines. In addition, you have determined that the inventory is negligible.

The management of the company has deemed the profit performance of the running shoe line as unacceptable. As a result, it has decided to eliminate the running shoe line. Management does not expect to be able to increase sales in the other two lines. However, as a result of eliminating the running shoe line, management expects the profits of the company to increase by $44,200.

a. Are management’s decision and conclusions correct?

Management’s decision and conclusion are incorrect . The profit will not  be improved because the fixed costs used in manufacturing and selling running shoes will not  be avoided if the line is eliminated.

Feedback

Correct

b. Prepare a variable costing income statement for the three products. Enter a net loss as a negative number using a minus sign; enter all other amounts as positive numbers.

Winslow Inc.
Variable Costing Income Statements—Three Product Lines
For the Year Ended December 31, 20Y1
	Cross Training Shoes	Golf Shoes	Running Shoes
Revenues	$	$	$
Variable cost of goods sold
Manufacturing margin	$	$	$
Variable selling and administrative expenses
Contribution margin	$	$	$
Fixed costs:
Fixed manufacturing costs	$	$	$
Fixed selling and administrative expenses
Total fixed costs	$	$	$
Income from operations	$	$	$

Feedback

c. Use the report in (b) to determine the profit impact of eliminating the running shoes line, assuming no other changes.

If the running shoes line were eliminated, then the contribution margin of the product line would be eliminated  and the fixed costs would not  be eliminated. Thus, the profit of the company would actually decline  by __________$. Management should keep the line and attempt to improve the profitability of the product by increasing  prices, increasing  volume, or reducing  costs.

I tried $56,000 and it did not work, please help. I only need to blank answer for the third part of the problem

John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, because of strict regulations on amounts reimbursed for lab tests, payments received from insurance companies and governmental units have not been high enough to cover lab costs. Mr. Fleming has asked you to evaluate costs in the hospital’s lab for the past month. The following information is available: Two types of tests are performed in the lab—blood tests and smears. During the past month, 1,800 blood tests and 2,400 smears were performed in the lab. Small glass plates are used in both types of tests. During the past month, the hospital purchased 12,000 plates at a cost of $56,400. 1,500 of these plates were unused at the end of the month; no plates were on hand at the beginning of the month. During the past month, 1,150 hours of labor time were recorded in the lab at a cost of $21,850. The lab’s variable overhead cost last month totaled $7,820. Valley View Hospital has never used standard costs. By searching industry literature, however, you have determined the following nationwide averages for hospital labs: Plates: Two plates are required per lab test. These plates cost $5.00 each and are disposed of after the test is completed. Labor: Each blood test should require 0.3 hours to complete, and each smear should require 0.15 hours to complete. The average cost of this lab time is $20 per hour. Overhead: Overhead cost is based on direct labor-hours. The average rate for variable overhead is $6 per hour. Required: 1. Compute a materials price variance for the plates purchased last month and a materials quantity variance for the plates used last month. 2. For labor cost in the lab: a. Compute a labor rate variance and a labor efficiency variance. b. In most hospitals, one-half of the workers in the lab are senior technicians and one-half are assistants. In an effort to reduce costs, Valley View Hospital employs only one-fourth senior technicians and three-fourths assistants. Would you recommend that this policy be continued? 3-a. Compute the variable overhead rate and efficiency variances. 3-b. Is there any relation between the variable overhead efficiency variance and the labor efficiency variance?

Problem 7-23 Absorption and Variable Costing; Production Constant, Sales Fluctuate [LO7-1, LO7-2, LO7-3]

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Tami’s Creations, Inc. Income Statement For the Quarter Ended March 31
Sales (28,350 units)				$	1,134,000
Variable expenses:
Variable cost of goods sold	$	467,775
Variable selling and administrative		195,615			663,390
Contribution margin					470,610
Fixed expenses:
Fixed manufacturing overhead		266,800
Fixed selling and administrative		223,810			490,610
Net operating loss				$	( 20,000)

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Units produced	33,350
Units sold	28,350
Variable costs per unit:
Direct materials		$	7.40
Direct labor		$	7.50
Variable manufacturing overhead		$	1.60
Variable selling and administrative		$	6.90

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter?

c. Reconcile the variable and absorption costing net operating income (loss) figures.

3. During the second quarter of operations, the company again produced 33,350 units but sold 38,350 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.