Cost of Units Completed and in Process

The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production.

a. Based on the above data, determine the different costs listed below.

The following is a series of transactions for Berkeley City. Indicate how Berkeley reports each transaction within the government-wide financial statements and then on the fund financial statements. Assume that Berkeley follows a policy of considering resources as available if they will be received within 60 days. Incurred Liabilities are assumed to be claims to current resources if they will be paid within 60 days.

1. Borrowed money by issuing a 20-year bond for $5 million, its face value. This money is to be used to construct a highway around Berkeley.

2. Transferred cash of $110,000 from the general fund to the debt service funds to make the first payment of principal and interest on the bond in (1).

3. Paid the cash in (2) on the bond. Of this total, $80,000 represents interest; the remainder reduces the principal of the bond payable.

4. Completed construction of the highway and paid the entire $5 million.

5. The highway (in 4) is expected to last 30 years. However, the government qualifies to use the modified approach, which it has adopted for this system. A $400,000 cost is incurred during the year to maintain the highway at an appropriate, predetermined condition. Of this amount, $300,000 was paid immediately but the other $100,000 will not be paid until the sixth month of the subsequent year.

6. Received lights for the new highway donated from a local business. The lights are valued at $300,000 and should last 30 years. The modified approach is not used for this network of infrastructure. Straight-line depreciation is applied using the half-year convention.

7. Agreed to stop collecting property taxes from the Charlie Company for eight years in exchange for the promise that a small manufacturing plant will be built within Berkeley to generate capital investment and new job opportunities for the residents.

8. Recorded cash revenues of $3 million from the local subway system and made salary expense payments of $400,000 to its employees.

9. Opened a solid waste landfill at the beginning of the year that will be used for 25 years. This year an estimated 5 percent of the capacity was filed. The city anticipates closure, and postclosure requirements will be $3 million based on current cost figures although no costs have been incurred to date.

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts—the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,774,100 Cost of goods sold 1,232,931 Gross margin 541,169 Selling and administrative expenses 640,000 Net operating loss $ (98,831 ) Hi-Tek produced and sold 60,100 units of B300 at a price of $21 per unit and 12,800 units of T500 at a price of $40 per unit. The company’s traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company’s two product lines is shown below: B300 T500 Total Direct materials $ 400,100 $ 163,000 $ 563,100 Direct labor $ 120,400 $ 42,800 163,200 Manufacturing overhead 506,631 Cost of goods sold $ 1,232,931 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $58,000 and $108,000 of the company’s advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company’s manufacturing overhead to four activities as shown below: Manufacturing Overhead Activity Activity Cost Pool (and Activity Measure) B300 T500 Total Machining (machine-hours) $ 208,651 90,000 62,300 152,300 Setups (setup hours) 136,080 74 250 324 Product-sustaining (number of products) 101,000 1 1 2 Other (organization-sustaining costs) 60,900 NA NA NA Total manufacturing overhead cost $ 506,631 Required: 1. Compute the product margins for the B300 and T500 under the company’s traditional costing system. 2. Compute the product margins for B300 and T500 under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

The Cutting Department of Tangu Carpet Company provides the following data for December 2016. Assume that all materials are added at the beginning of the process.

a. Prepare a cost of production report for the Cutting Department. If an amount is zero or a blank, enter in "0". For the cost per equivalent unitcomputations, round your answers to two decimal places.

b. Compute and evaluate the change in cost per equivalent unit for direct materials and conversion from the previous month (November). If required, round your answers to two decimal places.

The balance sheet data below for Randolph Company for two recent years.

Required:

a. Using horizontal analysis, show the percentage change for each balance sheet item using Year 1 as a base year. If required, round percentage to one decimal place. If required, use the minus sign to indicate decreases in amounts and percents (negative values).

1. Randolph Company
   Comparative Balance Sheet
   December 31, Year 2 and Year 1
   Assets	Year 2	Year 1	Increase/Decrease Amount	Increase/Decrease Percentage
   Current assets	$445	$280	$	%
   Plant assets	680	520		%
   Total assets	$1,125	$800	$	%
   Liabilities & stockholders' equity
   Current liabilities	$285	$120	$	%
   Long-term debt	255	160		%
   Common stock	325	320		%
   Retained earnings	260	200		%
   Total liabilities and stockholders' equity	$1,125	$800	$	%

   b. Using vertical analysis, prepare a comparative balance sheet. If required, round your answers to one decimal place.

   Randolph Company
   Comparative Balance Sheet
   December 31, Year 2 and Year 1
   Assets	Year 2 Amount	Year 2 Percent	Year 1 Amount	Year 1 Percent
   Current assets	$445	%	$280	%
   Plant assets	680	%	520	%
   Total assets	$1,125	%	$800	%
   Liabilities & stockholders' equity
   Current liabilities	$285	%	$120	%
   Long-term debt	255	%	160	%
   Common stock	325	%	320	%
   Retained earnings	260	%	200	%
   Total liabilities and stockholders' equity	$1,125	%	$800	%

• Compare and contrast the difference between variable and full costing.
• Describe why income calculated under full absorption costing will be greater than income calculated under variable costing when production exceeds sales.
• Explain how a manufacturing company can "bury" fixed manufacturing costs in ending inventory under full absorption costing.

***IT DOES NOT HAVE TO BE LONG**

Average Rate of Return—Cost Savings

Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $85,000 with a $7,000 residual value and a ten-year life. The equipment will replace one employee who has an average wage of $18,370 per year. In addition, the equipment will have operating and energy costs of $4,130 per year.

Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment. If required, round to the nearest whole percent.

Calculate Cash Flows

Nature’s Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 7,400 units at $46 each. The new manufacturing equipment will cost $144,300 and is expected to have a 10-year life and $11,100 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis:

Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar.

Assume that the company uses the FIFO method.

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:

* $3 per unit variable; $255,000 fixed each year.

The company’s $35 unit product cost is computed as follows:

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.

Production and cost data for the first two years of operations are:

Required:

1. Using variable costing, what is the unit product cost for both years? =$20

2. What is the variable costing net operating income in Year 1 and in Year 2?

3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

Use the following information for questions 1 through 6.

Best Linens manufactures towels and other linens. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of March 2019 follow:

Work-in-process, February 28—50,000 units

100 percent complete for direct materials; 40 percent completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050

Units started during March,              225,000

Units completed during March         200,000

Work-in-process, March 31             75,000 units

100 percent complete for direct materials; 20 percent completed for conversion costs

Direct materials added during March [actual costs] $342,000

Conversion costs added during March [actual costs]          $352,950

1. Assuming Best Linens uses the weighted-average method to account for inventories, what are the equivalent units of work for the month of March for Direct Materials and Conversion Costs?

2. Assuming Best Linens used the weighted-average method to account for inventories, what is the cost per equivalent whole unit produced during March?

3. Assuming Best Linens uses the weighted-average method to account for inventories, what is the assignment of costs to work-in-process at the end of March?

4. If Best Linens uses the First-in, First-out (FIFO) method to account for inventories, what are the equivalent units of work for the month of March for Direct Materials and Conversion Costs?

5. If Best Linens uses the First-in, First-out (FIFO) method to account for inventories, what is the cost per equivalent unit for March for both Direct Materials and Conversion Costs?

6. Assuming Best Linens uses the First-in, First-out (FIFO) method to account for inventories, what is the assignment of costs to units completed and transferred to the Sewing Department during March?

7. In the Sewing Department, additional direct materials are added to the product at the end of production. Without prejudice to your answer for questions 1 through 9, assume that 200,000 units were transferred from the Cutting Department and that the weighted-average method is used. Data for February follow:

Work-in-process, February 28—70,000 units (30 percent complete as to conversion)

Units completed during March—240,000 units

Work-in-process, March 31—30,000 units (80 percent complete as to conversion)

For the Sewing Department, what are the equivalent units of work done in March for Transferred In, Direct Materials, and Conversion Costs?

Apply the following information to your data from question #7:

8. Standard costs for the Cutting Department—Direct materials: $1.50 per unit; Conversion costs $1.75 per unit, what is the standard cost of units transferred from the Cutting Department during March?

9. Using the information from question 8 regarding standard costs, what is the conversion costs variance for the month of March?

10. Provide the journal entry to record inventory costs and direct-material variances for the month of March.

You have just opened your own printing business. A large sports franchise is beginning an important advertising campaign in order to attract more fans to the sport. The purchasing officer of the company calls and asks you to make a bid on printing 5,000 high quality posters that are to be given out to important boosters. He asks you to come by his office to talk about the job. There, he tells you that he would like to help you get started in your new business. He says that he has already ask for bids, and the lowest bid is $25,000. He continues by suggesting that you come in with a bid for $24,000 and give him $500 in cash so that you get the bid. Your immediate reaction is to be flattered because you know that this could lead to many more contracts. You go back to your office and calculate your costs. You are pleased to see that you will make about $6,000 on the project, which you really need.

Is the deal suggested by the purchasing office fraud? Explain.

On December 31, 2020, Berclair Inc. had 360 million shares of common stock and 3 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2021, Berclair purchased 88 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2021. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2021, was $550 million. Also outstanding at December 31 were 30 million incentive stock options granted to key executives on September 13, 2013. The options were exercisable as of September 13, 2020, for 30 million common shares at an exercise price of $56 per share. During 2021, the market price of the common shares averaged $70 per share. Required: Compute Berclair's basic and diluted earnings per share for the year ended December 31, 2021. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Do not round intermediate calculations.)

Required information Problem 19-3A Source documents, journal entries, and accounts in job order costing LO P1, P2, P3 [The following information applies to the questions displayed below.] Widmer Watercraft’s predetermined overhead rate for the year 2017 is 200% of direct labor. Information on the company’s production activities during May 2017 follows. Purchased raw materials on credit, $220,000. Materials requisitions record use of the following materials for the month. Job 136 $ 48,500 Job 137 32,500 Job 138 19,800 Job 139 22,800 Job 140 7,000 Total direct materials 130,600 Indirect materials 20,500 Total materials used $ 151,100 Paid $15,000 cash to a computer consultant to reprogram factory equipment. Time tickets record use of the following labor for the month. These wages were paid in cash. Job 136 $ 12,100 Job 137 10,600 Job 138 37,700 Job 139 39,600 Job 140 3,600 Total direct labor 103,600 Indirect labor 24,500 Total $ 128,100 Applied overhead to Jobs 136, 138, and 139. Transferred Jobs 136, 138, and 139 to Finished Goods. Sold Jobs 136 and 138 on credit at a total price of $535,000. The company incurred the following overhead costs during the month (credit Prepaid Insurance for expired factory insurance). Depreciation of factory building $ 69,500 Depreciation of factory equipment 38,500 Expired factory insurance 11,000 Accrued property taxes payable 35,000 Applied overhead at month-end to the Work in Process Inventory account (Jobs 137 and 140) using the predetermined overhead rate of 200% of direct labor cost.