Audio Accessories Ltd manufactures a model of compact disc
holders which is produced in three separate departments: Molding,
Assembly, and Finishing. It uses the weighted-average
process-costing method to account for the cost of production. The
following information was obtained for the Assembly Department for
the month of April.
Amount Percentage complete
WIP, 1 April (5,000 units)
Prior department costs transferred in from the Molding Department
$7,000 100%
Costs added by the Assembly Department
Direct materials $3,500 100%
Direct labour 4,500 60%
Manufacturing overhead 2,000 50%
10,000
Total WIP, 1 April $17,000
During the month of April, the Molding Department transferred into
the Assembly Department 25,000 units at a prior department cost of
$38,000. The Assembly Department added the following $51,700 of
costs:
Direct materials $19,700
Direct labour 22,500
Manufacturing overhead 9,500
$51,700
The Assembly Department completed and transferred out 20,000 units
to the Finishing Department. The balance was still in WIP in the
Assembly Department. The degree of completion of WIP at 30 April
was as follows:
Direct materials 90%
Direct labour 70%
Manufacturing overhead 30%
Required:
(a) Prepare a report to show the physical flow of units, the
equivalent units, unit costs of transferred in cost, direct
materials, direct labour and manufacturing overheads.
(b) Prepare a report to show the cost of goods completed and the
cost of ending work in process for the month.
Explain why process costing system is best suited to Audio
Accessories Ltd?
In: Accounting
Top executive officers of Baird Company, a merchandising firm, are preparing the next year’s budget. The controller has provided everyone with the current year’s projected income statement. Current Year Sales revenue $ 2,300,000 Cost of goods sold 1,725,000 Gross profit 575,000 Selling & administrative expenses 304,000 Net income $ 271,000 Cost of goods sold is usually 75 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $74,000. The president has announced that the company’s goal is to increase net income by 15 percent. Required The following items are independent of each other. Using Excel prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 2 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income. The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $347,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal?
In: Accounting
EXERCISE 18.11 The following information pertains to May activity
in Accessory World’s Coating Department:
Cost data:
Total cost of beginning inventory on May 1 . . . . . . . . . . . .
. . . . . . . . . . . . . $45,300
Direct materials costs incurred in May. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 11,925
Conversion costs incurred in May . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 84,525
Cut sets transferred in during May. . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . ?
Physical units data:
Units in process, May 1 . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 6,000 sets
Units started in May . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . ? sets
Units in process, May 31 . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 9,000 sets
Percentage of completion data:
Direct materials, May 1. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 60%
Conversion, May 1 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 80
Cut sets transferred in, May 1 . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . ?
Direct materials, May 31. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 70%
Conversion, May 31 . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 90
Cut sets transferred in, May 31 . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . ?
Compute how many cut mat sets were started in the Coating
Department during May.
b. Prepare a schedule showing: (1) the number of mat sets
transferred out of the Coating Department
in May, and (2) the number of mat sets started and completed by the
Coating Department
in May.
c. Compute the equivalent units of input resources for the Coating
Department in May.
d. Compute the cost per equivalent unit of input resource for the
Coating Department in May.
e. Prepare the summary journal entry required to transfer the cost
of finished mat sets from the
Coating Department’s Work in Process Inventory to the company’s
Finished Goods Inventory in
May.
f. Compute the total cost assigned to the Coating Department’s
ending inventory in process on
May 31.
In: Accounting
Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments--Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):
| Molding | Fabrication | Total | |||||||
| Estimated total machine-hours used | 2,500 | 1,500 | 4,000 | ||||||
| Estimated total fixed manufacturing overhead | $ | 10,250 | $ | 15,150 | $ | 25,400 | |||
| Estimated variable manufacturing overhead per machine-hour | $ | 1.50 | $ | 2.30 | |||||
| Job P | Job Q | |||||
| Direct materials | $ | 14,000 | $ | 8,500 | ||
| Direct labor cost | $ | 21,800 | $ | 7,900 | ||
| Actual machine-hours used: | ||||||
| Molding | 1,800 | 900 | ||||
| Fabrication | 700 | 1,000 | ||||
| Total | 2,500 | 1,900 | ||||
Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.
Required:
12. If Job P included 20 units, what was its unit product cost?
2. Assume that Sweeten Company used cost-plus pricing (and a markup percentage of 80% of total manufacturing cost) to establish selling prices for all of its jobs. What selling price would the company have established for Jobs P and Q? What are the selling prices for both jobs when stated on a per unit basis assuming 20 units were produced for Job P and 30 units were produced for Job Q?
3.What was Sweeten Company’s cost of goods sold for March?
In: Accounting
Top executive officers of Baird Company, a merchandising firm, are preparing the next year’s budget. The controller has provided everyone with the current year’s projected income statement.
|
Current Year |
|||
|
Sales revenue |
$ |
2,300,000 |
|
|
Cost of goods sold |
1,725,000 |
||
|
Gross profit |
575,000 |
||
|
Selling & administrative expenses |
304,000 |
||
|
Net income |
$ |
271,000 |
|
Cost of goods sold is usually 75 percent of sales revenue, and
selling and administrative expenses are usually 10 percent of sales
plus a fixed cost of $74,000. The president has announced that the
company’s goal is to increase net income by 15 percent.
Required
The following items are independent of each other.
Using Excel prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal?
The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 2 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income.
The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $347,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal?
In: Accounting
Top executive officers of Tildon Company, a merchandising firm, are preparing the next year’s budget. The controller has provided everyone with the current year’s projected income statement.
| Current Year | |||
| Sales revenue | $ | 1,600,000 | |
| Cost of goods sold | 1,120,000 | ||
| Gross profit | 480,000 | ||
| Selling & administrative expenses | 190,000 | ||
| Net income | $ | 290,000 | |
Cost of goods sold is usually 70 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $30,000. The president has announced that the company’s goal is to increase net income by 15 percent.
Required
The following items are independent of each other:
A. Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal?
B. The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 2 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income.
C. The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $230,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal?
In: Accounting
Top executive officers of Tildon Company, a merchandising firm, are preparing the next year’s budget. The controller has provided everyone with the current year’s projected income statement.
| Sales revenue | $ | 1,600,000 | |
| Cost of goods sold | 1,120,000 | ||
| Gross profit | 480,000 | ||
| Selling & administrative expenses | 190,000 | ||
| Net income | $ | 290,000 | |
|
Cost of goods sold is usually 70 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $30,000. The president has announced that the company’s goal is to increase net income by 15 percent. |
|||
Required
The following items are independent of each other:
A Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal?
B The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 2 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income.
C The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $230,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal?
In: Accounting
Newton Corporation uses a process costing system to trace costs through several phases of produc- tion, starting with the Blending Department and ending with the Packaging Department. Recent computer problems have caused some of the company’s accounting records to be destroyed. Shown below is a partial summary of information retrieved by accountants from the Blending Depart- ment’s February production cost report:
|
Cost Data: Blending Department Direct materials costs in beginning inventory, February 1 . . . . . . . . . . . . . . . . . . |
$ 12,000 |
|
Conversion costs in beginning inventory, February 1 . . . . . . . . . . . . . . . . . . . . . . |
25,200 |
|
Direct materials costs incurred in February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
162,000 |
|
Conversion costs incurred in February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
271,000 |
|
Cost per equivalent unit of conversion in February. . . . . . . . . . . . . . . . . . . . . . . . |
5 |
|
Physical Units: Blending Department Units in process, February 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
? |
|
Units transferred out during February. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
58,000 |
|
Units started in February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
54,000 |
|
Units in process, February 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
2,000 |
|
Percentage of Completion: Blending Department Direct materials, February 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
100% |
|
Conversion, February 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
? |
|
Direct materials, February 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
100% |
|
Conversion, February 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
20 |
a. Compute the number of units that were in the Blending Department’s beginning inventory on February 1.
b. Compute the number of units that were started and completed by the Blending Department in February.
c. Compute the cost per equivalent unit of direct materials and conversion carried forward from
January and assigned to the Blending Department’s beginning inventory on February 1.
d. Compute the Blending Department’s cost per equivalent unit of direct materials consumed in
February.
In: Accounting
Top executive officers of Baird Company, a merchandising firm, are preparing the next year’s budget. The controller has provided everyone with the current year’s projected income statement.
|
Current Year |
|||
|
Sales revenue |
$ |
2,300,000 |
|
|
Cost of goods sold |
1,725,000 |
||
|
Gross profit |
575,000 |
||
|
Selling & administrative expenses |
304,000 |
||
|
Net income |
$ |
271,000 |
|
Cost of goods sold is usually 75 percent of sales revenue, and
selling and administrative expenses are usually 10 percent of sales
plus a fixed cost of $74,000. The president has announced that the
company’s goal is to increase net income by 15 percent.
Required
The following items are independent of each other.
Using Excel prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal?
The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 2 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income.
The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $347,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal?
In: Accounting
Top executive officers of Baird Company, a merchandising firm, are preparing the next year’s budget. The controller has provided everyone with the current year’s projected income statement.
|
Current Year |
|||
|
Sales revenue |
$ |
2,300,000 |
|
|
Cost of goods sold |
1,725,000 |
||
|
Gross profit |
575,000 |
||
|
Selling & administrative expenses |
304,000 |
||
|
Net income |
$ |
271,000 |
|
Cost of goods sold is usually 75 percent of sales revenue, and
selling and administrative expenses are usually 10 percent of sales
plus a fixed cost of $74,000. The president has announced that the
company’s goal is to increase net income by 15 percent.
Required
The following items are independent of each other.
Using Excel prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal?
The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 2 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 15 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income.
The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $347,000. With the increased advertising, the company expects sales revenue to increase by 15 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal?
In: Accounting