INTRODUCT TO COST ACCOUNTING

Chapter 1

 INTRODUCT TO COST ACCOUNTING.The following amounts relate to the Macro-Disk Corporation :

Finished Goods Inventory, August 1, 2011	98, 470
Finished Goods Inventory, August 30, 2011	94, 290
Cost of Goods Manufactured	135, 705
Net Sales	170, 940

a.       Calculate the cost of goods solds.

b.      Calculate the gross profit on sales.

Answer :

Macro-Disk Corporation

Revenue

      Net Sales                                                                                             170, 940

Cost of Goods Sold

      Finished Goods Inventory, August 1                         98, 470

      Add Cost of Goods Manufactured                            135, 705

      Total Goods Available for Sale                                  234, 175

      Deduct Finished Goods Inventory, August 3                        94, 290

      Cost of Goods Sold                                                                            139, 885

Gross Profit on Sales                                                                                31,005

Chapter 2  (Acounting for Materials)

The following information retaes to materials purchases for the Bella Company :

	Material A	Material B
Annual demand for material	9000 lb	63,375
Cost to place an order	$10	$ 10
Cost to carry an item	$ 2	$ 3
Safety stock	250 lb	750 lb
Lead time	20 days	10 days
Daily usage	15 lb	250 lb

Instructions

a.       Calculate the economic order quantity (EOQ) for each material.

b.      Calculate the reorder point for each material.

Answer

EOQ

Reorder Point

a.       Material A

15 lb (daily usage) x 20 days (lead time)        300

Plus Safety Stock                                            250 +

            Reorder point                                                  550

b.      Material B

150 lb x 10 days                                              1500

Plus safety stock                                             750

Reorder Point                                                  2250

Chapter 3 (Accounting for Labors)

Calculate the employer’s payroll taxes for Peter Wade, Inc. for the month of April 2009 and the general journal entry needed to recognize the payroll tax liability.

Gross wages                                                    $ 750,300

Taxable wages for social security                   $ 662,310

Taxable wages for medicare                           $ 750,300

Taxable wages for FUTA and SUTA             $   81,280

Answer :

Employers’s payyrol taxes

            Social Security taxes payable              ($ 662,310 x 0.062)                 $ 41,063.22

            Medicare taxes payable                       ($ 750,300 x 0.015)                 $ 11, 254.5

            FUTA                                                  ($   81,280 x 0.008)                 $ 650.24

            SUTA                                                  ($   81,280 x 0.038)                 $ 3,088.64

Record to general journal

Manufacturing Overhead Control                  56,056.6

            Social Security taxes payable                                      $ 41,063.22

            Medicare taxes payable                                               $ 11, 254.5

            FUTA  taxes payable                                                   $ 650.24

            SUTA  taxes payable                                                   $ 3,088.64

Chapter 4  (Accounting for Overhead)

The Gracie Dish Corporation allocates Building services Departement overhead on the basis of the amount of floor space occupied by each producing department in the factory. The mixing department occupies 3,000 square feet, the Molding Department occupies 7,000 square feet, and the finishing occupies 10,000 square feet. Calculate the amount that should be allocated to each of these producing departments based on the square footage occupied if the Building Services Departement incurs $75,400 in overhead costs.

Answer :

Departement	Square Feet Occupied	Percentage
Mixing Department	3000	15
Molding Department	7000	35
Finishing Departemen	10000	50
Total	20000	100

Note : percentage = Square Feet occupied : Total Feet

Departement	Dollar x Percentage	Amount
Mixing Department	75,400x 15	11310
Molding Department	75,400 x 35	26390
Finishing Departement	75,400 x 50	37700
Total		75400

                                               

Chapter 5 (Process Costing-General Procedures)

A department had no beginning work in process inventory. During the month, 7,500 units were transferred in from the prior department. Of this amount, 7,000 werw completed by the end of the month and transferred to finished goods. The ending work in process incomplete as ti labor ventory was 100 percent complete as to materials and 40 percent complete as to labor 30 percent complete as to overhead.

a.       What are the equivalent units of  production for materials?

b.      What are the equivalent production for labor?

c.       What are the equivalent units of production for overhead?

Monthly Production Report

Quantity

            Transferred in from prior Departement                       7500

            Transferred our to finished goods                              7000

            Work in process-Ending                                              500

Stage of completion of ending work in process

            Materials                                                                     100%

            Labor                                                                           40%

            Overhead                                                                    30%

Equivalent Production Computations              

Material

Transferred out to finished goods                                          7000

Work in Process-Ending (500 x 100%)                                  500

Equivalent units for materials                                     7500

Labor

Transffered out to finished goods                                          7000

Work in process-Ending (500 x 40%)                                     200

              Equivalent Units for labor                                         7200

Overhead

Transffered out to finished goods                                          7000

Work in process-Ending (500 x 30%)                                     150

              Equivalent Units for labor                                         7150

Chapter 6 (Joint and By Product)

Beginning inventory was 6,000 units, one-fourth complete as to labor and factory overhead. During the period, 42,000 units were started in process and 36,000 units were finished. There were 18,000 units in ending work in process, one-half complete as to labor and factory overhead. Assuming that the average costing method is used and that all materials are put into production at the beginning of the process, while labor and overhead are applied evenly throughout production, determine the equivalent units of production for direct materials and for direct labor and factory overhead respectively.

Keynote:

Beginning inventory                                             = 6,000 units, ½ complete as to labor and factory overhead

Started in process                                      = 42,000 units

Finished in process                                                = 36,000 units

Ending work in process                            = 18,000 units, ½ complete as to labor and factory overhead

        

Asked:

The equivalent units of production for direct materials and for direct labor and factory overhead = ?

Answer:

Equivalent units of production for direct material:
Units finished and transferred out	36,000
Units in ending inventory, 100% complete	18,000
Equivalent units of production	54,000
Equivalent units of production for direct labor and factory overhead:
Units finished and transferred out	36,000
Units in ending inventory, 6,000 x 50%	6,000
Equivalent units of production	42,000

Chapter 7 (Budgeting)

The production budget for the Mantra Company, inc. calls for manufacturing 60,000 units of product during 2007. Each units is expected to required 0,5 hours of labor in the Blending Department at a ate of $ 12.00 per hour and 0,7 hours of labor in the Baking Department at a rate of $14.00 hour . prepare the direct labor budget for the company for 2007.

Answer :

Mantra Company

Direct Labor Budget

Years Ending December 31, 2007

Department	Scheduled Production	Hours Per Unit	Total Estimated Hours	Rate per Hour	Total Cost
Blending	60,000	0,5	30,000	$12.00	360,000
Baking	60,000	0,7	42,000	14.00	588,000
Total					948,000

Chapter 8 (Standard Costing)

Compute materials quantity and price variances and prepare a journal entry to charge materials into production and record variances. The standard cost of the material used in the Forming Department in May 2007 was $ 240,000 (15,000 pounds at $24 per pound). The actual cost of materials used was  $478,380 (20,100 pounds at $23,80 per pound).

a.       Compute the materials quantity and price variances for May

b.      Compute the net materials variance.

Answer :

a.       Materials Quantity Variance = ( Standard Quantity x Standard Price) – (Actual Quantity x  Standard Price)

15,000 standard units x $ 24 standard price per unit                                     $ 360,000

20,100 actual units x $ $ 24 standard price per unit                           $ 482,400 -

            Materials Quantity Variance                                                   $ 122,400 U

Materials Price Variance = ( Actual Quantity x Standard Price) – (Actual Quantity x  Actual Price)

20,100 actual units x $ 24 standard price per unit                              $ 482, 400

20,100 actual units x $23, 80  actual price per unit                            $ 478,380 -

                                                                                                            $   4, 020 F

b.      Net Material Variance

Materials Price Variance                                                         $    4,020 F

Material Quantity Variance                                                    $   122,400 U

Net Materials                                                                          $    118,380 U