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ACC 206 Week 3 Assignment Chapter 4 and 5 Problems and Exercises, DQs, Journal

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Chapter 4 and 5 Problems
 
  Please complete the following 7 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.
 
Chapter 4 Exercise 3
3. Cost flows and overhead application
Cleveland Metals uses a job cost system and applies factory overhead to production at a predetermined rate of 180% of direct labor cost. Data pertaining to recent operations follow.
·         Job no. 636 was the only job in process on January 1 of the current year. The Work in Process account contained a $24,600 balance on this date.
·         Jobs no. 637, 638, and 639 were started during January.
·         Total direct material requisitions and direct labor incurred during January amounted to $89,200 and $114,500, respectively.
·         The only job that remained in process on January 31 was job no. 638, with costs of $15,000 for direct materials and $20,000 for direct labor. 
a.       Compute the total cost of the work in process inventory on January 31.
b.      Compute the cost of jobs completed during January, and present the proper journal entry to reflect job completion.
 
Chapter 4 Exercise 7
7. Overhead application: Working backward
The Towson Manufacturing Corporation applies overhead on the basis of machine hours. The following divisional information is presented for your review:
 
Division A
Division B
Actual machine hours
22,500
?
Estimated machine hours
20,000
?
Overhead application rate
$4.50
$5.00
Actual overhead
$110,000
?
Estimated overhead
?
$90,000
Applied overhead
?
$86,000
Over- (under-) applied overhead
?
$6,500
FIND THE UNKNOWNS FOR EACH OF THE DIVISIONS.
 
Chapter 4 Problem 2
2. Computations using a job order system
General Corporation employs a job order cost system. On May 1 the following balances were extracted from the general ledger;
 
Work in process          $ 35,200
Finished goods                       86,900
Cost of goods sold      128,700
 
Work in Process consisted of two jobs, no. 101 ($20,400) and no. 103 ($14,800). During May, direct materials requisitioned from the storeroom amounted to $96,500, and direct labor incurred totaled $114,500. These figures are subdivided as follows:
 
Document*
           Date
       Department
    Hours
    Amount
MR 1165
19-Mar
Machining
$5,600
MR 1169
21-Mar
Machining
3,500
TT 1450-52
23-Mar
Machining
45
400
MUR 46
23-Mar
Machining
105
MR 4330
27-Mar
Finishing
700
TT 1475-76
31-Mar
Machining
30
300
MUR 47
31-Mar
Machining
50
TT 6608-13
31-Mar
Finishing
200
2,000
 
 
Job no. 115 was the only job in process at the end of the month. Job no. 101 and three "other" jobs were sold during May at a profit of 20% of cost. The "other" jobs contained material and labor charges of $21,000 and $17,400, respectively.
 
General applies overhead daily at the rate of 150% of direct labor cost as labor summaries are posted to job orders. The firm's fiscal year ends on May 31.
Instructions:
a.       Compute the total overhead applied to production during May.
b.      Compute the cost of the ending work in process inventory.
c.       Compute the cost of jobs completed during May.
d.      Compute the cost of goods sold for the year ended May 31.
 
 
 
 
 
 
Chapter 5 Exercise 1
1. High-low method
The following cost data pertain to 19X6 operations of Heritage Products:
 
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Shipping costs
$58,200
$58,620
$60,125
$59,400
Orders shipped
120
140
175
150
 
The company uses the high-low method to analyze costs.
a.       Determine the variable cost per order shipped.
b.      Determine the fixed shipping costs per quarter.
c.       If present cost behavior patterns continue, determine total shipping costs for 19X7 if activity amounts to 570 orders.
 
Chapter 5 Exercise 2
The treasurer anticipates the following costs for the event, which will be held at the Regency Hotel: 
Room rental                                       $300 
Dinner cost (per person)                     25 
Chartered buses                                  500 
Favors and souvenirs (per person)     5 
Band                                                  900

Each person would pay $40 to attend; 200 attendees are expected.
a.       Will the event be profitable for the sorority? Show computations.
b.      How many people must attend for the sorority to break even?
c.       Suppose the sorority encouraged its members to drive to the hotel and did not charter the buses. Further, a planned menu change will reduce the cost per meal by $2. If each member will still be charged $40, compute the contribution margin per person.
 
Chapter 5 Exercise 3
3. Break-even and other CVP relationships
Cedars Hospital has average revenue of $180 per patient day. Variable costs are $45 per patient day; fixed costs total $4,320,000 per year.
a.       How many patient days does the hospital need to break even?
b.      What level of revenue is needed to earn a target income of $540,000?
c.       If variable costs drop to $36 per patient day, what increase in fixed costs can be tolerated without changing the break-even point as determined in part (a)?
 
Chapter 5 Problem 6
6. Direct and absorption costing
The information that follows pertains to Consumer Products for the year ended December 31, 19X6.
Inventory, 1/1/X6
24,000 units
Units manufactured
80,000
Units sold
82,000
Inventory, 12/31/X6
? units
Manufacturing costs:
Direct materials
$3 per unit
Direct labor
$5 per unit
Variable factory overhead
$9 per unit
Fixed factory overhead
$280,000
Selling & administrative expenses:
Variable
$2 per unit
Fixed
$136,000
 
Assume that costs have been stable in recent years.
 
Instructions:
a.       Compute the number of units in the ending inventory.
b.      Calculate the cost of a unit assuming use of:
1.      Direct costing.
2.      Absorption costing.
c.       Prepare an income statement for the year ended December 31, 19X6, by using direct costing.
d.      Prepare an income statement for the year ended December 31, 19X6, by using absorption costing.
 
DQ 1
Issues in Costing.  Describe three issues/problems that a company could encounter when trying to determine the actual cost of a good or service to be used in the cost of goods sold. For each of your issues, provide an example of a company or industry where these issues could be present.
 
DQ 2
CVP and the Airline Industry.  We’ve all experienced (or heard about) the challenges that the airlines have been facing. Read the Zacks Investment Research article, “Airline Industry Stock Outlook –
August 2012.” Identify three factors that are affecting airline company’s ability to break even. For each of your factors, discuss how these have an impact on the breakeven (contribution margin, fixed costs, variable costs, a combination, etc.), and what happens if these factors increase or decrease.

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