For Final Examination of Managerial Accounting IMD_Year 3_2010 P2-141) the following data (in thousands of dollars) have

been taken from the accounting records of Larder Corporation for the just completed year. Sales ........................................................................... $ !" #urchases of raw materials ........................................ $$%" &irect labor ................................................................ $'$" (anufacturing overhead ............................................ $'"" )dministrative e*penses ............................................ $$+" Selling e*penses ......................................................... $$," -aw materials inventory. beginning .......................... $%" -aw materials inventory. ending ............................... $+" /ork in process inventory. beginning ....................... $0" /ork in process inventory. ending ............................ $'" 1inished goods inventory. beginning ......................... $$"" 1inished goods inventory. ending .............................. $%" Required: a. #repare a Schedule of Cost of 2oods (anufactured in good form. b. Compute the Cost of 2oods Sold. c. 3sing data from your answers above as needed. prepare an 4ncome Statement in good form P3-109) )ladili Company is a manufacturing firm that uses job5order costing. )t the beginning of the year. the company6s inventory balances were as follows7 -aw materials ................................ $08.""" /ork in process ............................. $,$.""" 1inished goods ............................... $$",.""" 9he company applies overhead to jobs using a predetermined overhead rate based on machine5 hours. )t the beginning of the year. the company estimated that it would work '$.""" machine5 hours and incur $'$".""" in manufacturing overhead cost. 9he following transactions were recorded for the year7 a. -aw materials were purchased. $0,8.""". b. -aw materials were re:uisitioned for use in production. $00+.""" ($0"'.""" direct and $08.""" indirect). c. 9he following employee costs were incurred7 direct labor. $08"."""; indirect labor. $8+."""; and administrative salaries. $$$$.""". d. Selling costs. $$!0.""". e. 1actory utility costs. $' .""". f. &epreciation for the year was $$"'.""" of which $ 0.""" is related to factory operations and $ .""" is related to selling and administrative activities. g. (anufacturing overhead was applied to jobs. 9he actual level of activity for the year was $ .""" machine5hours. h. 9he cost of goods manufactured for the year was $+%".""". i. Sales for the year totaled $$.''$.""" and the costs on the job cost sheets of the goods that were sold totaled $+!!.""". j. 9he balance in the (anufacturing <verhead account was closed out to Cost of 2oods Sold.
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Required: #repare the appropriate journal entry for each of the items above (a. through j.). =ou can assume that all transactions with employees. customers. and suppliers were conducted in cash. P3-111) >aar Company is a manufacturing firm that uses job5order costing. 9he company6s inventory balances were as follows at the beginning and end of the year7 Beginning Balance Ending Balance -aw materials ................................ $'8."""??????? $'".""" /ork in process ............................. $%$."""???????... $!0.""" 1inished goods ............................... $88.""" ???????..$+$.""" 9he company applies overhead to jobs using a predetermined overhead rate based on machine5 hours. )t the beginning of the year. the company estimated that it would work ,,.""" machine5 hours and incur $$%8.""" in manufacturing overhead cost. 9he following transactions were recorded for the year7 -aw materials were purchased. $,! .""". -aw materials were re:uisitioned for use in production. $,8!.""" ($,0$.""" direct and $0,.""" indirect). 9he following employee costs were incurred7 direct labor. $' 8."""; indirect labor. $80."""; and administrative salaries. $$!%.""". Selling costs. $$0,.""". 1actory utility costs. $$,.""". &epreciation for the year was $$$ .""" of which $$$,.""" is related to factory operations and $!.""" is related to selling and administrative activities. (anufacturing overhead was applied to jobs. 9he actual level of activity for the year was ,%.""" machine5hours. Sales for the year totaled $$.'+%.""" Required: a. #repare a schedule of cost of goods manufactured in good form. b. /as the overhead under5 or overapplied@ >y how much@ c. #repare an income statement for the year in good form. 9he company closes any under5 or overapplied overhead to Cost of 2oods Sold. P3-115) 9he Commonwealth Company uses a job5order cost system and applies manufacturing overhead cost to jobs using a predetermined overhead rate based on the cost of materials used in production. )t the beginning of the year. the following estimates were made as a basis for computing the predetermined overhead rate7 manufacturing overhead cost. $$+8."""; direct materials cost. $$!!.""". 9he following transactions took place during the year (all purchases and services were ac:uired on account)7 a. -aw materials purchased $ 8.""". b. -aw materials re:uisitioned for use in production (all direct materials). $++.""". c. 3tility bills incurred in the factory. $$%.""". d. Costs for salaries and wages incurred as follows7 &irect labor. $$%,.""" 4ndirect labor. $%".""" Selling and administrative salaries. $$',.""" e. (aintenance costs incurred in the factory. $$'.""". f. )dvertising costs incurred $ +.""".
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g. &epreciation recorded for the year. $%!.""" (%!A relates to factory assets and the remainder relates to selling and administrative assets). h. -ental cost incurred on buildings. $+".""" (+"A of the space is occupied by the factory. and '"A is occupied by sales and administration). i. (iscellaneous selling and administrative costs incurred $$'.""". j. (anufacturing overhead cost was applied to jobs. k. Cost of goods manufactured for the year. $,+".""". l. Sales for the year (all on account) totaled $ "".""". 9hese goods cost $!!".""" to manufacture Required: #repare journal entries to record the information above. Bey your entries to the letters a through l. P3-Review Problem) Cogle Company is a manufacturing firm that uses job5order costing. <n Danuary $. the beginning of its fiscal year. the companyEs inventory balances were as follows7 -aw materials . . . . . . . . . . . . . . . . . . . . . . $'".""" /ork in process . . . . . . . . . . . . . . . . . . . . $!.""" 1inished goods . . . . . . . . . . . . . . . . . . . . . 0".""" 9he company applies overhead cost to jobs on the basis of machine5hours worked. 1or the current year. the company estimated that it would work %!.""" machine5hours and incur $,!".""" in manufacturing overhead cost. 9he following transactions were recorded for the year7 a. -aw materials were purchased on account. $,$".""". b. -aw materials were re:uisitioned for use in production. $0+".""" ($08".""" direct materials and $'".""" indirect materials). c. 9he following costs were incurred for employee services7 direct labour. $%!."""; indirect labour. $$$"."""; sales commissions. $ "."""; and administrative salaries. $'"".""". d. Sales travel costs were incurred. $$%.""". e. 3tility costs were incurred in the factory. $,0.""". f. )dvertising costs were incurred. $$+".""". g. &epreciation was recorded for the year. $0!".""" (+"A relates to factory operations. and '"A relates to selling and administrative activities). h. 4nsurance e*pired during the year. $$".""" (%"A relates to factory operations. and the remaining 0"A relates to selling and administrative activities). i. (anufacturing overhead was applied to production. &ue to greater than e*pected demand for its products. the company worked +".""" machine5hours during the year. j. 2oods costing $ "".""" to manufacture according to their job cost sheets were completed during the year. k. 2oods were sold on account to customers during the year at a total selling price of $$.!"".""". 9he goods cost $+%".""" to manufacture according to their job cost sheets. Required $. #repare journal entries to record the preceding transactions. '. #ost the entries in ($) above to 95accounts (do not forget to enter the opening balances in the inventory accounts). 0. 4s (anufacturing <verhead underapplied or overapplied for the year@ #repare a journal entry to close any balance in the (anufacturing <verhead account to Cost of 2oods Sold. &o not allocate the balance between ending inventories and Cost of 2oods Sold. ,. #repare an income statement for the year and a statement of cost of goods manufactured.
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Problem 3-20) Celestial &isplays. 4nc. puts together large5scale fireworks displaysFprimarily for celebrations sponsored by corporations and municipalities. 9he company assembles and orchestrates comple* displays using pyrotechnic components purchased from suppliers throughout the world. 9he company has built a reputation for safety and for the awesome power and brilliance of its computer controlled shows. Celestial &isplays builds its own launch platforms and its own electronic controls. >ecause of the companyEs reputation. customers order shows up to a year in advance. Since each show is different in terms of duration and components used. Celestial &isplays uses a job5order costing system. Celestial &isplaysE trial balance as of Danuary $. the beginning of the current year. is given below7

9he company charges manufacturing overhead costs to jobs on the basis of direct labor hours. (Gach customer order for a complete fireworks display is a separate job.) (anagement estimated that the company would incur $$0!.""" in manufacturing overhead costs in the fabrication and electronics shops and would work $+.""" direct labour5hours during the year. 9he following transactions occurred during the year7 a. -aw materials. consisting mostly of skyrockets. mortar bombs. flares. wiring. and electronic components. were purchased on account. $+'".""". b. -aw materials were issued to production. $+0".""" ($$0.""" of this amount was for indirect materials. and the remainder was for direct materials). c. 1abrication and electronics shop payrolls were accrued. $'"".""" (%"A direct labour and 0"A indirect labor). ) total of '".+"" direct labour5hours were worked during the year. d. Sales and administrative salaries were accrued. $$!".""". e. 9he company prepaid additional insurance premiums of $0+.""" during the year. #repaid insurance e*piring during the year was $,".""" (only $8"" relates to selling and administrative; the other $0 .,"" relates to the fabrication and electronics shops because of the safety haHards involved in handling fireworks). f. (arketing cost incurred $$"".""".
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g. &epreciation charges for the year. $,".""" (%"A relates to fabrication and electronics shop assets. and 0"A relates to selling and administrative assets). h. #roperty ta*es accrued on the shop buildings. $$'.8"" (credit )ccounts #ayable). i. (anufacturing overhead cost was applied to jobs. j. Dobs completed during the year had a total production cost of $$.$"8.""" according to their job cost sheets. k. -evenue (all on account). $$.,'".""". Cost of 2oods Sold (before any adjustment for underapplied or overapplied overhead). $$.$'".""". l. Cash collections on account from customers. $$.,$!.""". m. Cash payments on accounts payable. $ %".""". Cash payments to employees for salaries and wages. $0,+.""".

Required:
$. #repare journal entries for the yearEs transactions. '. #repare a 95account for each account in the companyEs trial balance. and enter the opening balances given above. #ost your journal entries to the 95accounts. #repare new 95accounts as needed. Compute the ending balance in each account. 0. 4s manufacturing overhead under5 or overapplied for the year@ #repare the necessary journal entry to close the balance in the (anufacturing <verhead account to Cost of 2oods Sold. ,. #repare an income statement for the year. (&o not prepare a statement of cost of goods manufactured; all of the information needed for the income statement is available in the 95 accounts.) P4-158) )nchor 4nc. uses the weighted5average method in its process costing system. 9he following data concern the operations of the company6s first processing department for a recent month. /ork in process. beginning7 3nits in process ........................................................... +"" Stage of completion with respect to materials ............ 8"A Stage of completion with respect to conversion.......... $"A Costs in the beginning inventory7 (aterials cost ........................................................... $$.' 8 Conversion cost ........................................................ $'.,$8 3nits started into production during the month .............. $8.""" 3nits completed and transferred out .............................. $8.!"" Costs added to production during the month7 (aterials cost .............................................................. $,%."%8 Conversion cost ........................................................... $, %.'$0 /ork in process. ending7 3nits in process ........................................................... 0"" Stage of completion with respect to materials ............ 8"A Stage of completion with respect to conversion.......... %"A Required: #repare a production report for the department using the weighted5average method.

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P4-160) >ae 4nc. uses the weighted5average method in its process costing system. 9he following data concern the operations of the company6s first processing department for a recent month. /ork in process. beginning7 3nits in process ........................................................... $"" Stage of completion with respect to materials ............ %"A Stage of completion with respect to conversion.......... "A Costs in the beginning inventory7 (aterials cost ........................................................... $$+' Conversion cost ........................................................ $0.,' 3nits started into production during the month ..............$".""" 3nits completed and transferred out .............................. .%"" Costs added to production during the month7 (aterials cost .............................................................. $'%. +8 Conversion cost ........................................................... $0%0.+$! /ork in process. ending7 3nits in process ........................................................... ,"" Stage of completion with respect to materials ............ "A Stage of completion with respect to conversion.......... %"A

Required:
3sing the weighted5average method7 a. &etermine the e:uivalent units of production for materials and conversion costs. b. &etermine the cost per e:uivalent unit for materials and conversion costs. c. &etermine the cost of units transferred out of the department during the month. d. &etermine the cost of ending work in process inventory in the department. P6-Solu) Ioltar Company manufactured and sells a telephone answering machine. 9he companyEs contribution format income statement for the most recent year is given below7
Total $ 1,200,000 900,000 #00,000 240,000 $ 60,000 Per Unit Percent of Sales $ 60 100% 45 ? $ 15 ?%

Sales (20,000 units . Less variable expenses.. C ntributi n !ar"in. Less $ixe% expenses &et peratin" in' !e..

(anagement is an*ious to improve the companyEs profit performance and has asked for an analysis of a number of items. -e:uired7 $5 Compute the companyEs C( ratio and variable e*pense ratio.

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'5 Compute the companyEs break5even point in both units and sales dollars. 3se the e:uation method. 05 )ssume that sales increase by $,"".""" ne*t year. 4f cost behavior patterns remain unchanged. by how much will be companyEs net operating income increase@ 3se the C( ratio to determine your answer. ,5 -efer to the original data. )ssume that ne*t year management wants the company to earn a minimum profit of $ ".""". Cow many units will have to be sold to meet this target profit figure@ !5 -efer to the original data. Compute the companyEs margin of safety in both dollar and percentage form. 85 a. Compute the companyEs degree of operating leverage at the present level of sales. b. )ssume that through a more intense effort by the sales of staff the companyEs sales increase by +A ne*t year. >y what percentage would you e*pect ne*t operating income to increase@ 3se the operating leverage concept to obtain your answer. c. Ierify your answer to (b) by preparing a new income statement showing an +A increase in sales. %5 4n an effort to increase sales and profits. management is considering the use of a higher :uality speaker. 9he higher :uality speaker would increase variable costs by $0 per unit. but management could eliminate one :uality inspector who is paid a salary of $0".""" per year. 9he sale manager estimates that the higher :uality speaker would increase annual sales by at least '"A. a. )ssume that changes are made as described above. prepare a projected income statement for ne*t year. Show data on a total per unit. and percentage basis. b. Compute the companyEs new break5even point in both units and dollars of sales. 3se the contribution margin method. c. /ould you recommend that the changes be made@ P6- Solu Pra Exam) Chen J Chen 1urniture 4nc. sells a small hand5crafted table for $0" per unit. 9he variable costs related to the table. including product and shipping costs. are $$+ per unit. 9otal fi*ed costs for the company are $8".""". #repare a CI# graph to appro*imate the break5even point in dollars and units. '. >arnard Ltd. sells a single product. 9he product has a selling price of $$"" per unit. variable e*penses of +"A of sales. and its fi*ed e*penses total $$!".""" per year. #art (a) /hat is the companyEs contribution margin ratio@ #art (b) /hat is its break5even point@ (2ive answer in dollars and in units.) 0. &ahlia (anufacturing Company reported $,.""".""" of sales during the month and incurred variable e*penses totaling $'.+"".""" and fi*ed e*penses of $%'".""". ) total of +".""" units were produced and sold last month. 9he company has no beginning or ending inventories.
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#art (a) what is the companyEs total contribution margin and contribution margin per unit@ #art (b) how many units would the company have to sell to achieve a desired target profit of $8""."""@ #art (c) /hat is the companyEs break5even point in sales dollars@ #art (d) /hat is the companyEs margin of safety@ #art (e) /hat is the company6s degree of operating leverage@

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