Problem 17-1: Martin Company

(000s omitted)
Raw Materials Inventory
Balance, Sept. 1 ...................................................................................................................................................................
80 Issued for use .................................................................................................
100
Purchases .............................................................................................................................................................................
55 To balance ......................................................................................................
35
135
135
Balance, October 1 ..............................................................................................................................................................
35

Work in Process Inventory

Balance, Sept. 1 ...................................................................................................................................................................
95 Goods manufactured ......................................................................................
210
Direct material .....................................................................................................................................................................
100 To balance ......................................................................................................
120
Direct labor ..........................................................................................................................................................................
60
330
Overhead .............................................................................................................................................................................
75
330
Balance, October 1 ..............................................................................................................................................................
120

Finished Goods Inventory

Balance, Sept. 1 ...................................................................................................................................................................
65 Cost of sales ...................................................................................................
235
Goods manufactured............................................................................................................................................................
210 To balance ......................................................................................................
40
275
275
Balance, October 1 ..............................................................................................................................................................
40
Cost of Sales
235
Problem 17-2: Burtis Company
Calculation of normal selling price for 20x3 assuming continued use of full cost:

20x2
Increase
20x3
Direct material ...........................................................................................................................................................................
$ 4.00
$ .48*
$ 4.48
Direct labor ................................................................................................................................................................................
7.00
.84*
7.84
Indirect manufacturing ...............................................................................................................................................................
4.80
.60
5.40
Selling and administrative..........................................................................................................................................................
3.50
.00
3.50
Total full cost.......................................................................................................................................................................
19.30
1.92
21.22
Profit (10%) ...............................................................................................................................................................................
1.93
.19
2.12
Selling price ...............................................................................................................................................................................
$21.23
$2.11
$23.34
*12 percent increase for direct material (.12 x $4.00 = $.48) and for direct labor (.12 x $7.00 = $.84)
$6,000 increase with volume of 10,000 units = increase of $.60 per unit.

Problem 17-3: Micha Smith

a.

b.

Total costs $5,700 Desired profit $3,300

150 hours
= $60.00 per hour

Fee per hour =

Revenue, 100 hours @ $60 .................................................................................................................................

$6,000
Costs ....................................................................................................................................................................
5,700
Profit ...................................................................................................................................................................
$ 300

Problem 18-1: Elliott Company

a. Overhead rate =
b.

c.

Production overhead $135,000

$1.50per direct labordollar

Direct labor dollars $90,000

Work in Process Inventory ..........................................................................................................................................

22,500
Raw Materials Inventory ........................................................................................................................................
6,000
Direct Labor ...........................................................................................................................................................
6,600
Production Overhead (6,600 x $1.50) ....................................................................................................................
9,900
Overhead absorbed @ $1.50/direct labor hour ............................................................................................................
$9,900
Actual overhead ...........................................................................................................................................................
9,550
Overabsorbed..........................................................................................................................................................
$ 350

Problem 18-2: Ryan Corporation

Cost Distributions

(a)
(b)

(c)

(d)
(e)

Cost Center
__A__
__B__
__C__
Heat, light, power ......................................................................................................................................................
$24,000
$ 8,000
$8,000
Depreciation:
Building ................................................................................................................................................................
2,400
300
300
Furniture and fixtures
600
200
Machinery and equipment ....................................................................................................................................
20,000
Insurance:
Inventories ............................................................................................................................................................
100
100
Building ................................................................................................................................................................
1,040
130
130
Furniture and fixtures
45
15
Machinery and equipment ....................................................................................................................................
850
Building repairs .........................................................................................................................................................
3,200
400
400
Machinery repairs ......................................................................................................................................................
1,900
Telephone expense ....................................................................................................................................................
360
1,080
360
Totals ....................................................................................................................................................................
$53,850
$10,655
$9,405

Calculations
(a)
Heat, light, power--basis of distribution, cubic feet:

(b)

(c)

A 600,000
B
200,000
C
200,000 1,000,000 cubic feet
6/10 x $40,000 = $24,000 A
2/10 x $40,000 = $8,000 B
2/10 x $40,000 = $8,000 C
Building depreciation--basis of distribution, square feet:

Manufacturing ......................................................................................................................................
48,000
Selling ..................................................................................................................................................
9,000
Administrative ......................................................................................................................................
3,000 60,000 square feet
48/60 x $3,000 = $2,400 A
6/60 x $3,000 = 300 B
6/60 x $3,000 = 300 C
Furniture and fixtures depreciation -- 75% ($800) = $600 B
25% ($800) = $200 C
(d)

Insurance--basis of distribution, square feet for building:

48/60 x $1,300 = $1,040 A
6/60 x $1,300 = $130 B
6/60 x $1,300 = $130 C
Insurance on inventories--half B; half A
Insurance on furniture and fixtures -- 75% ($60) = $45 B
25% ($60) = $15 C

(e)

Building repairs--basis for distribution, square feet:

48/60 x $4,000 = $3,200 A
6/60 x $4,000 = $400 B
6/60 x $4,000 = $400 C

(f)

Telephone--basis for distribution, number of extensions:

Total extensions -- 45
9/45 x $1,800 = $360 A
27/45 x $1,800 = $1,080 B
9/45 x $1,800 = $360 C

Problem 18-3: Mid-City College

a.

($000)

Service Centers
Instruction Centers
Bldg. and
Cent.
Arts and
Bus.
Total
Grounds
Adm.
Sciences Education
Adm.
Overhead costs ....................................................................................................................................................................
$l0,500
$1,575
$1,050
$3,150
$2,625
$2,100
Buildings and Grounds ........................................................................................................................................................
(1,575)
262
525
438
350
Central Administrator ..........................................................................................................................................................
______
_____
(1,312)
525
315
472
Overhead
$10,500
$0
$0
$4,200
$3,378
$2,922

*Reassignment of Building and Grounds Department using percent of space occupied:

Percent of
Cost Center
Floor Space
Cost Reassignment
15
Central Administration ...........................................................................................................................................
15
x$1,575 = $262
90
30
Arts and Sciences ...................................................................................................................................................
30
x$1,575 525
90
25
Education ................................................................................................................................................................
25
x$1,575 438
90
20
Business Administration.........................................................................................................................................
20
x$1,575 350
90
Total .......................................................................................................................................................................
90
$1,575

**Reassignment of Central Administration Department using number of employees:

Number of
Cost Center
Employees
Cost Reassignment
80
Arts and Sciences ...................................................................................................................................................
80
x$1,312 = $ 525
200
48
Education................................................................................................................................................................
48
x$1,312 =
315
200
72
Business Administration ........................................................................................................................................
72
x$1,312 =
472
200
Total .......................................................................................................................................................................
200
$1,312
b.
Number of
Overhead Cost
Instruction Center
Overhead Cost
Students
per Student
Arts and Sciences .........................................................................................................................................................
$ 4,200
6,000
$ .70
Education ......................................................................................................................................................................
3,378
2,500
1.35
Business Administration ...............................................................................................................................................
2,922
1,500
1.95
$10,500
10,000