Chapter 2: Financial Statements of a Manufacturing Business.

Required: For both the questions below, prepare the following external statements for the period ended
December 31, 19xx:
a. Cost of goods manufactured statement c. Retained earnings statement
b. Income statement d. Balance Sheet (Statement of Financial Position)
Problem 2-7 Ralph Corporation
Cash $20, 350 Capital Stock, $ 1 par value 100, 000
Accounts Receivable 29, 600 Paid – in capital in excess of par 25, 000
Allowance for uncollectible 1, 450 Retained Earnings, Jan 1 22, 350
Direct Material Inventory, Jan 1 7, 650 Dividends 11, 000
Work in process Inventory Jan 1 6, 900 Sales 396, 200
Finished goods Inventory Jan 1 3, 750 Sales Return & Allowance 2, 850
Prepaid Expenses 1, 600 Purchases of direct material 83, 350
Factory equipment 121, 500 Purchases Return & Allowance 4, 150
Accumulated depre: Factory equipment 36, 400 Freight in 13, 900
Selling Equipment 71, 150 Direct labor 117, 700
Accumulated depre: Selling Equipment 23, 700 Factory overhead 60, 750
Patents 7, 100 Selling expenses 36, 200
Accounts Payable 15, 300 General & Admin Expenses 32, 050
Miscellaneous Payable 2, 850 Income Tax Expense 23, 272
Income tax Payable 23, 272
The inventories as of December 31 are as follows

Direct Material Inventory $ 8, 050

Work in process Inventory 7, 250
Finished goods Inventory 3, 350

Problem 2-8 Mush’s Marshmallow Company

Cash 81, 000 Miscellaneous Payable 36, 600
Accounts Receivable 187, 800 Capital Stock, $ 1 par value 600, 000
Allowance for uncollectible 9, 000 Retained Earnings, Jan 1 116, 700
Direct Material Inventory, Jan 1 37, 500 Dividends 84, 000
Work in process Inventory Jan 1 45, 000 Sales (net) 1629, 000
Finished goods Inventory Jan 1 33, 300 Purchases of direct material 320, 100
Prepaid Expenses 5, 400 Direct labor 460, 500
Factory equipment 588, 000 Factory overhead 284, 700
Accumulated depre: Factory 169, 500 Selling expenses 261, 600
equipment
Office equipment 184, 200 Admin Expenses 97, 800
Accumulated depre: Office 73, 800 Income Tax Expense 75, 000
Equipment
Accounts Payable 111, 300 2745, 900 2745, 900
The inventories as of December 31 are as follows
Direct Material Inventory $ 45, 300
Work in process Inventory 29, 400
Finished goods Inventory 40, 200

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Question: Prepare the 4 Financial Statements from the trial balance of Good Company on 31 December
2017:

Rs. Rs.
Cash 29, 000 Capital 34, 532
Accounts Receivable 28, 150 Retained Earnings – Jan 1 4, 160
Allowance for Bad Debts 2, 400 Dividends 10, 150
Raw Material – Jan 1 3, 600 Sales 496, 100
Work in Process – Jan 1 34, 050 Sales Returns 5, 900
Finished Goods – Jan 1 12, 900 Purchases 146, 100
Prepaid Expenses 3, 000 Carriage Inwards 1, 900
Factory Machine 40, 300 Purchases Discount 2, 800
Allowance for Depre – Fac. machine 9, 010 Purchases Returns 700
Office Equipment 15, 000 Depreciation – factory machine 18, 000
Allowance for Depre – Off. equip 2, 000 Depreciation – Office machine 9, 000
Accounts Payable 12,090 Indirect material 9, 450
Rent Payable 8, 870 Income Tax 23, 662

R M – Dec 31 Rs. 4, 600 Labor Rs. 93, 000 of which 75 % was for direct labor
WIP – Dec 31 Rs. 23, 960 Heat & light Rs. 69, 500, following the ratio for factory and office as to 7:3
F G – Dec 31 Rs. 23, 000 Maintenance Rs. 20, 000 – three fifths factory and two fifths office

Chapter 3: Accounting for Material and Labor

For Questions 1 and 2, calculate the cost of material issued and cost of material ending
under the three given methods. Also give the journal entries under each of the method.
Question 1

Date Details Units Cost per Total 1. SPECIFIC

unit Rs. Cost Rs IDENTIFICATION
Jan 01 Beg Inventory 20 10 200 30 units issued on January 06
Jan 05 Purchases 50 11 550 were taken from the purchases
Jan 06 Issued 30 of Jan 05 and the 60 units
Jan 09 Purchases 40 12 480 issued on Jan 20 were taken
Jan 15 Purchases 20 13 260
from the beg inv (20 units) and
Jan 20 Issued 60
Jan 28 Purchases 10 15 150 the purchase of Jan 09.

2.Weighted Average 3. FIFO

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Question 2 1. Specific Identification
Date Details Units Cost per Total
unit Rs. Cost Rs 42 units issued on June 17 were from 20
June01 Beg Inv 30 25 units from beginning inventory and the
June 03 Purchases 35 28 remaining from Purchases of June 10.
June 10 Purchases 45 28 36 units issued on June 21 were from 10
June 17 Issued 42 units of Beginning Inventory, 26 units from
June 21 Issued 36 Purchases of June 3.
June 28 Purchases 30 30 46 units issued on June 29 were from
June 29 Issued 46 20 units from purchases of June 10
and the remaining from the
purchases of June 28.

2. FIFO 3. Weighted Average

Question 3: The president of Margo’s Supply Company has provided the following data
concerning the company’s wood pulp inventory for the month of Jan. The company
measures its inventory under the FIFO method.
Jan 01 Opening inventory: 1, 000 lb of wood pulp costing $ 0.50 / lb
10 Purchased: 300 lb at $ 0.55 / lb
16 Issued: 300 lb
26 Issued: 750 lb
28 Purchased: 400 lb at $ 0.60 / lb
31 Issued: 350 lb
Required:
a. Journalize the above transactions under the perpetual inventory system.
b. Compute the cost of material issued and the ending material

Question 4: Highway manufacturers pays its employees weekly. Below is the payroll
summary prepared by the payroll department for the week ended January 15

Names Hours Direct Labor Indirect Labor Per hour

Hours Hours Rate
J. Peters 40 35 5 $6.50
T. Palmer 35 34 1 5.75
K. Tim 40 35 5 6.00
A.Helen 40 30 10 6.50
F. Pam 36 30 6 6.25
J. White 40 40 --- 6.00
231 204 27

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Required:
1. What amount should be charged to Work-in-process inventory?
2. What amount should be charged to factory overhead?
3. Record the payroll.

Question 5: The A.B. Cody Company recently adopted an incentive plan. Factory workers are
paid $ 0.75 per unit with a guaranteed minimum wage of $200 per week. Following is the report
on the employees’ productivity for the week ending May 19, 20xx. All employees had worked
full 40 hour week.

Chapter 4: Costing and Control of Factory Overhead

Product Cost Standard Normal Actual

Elements Costing Costing Costing
Direct Materials Estimated costs Actual costs Actual costs
Direct Labor Estimated costs Actual costs Actual costs
Manufacturing Overhead Estimated costs Estimated costs Actual costs

Question 1: Assume the following information is available for the G. Long Company (all estimated
figures):
– Factory overhead 425,000 Units of production 500,000
– Direct materials cost Rs.1,000,000 Direct labor costs Rs.1,500,000
– Direct labor hours 250,000 Machine hours 110,000
Required: Compute the factory overhead application rate for the G. Long Company under the
following bases:
1. Unit of production
2. Direct materials cost
3. Direct labor cost
4. Direct labor hours 5. Machine hours (Problem 4-2, Pg 173)

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Question 2: (Exercise 4-3, Pg 187)

Required: Compute the application rates used to apply FOH, and determine the applied overhead
during January for each of the following bases:
a. Units of Production b. DM Cost c. DL Hours
4. DL Cost e. Machine Hours

Question 3:
Normal capacity, in units 250, 000
Estimated Direct Material Cost $ 500, 000
Normal capacity, in direct labor hours (2 direct labor hours per unit) 500, 000
Rate per direct labor hour $4 / DLH
Relevant range of production
In units 100, 000 – 400, 000
In direct labor hours 200, 000 – 800, 000
Factory Overhead Costs:
Variable Factory Overhead:
1. Indirect material, average per unit $ .50
2. Indirect labor costs, average per hour $ 5.00
Indirect labor hours ( 3 % of 500, 000 DLH) 15, 000
3. Fuel to run factory equipment, average per machine hour $30.00
Equipment hours required (3 % of 500, 000 DLH) 15, 000
Fixed Factory Overhead
Factory Rent $ 300, 000
Depreciation of factory equipment $ 50, 000
STATIC BUDGET (only one estimated level of production) 250, 000

Required: Compute the FOH application rate on the basis of

1. Units of production 2. Direct material costs 3. Direct labor costs
4. Direct labor hours 5.Machine hours

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Question 4: (Problem 4-3)
Department Estimated Rate Per DLH Actual DL Hours Actual Overhead
Dyeing Rs. 3.10 7, 600 Cost for the period
Weaving 6.04 11, 000 was Rs.91, 900.
Blocking 0.85 2, 200
Required: Give journal entries to record the estimated FOH, actual FOH and to close the FOH.

Question 5: (Exercise 4-1, Pg 186)

Fixed, Variable, and Semi variable Factory Overhead

Donahue and Daughters, Inc., produced 225, 000 bottles of perfume during the year. The
production costs for the bottles of perfume were the following:

DM $940, 000 DL $550, 000 IIDM $348, 750

Factory Rent $40, 000 Depreciation $33, 750 IDL $213, 750
Factory Supervisors $60, 000

Each worker can produce 2, 500 bottles. Each supervisor can handle up to 30 workers; the
supervisors are paid equal salaries, Depreciation is determined using the units of production
method.

Required: Determine the total factory overhead for Donahue and Daughters, Inc., if the
company had produced 375, 000 bottles during the year.

Chapter 5: Job Order Costing

Question 1: (Exercise 5-1, Pg 235)

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Question 2:

Question 3: Herald Corporation produces special products to customer’s specifications and uses
job order costing system. The following data relates to its operations for the month of December
2014
a. Purchase raw material on account Rs. 42,000
b. Material issued to factory Rs. 33,000 of which Rs. 3,000 was used indirectly
c. Labor used: Direct Rs. 50,000 Indirect Rs. 5,000
d. Factory overhead is applied at 100 % of Direct labor cost
e. Job was completed to the extent of Rs.117,000 i.e. 90 %
f. Goods sold on account Rs. 170,000. Finished goods inventory at Rs. 10,000
g. Factory overhead cost incurred Rs. 40,000
Required: Record the above transactions in journal & close the FOH Account

Question 4: All Good Corporation produces special products to customer specifications and uses
job order costing system. The following data relates to its operations for the December, 2014
a. Purchased raw material on account Rs. 52,000
b. Material issued to factory Rs.43, 000 of which Rs. 4,000 was used indirectly.
c. Labor used: Direct Rs. 65,000 indirect Rs. 5,500
d. Factory Overhead is applied at 85% of Direct Labor cost.
e. Job was completed to the extent of 90%
f. Goods sold on account Rs.210, 000. Finished goods inventory valued at Rs.12,000
g. Factory overhead cost incurred Rs. 45,000
Required : Record the above transactions in journal and close the FOH A/C

Question 5: The following data relates to M/s Alpine Co. for the month of September, 2012
a. Material purchased on account Rs.120,000
b. Material requisitioned and Factory labor used
Material Factory-Labor
Job No. 501 Rs. 13,000 Rs.19,000
Job No. 502 9,000 15,520
Job No. 503 22,400 14,080
Job No. 504 17,600 20,800
Job No. 505 14,000 7,200
Job No. 506 7,000 3,600

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 For general factory use 3,800 7,400
c. Factory overhead cost incurred on account Rs.68,800
d. Depreciation of machinery Rs.10,400
e. The factory overhead rate is 110% of direct labor cost
f. Job completed: No. 501, 503, 504 and 506
g. Job no. 501, 503 and 504 were shipped and customers were billed for Rs. 84,000, Rs.
85,000 and Rs. 100,000
Required: Record the transactions of questions 3 & 4 in general journal and close the factory
overhead account

Question 6: The following data relates to M/s Kevin Co. for the month of October, 2012
a. Material purchased on account Rs.300,000
b. Material requisitioned and Factory labor used
Material Factory-Labor
Job No. 58 Rs. 7,000 Rs.10, 000
Job No. 59 8, 500 14, 000
Job No. 60 8, 950 12, 300
Job No. 61 11, 250 9, 500
Job No. 62 8, 300 9, 200
For general factory use 5, 400 6, 200
c. Factory overhead cost incurred Rs.54,800
d. The factory overhead rate is 115% of direct labor cost
e. Job completed: No 58, 59, 60 and 62
f. Job no. 58, 59 and 62 were shipped and customers were billed for Rs. 38,000,
Rs. 43,000 and Rs. 35,000
Chapter 6: Process Costing
Question 1
Department A Department B
Units
Started in process 60, 000
Received from department A 46, 000
Transferred to department B 46, 000
Transferred to finished goods inventory 40, 000
Ending units in process:
Department A (direct material 100% complete; direct
labor & factory overhead 40% complete) 14, 000
Department B (direct labor & FOH 35%)
complete) 6, 000
Costs $ $
Direct material 31, 200 0
Direct labor 36, 120 35, 785
Factory Overhead (applied) 34, 572 31, 996

Required: Prepare a Cost of Production Report for Department A and Department B for both the
questions.

Question 2
Department A Department B

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Units
Started in process 150, 000
Received from department A 95, 000
Transferred to department B 95, 000
Transferred to finished goods inventory 63, 000
Ending units in process:
Department A (direct material 100% complete; direct
Labor 45% & factory overhead 40% complete) 55, 000
Department B (direct labor 25% & FOH 55%
complete) 32, 000

Costs Rs. Rs.

Direct material 76, 500 0
Direct labor 114, 960 10, 650
Factory Overhead (applied) 40, 950 20, 956

Chapters 10 & 11: Standard and Actual Costing

1. The standard price for material 3-291 is $3.65 per liter. During November, 2, 000 liters were
purchased at $ 3.60 per liter. The quantity of material issued during the month was 1, 775 liters
and the quantity allowed for November production was 1, 825 liters. Compute the material price
variance assuming that it is recorded at the time of purchase.

2. The Shawn Lawn Furniture Company uses 12 meters of aluminum pipe at $ 0.80 per meter as
standard for the production of its Type A lawn chair. During one month’s operations, 100, 000
meters of the pipe were purchased at $0.78 a meter, and 7, 200 chairs were produced using 87,
300 meters of pipe. The materials price variance is recognized when materials are purchased.
Compute the material price and quantity variances.

3. Hawaii Company produced 7, 600 comic books for the year. The DM Qty Std was 6 units of DM
per unit of finished goods. The amount of DM used in production was 46, 500 units. DM
purchased amounted to 36, 000 units. The actual DM cost was $ 3.25 each but the Std DM cost
was $ 3.30 each. A process cost system is used to accumulate costs. Compute both the DM
Variances.

4. The processing of a product requires a Std of 0.8 DLH per unit at a Std wage rate of $ 6.75 per
hour. The 2, 000 units actually required 1, 580 DLH at a cost of $ 6.90 per hour. Compute DL
Rate & Efficiency Variances

5. Unicorn Company produced 16, 000 FGs for the year. The DL Efficiency Std was 3 hrs per unit.
The actual DL hours worked were 47, 750. The company employs a DL Std wage rate of $ 7.25
per hour; $ 7.18 was the actual DL wage rate. . Compute DL Rate & Efficiency Variances

6. The XYZ Corporation produces one main product. The company employs a standard cost system.
Below is October’s flexible budget.

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 Direct labor hours 800 900 1, 000
Total Variable FOH $ 1, 200 $ 1, 350 $ 1, 500
Total Fixed FOH $ 1, 890 $ 1, 890 $ 1, 890
Total FOH $ 3, 090 $ 3, 240 $ 3, 390
FOH is applied based on normal capacity. The number of DL Hours allowed for October’s
production is 850 hrs. Actual FOH costs for Oct were $ 3, 350. Actual DL hrs worked for the
month were 910 hours. Normal capacity is 900 DL Hrs. Calculate the FOH variance for October
using the one-factor analysis method

7. The following is the company’s FOH costs for January:

Budgeted fixed FOH $ 75, 000

Std Fixed FOH Appl. Rate per DL hour $3
Std Variable FOH Appl. Rate per DL hour $6
Standard DL hours allowed for actual production 24, 000
Actual Total FOH incurred $ 220, 000
Calculate the FOH Variances for January using the two-factor analysis method.

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