Managerial Accounting

Cost of Goods Manufactured StatementBB Materials Inventory $ 6,000.00

+ Materials Purchased $ 7,000.00 - EB Material Inventory ($1,000.00)= Material Used $ 12,000.00

Materials Used+ Direct Labor $ 5,000.00 + Manufacturing Overhead

Indirect Labor $ 600.00 Indirect Materials $ 500.00 Utilities $ 1,900.00 Depreciation exp $ 3,500.00

+ BB Work in Process $ 800.00 - EB Work in Process $ (3,000.00)= Cost of Goods Manufactured $ 21,300.00

Income StatementBB Finished Goods $ 4,000.00

+ Cost of goods Manufactored $ 21,300.00 - EB Finished Goods $ (5,300.00)= Cost of Goods Sold $ 20,000.00

Sales $ 31,800.00 - Cost of Goods Sold $ (20,000.00)= Gross (Margin/Profit) $ 11,800.00

Sales $ 31,800.00 - Cost of Goods Sold $ (20,000.00)- Operating Expenses= Net Income $ 11,800.00

BB Finished Goods + Cost of Goods Manufactured is offten Called Goods available for Sale.

Cost of goods available for sale

Prime Cost = direct materials + direct labor

Shedule of Cost of Goods Manufactured

Direct materials:Raw materials inventory, beginningAdd: Purchases of raw materialsRaw materials available for useDeduct: Raw materials inventory, endingRaw materials used in production

Direct LaborManufacturing overheadTotal manufacturing costAdd: Work in process inventory, beginning

Sub totalDeduct: Work in process inventory, endingCost fo goods manufactured

Income StatementSalesCost of Goods Sold:

Finished goods inventory, beginningAdd: Cost of goods manufacturedGoods availabel for saleFinished goods inventory, ending

Gross MarginSelling & Admin Expenses

Selling ExpenseAdministrative ExpensesNet Income

BB Finished Goods + Cost of Goods Manufactured is offten Called Goods available for Sale.

Cost of goods available for sale

Prime Cost = direct materials + direct labor

$ 6,000.00 7,000.00 13,000.00 (1,000.00)

12,000.00 5,000.00 6,500.00 23,500.00 800.00 24,300.00 (3,000.00) 21,300.00

$ 31,800.00

$ 4,000.00 $ 21,300.00 $ 25,300.00 $ (5,300.00) $ 20,000.00

$ 11,800.00

$ - $ 11,800.00

Top Switch Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout the state of Tennessee affected Top Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed. Before the unfortunate incident, recovery specialists cleaned the buildings. The company controller is very nervous and anxious to recover whatever records he can to support the insurance claim for the destroyed inventory. After consulting with the cost accountant, they decide to retrieve the previous year’s annual report for the beginning iThe cost accountant was working on the first quarter results before the storm hit, and to his surprise, the report was still in his desk drawer. After reviewing the data , the information shows the following information: Material purchases were $ 325,000; Direct Labor was $ 220,000. Further discussions between the controller and the cost accountant revealed that sales were $ 1,350,000 and the gross margin was 30% of sales. The cost accountant also discovered, while sifting through the information, that cost of goods available for sale was $ 1,020,000 at cost. While assessing the damage, the controller determined that the prime costs were $ 545,000 up to the time of the damage and that manufacturing overhead is 65% of conversion cost. The cost accountant is not sure about all of this, but he decides to see what he can do with the information. Inventory numbers. In addition, they also agreed that they need first quarter cost data. The beginning inventory numbers are as follows: Raw Materials, $ 41,000 Work in Process, $ 56,000 Finished Goods, $ 35,000 Required: Determine the amount of cost in the Raw Materials, Work in Process, and Finished Goods Inventory as of the date of the storm. ( Hint: You may wish to reconstruct the various schedules and statements that would have been affected by the company’s accounts during the period.)

Which costs will change with a decrease in activity within the relevant range?

An increase in the activity level within the relevant range results in:

Which costs will change with a decrease in activity within the relevant range? Unit fixed cost and total variable cost.

An increase in the activity level within the relevant range results in: A decrease in fixed cost per unit

AssumptionsSales 350,000 Variable selling expense 35,000 Fixed Selling expense 96,000 Cost of Goods Sold (variable) 160,000 Fixed Admin expense 55,000 Variable Admin expense 15,000

SalesLess: Variable Expenses: BB Inventory 0 VC CoGS 160,000 VC S & A exp 50,000 Contribution MarginLess: Fixed expenses: Fixed Mfg OH Fixed S & ANet Operating Income

350,000 Sales 350,000 VC CoGS (160,000)GM 190,000

(210000) 140,000

- (70,000) 70,000

Units produced - Units sold 3,000 Selling price $ 70.00

Sales 210,000 Less: Variable Expenses: BB Inventory 0 VC CoGS 150,000 VC S & A exp - (150000)Contribution Margin 60,000 Less: Fixed expenses: Fixed Mfg OH (25,000) Fixed S & A - Net Operating Income 35,000

VC FCDMC 50 25,000 DLC 0 - VMfgOH 0V S&A 0

50 25,000 Total FC 3,000

Total VC 150,000

AssumptionsVariable cost per unit: Manufacturing: DMC 50 DLC 0 VMfgOH 0 V S& A 0

Fixed Cost per year FMfgOH 25,000 F S& A -

Sales 210,000 (VC) (150,000)CM 60,000 (FC) (25,000)NI 35,000

Change in NI 31,875

∆ 𝑖𝑛 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

Decrease 25% Units sold 2,250 Increase 15% Selling price $ 70.00 $ 80.50

$31,875.00

Sales 157,500 AssumptionsLess: Variable Expenses: Variable cost per unit: BB Inventory 0 Manufacturing: VC CoGS 129,375 DMC VC S & A exp - (129375) DLCContribution Margin 28,125 VMfgOHLess: Fixed expenses: V S& A Fixed Mfg OH (25,000) Fixed S & A - Fixed Cost per yearNet Operating Income 3,125 FMfgOH

F S& A

VC FC SalesDMC 57.5 25,000 (VC)DLC 0 - CMVMfgOH 0 (FC)V S&A 0 NI

57.5 25,000 Total FC 2,250

Total VC 129,375

∆ 𝑖𝑛 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

Assumptions

57.5000

25,000 -

157,500 (129,375)

28,125 (25,000)

3,125

Sales Forcast: 6,000,000

VC FCDM 1,600,000 DL 1,400,000 FOH 600,000 900,000 Selling Exp 240,000 360,000 Admin Exp 60,000 140,000 Total 3,900,000 1,400,000

4,000,000

0.35

Sales revenues - Variable costs- Fixed Cost = Net IncomeCM = Sales revenues - variable costCM Ratio = (Sales revenues - Variable cost)/Sales revenuesCM=((Sales revenues-Variable cost)/Sales revenues)*Sales revenues(CM Ratio*Sales revenues)-Fixed cost= Net Income

𝐶𝑀 𝑅𝑎𝑡𝑖𝑜=(𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒𝑠−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐶𝑜𝑠𝑡)/(𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒𝑠)

𝐵𝑟𝑒𝑎𝑘 𝑒𝑣𝑒𝑛 𝑝𝑜𝑖𝑛𝑡 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠 𝑑𝑜𝑙𝑙𝑎𝑟𝑠=(𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡)/(𝐶𝑀 𝑅𝑎𝑡𝑖𝑜)𝐶𝑀 𝑅𝑎𝑡𝑖𝑜=𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑀𝑎𝑟𝑔𝑖𝑛/(𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒𝑠)

2,100,000 0.35 2,100,000 -

CM Ratio = ($6,000,000-$3,900,000)/$6,000,000CM Ratio = $2,100,000/$6,000,000CM Ratio = .35

Break-even point in sales dollars = $1,400,000/.35Break-even point in sales dollars = $4,000,000 (Answer C)

AssumptionsTime Units Start Units increment Unit Price Unit VariabTotal Fixed CostsMonth 9000 500 $20 $7.00 $ 130,000

Units Sales Variable Cost Fixed Total Costs9000 $180,000 $63,000 $117,000 $130,000 $193,000 ($13,000)9500 $190,000 $66,500 $123,500 $130,000 $196,500 ($6,500)

10000 $200,000 $70,000 $130,000 $130,000 $200,000 $0 10500 $210,000 $73,500 $136,500 $130,000 $203,500 $6,500 11000 $220,000 $77,000 $143,000 $130,000 $207,000 $13,000 11500 $230,000 $80,500 $149,500 $130,000 $210,500 $19,500 12000 $240,000 $84,000 $156,000 $130,000 $214,000 $26,000 12500 $250,000 $87,500 $162,500 $130,000 $217,500 $32,500 13000 $260,000 $91,000 $169,000 $130,000 $221,000 $39,000 13500 $270,000 $94,500 $175,500 $130,000 $224,500 $45,500 14000 $280,000 $98,000 $182,000 $130,000 $228,000 $52,000 14500 $290,000 $101,500 $188,500 $130,000 $231,500 $58,500 15000 $300,000 $105,000 $195,000 $130,000 $235,000 $65,000

Break Even Label 10,000 $200,000.00 Breakeven Units approx =10000

Contribution Margin

Net Income

Break Even Revenue

AsumptionsSales 1,000,000 Units 50,000 Mfg VC 340,000 Mfg FC 70,000 S & A VC 10,000 S & A FC 60,000

AssumptionsUnit PriceCM RatioFixed Exp

Variable Expence per unit = 60.00 - (60.00*40%)

Variable Expence per unit = 60.00 - 24.00

Variable Expence per unit = 36.00

𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝐸𝑥𝑝𝑒𝑛𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡=𝑈𝑛𝑖𝑡 𝑃𝑟𝑖𝑐𝑒 −𝐶𝑀 𝑅𝑎𝑡𝑖𝑜

60.00 40%

28,800

AssumptionsTime Units StartUnits increment Unit Price Unit VariabTotal Fixed CostsMonth 9000 500 60.00 36.00 $ 28,800

Units Sales Variable Cost Fixed Total Costs9000 $540,000 $324,000 $216,000 $28,800 $352,800 $187,200 9500 $570,000 $342,000 $228,000 $28,800 $370,800 $199,200

10000 $600,000 $360,000 $240,000 $28,800 $388,800 $211,200 10500 $630,000 $378,000 $252,000 $28,800 $406,800 $223,200 11000 $660,000 $396,000 $264,000 $28,800 $424,800 $235,200 11500 $690,000 $414,000 $276,000 $28,800 $442,800 $247,200 12000 $720,000 $432,000 $288,000 $28,800 $460,800 $259,200 12500 $750,000 $450,000 $300,000 $28,800 $478,800 $271,200 13000 $780,000 $468,000 $312,000 $28,800 $496,800 $283,200 13500 $810,000 $486,000 $324,000 $28,800 $514,800 $295,200 14000 $840,000 $504,000 $336,000 $28,800 $532,800 $307,200 14500 $870,000 $522,000 $348,000 $28,800 $550,800 $319,200 15000 $900,000 $540,000 $360,000 $28,800 $568,800 $331,200

Label1200 $72,000.00 Breakeven Units approx =1200

Contribution Margin

Net Income

Break Even

Break Even Revenue

AssumptionsUnit Price 60.00 Unit Variable Cost 36.00 Fixed Cost 28,800

AsumptionsSales - Units - Mfg VC - Mfg FC - S & A VC - S & A FC -

Transfered from previous page

An allocated protion of fixed manufacturing overhead is included in product cost under:Absorption Costing Variable Costing

A NO NOB NO YesC Yes NOD Yes Yes

ABSORPTION COSTINGA costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.

VARIABLE COSTINGA costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

An allocated protion of fixed manufacturing overhead is included in product cost under:

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Unit product cost using variable costing

Units producedUnits soldSelling price

DMC 13DLC 55Variable Mfg OH 1

Unit product cost 69 Unit product cost using variable costing

VC FC13 130,500 55 8,300

15

74 138,800 Total FC year 8,300 12

Total VC 614,200 11,567.00 per month

Unit product cost using Absorption CostingUnits producedUnits soldSelling price

DMC 13DLC 55Variable Mfg OH 1FC OH 15Unit product cost 84 Unit product cost using absorption costing

VC FC13 130,500 55 8,300

15

74 138,800 Total FC year

(𝐹𝑖𝑥𝑒𝑑 𝑀𝑓𝑔 𝑂𝐻)/(𝑈𝑛𝑖𝑡𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑)=increase or decrease


8,300 12Total VC 614,200 11,567.00 per month

Units produced 8,700 Units sold 8,300 Selling price $ 92.00

Sales 763,600 Less: Variable Expenses: BB Inventory 0 VC CoGS 572,700

Unit product cost using variable costing VC S & A exp 41,500 (614200)Contribution Margin 149,400 Less: Fixed expenses: Fixed Mfg OH (130,500) Fixed S & A (8,300)Net Operating Income 10,600

VC FCDMC 13 130,500 DLC 55 8,300 VMfgOH 1V S&A 5

74 138,800 Total FC 8,300

Total VC 614,200

8,700 Units produced 8,700 8,300 Units sold 8,300 $ 92.00 Selling price $ 92.00

Sales 763,600 Less: Variable Expenses:

Unit product cost using absorption costing BB Inventory 0 CoGM 730,800 CoG Available for Sale 730,800 Less: EB Inventory (33,600) (697,200)GM 66,400 Selling & Admin exp (49,800)

Net Operating Income 16,600



VC FCDMC 13 130,500 DLC 55 8,300 VMfgOH 1OH Mfg Cost 15

Unit Product cost 84 138,800 Total FC 8,300

Total VC 697,200

Sales 763,600 (VC) (697,200)CM 66,400

(FC) (49,800)NI 16,600

8,700 8,300 $ 92.00


Fixed Cost per year FMfgOH 130,500 F S& A 8,300

Sales 763,600 (VC) (614,200)CM 149,400 (FC) (138,800)NI 10,600


Fixed Cost per year FMfgOH 130,500 F S& A 8,300

Units Produced 8700Units Sold 8300Selling Price 92.00

Assumptions ROIRequired ROI 0%Investment - Selling and Admin Exp 49,800 Unit product cost 84Unit sales 8,300

7%Markup percentage on absorption cost

Jan Feb Mar Apr May Jun Jul AugCurrent 30% 100,000 120,000 110,000 - - - - - 1st after 60%2nd after 8%3rd after 0%uncollect 0%

Jan Feb Mar Apr May Jun Jul Aug 30,000 36,000 33,000 - - - - - - 60,000 72,000 66,000 - - - - - - 8,000 9,600 8,800 - - - - - - - - - - - 30,000 96,000 113,000 75,600 8,800 - - -

Sep Oct Nov Dec -

Sep Oct Nov Dec - - - - - - - - - - - - - - - - - - - -

A labor efficiency variance resulting from the use of poor quality materials should be charged to: A) the production manager. B) the purchasing agent. C) manufacturing overhead. D) the engineering department.

An unfavorable labor efficiency variance indicates that: A) The actual labor rate was higher than the standard labor rate. B) The labor rate variance must also be unfavorable. C) Actual labor hours worked exceeded standard labor hours for the production level achieved. D) Overtime labor was used during the period.

A favorable labor rate variance indicates that A) actual hours exceed standard hours. B) standard hours exceed actual hours. C) the actual rate exceeds the standard rate. D) the standard rate exceeds the actual rate.

A labor efficiency variance resulting from the use of poor quality materials should be charged to:

Actual labor hours worked exceeded standard labor hours for the production level achieved.

Assumptions

Direct material 20 8.00 Direct labor 0.1 1.10 Variable Mfg OH 0.1 0.40

Unit CostProduction 4,000 Direct materials purchased 85,000 32,300.00 Direct labor worked 390 4,875.00 Variable Mfg OH incurred 1,475.00 EB Inventory of Direct materials 3,000

Materials Price Variance AP= 0.38 SP= 0.40 MPV= -1700 Display as positive number

Materials Quanity Variance AQ= 82,000 SQ= 80,000 MQV= 800

Labor Rate Variance AR= 12.5SR= 11.00 LRV= 585

Labor efficiency VarianceSQ= 400 LEV= (110) Display as positive number

Standard Quanity

Standard Cost per Bag

AssumptionsSales 400,000 Variavle exp 100,000 Traceabel fixed exp 250,000 Avg Operating Assets 200,000 Minimum required Rate of Return 20%

Residual IncomeOperating Income 50,000 Less: Min Required Return 40,000 Equals: Residual Income 10,000

Return on Investment Net Operating IncomeAvg Operating Assets

=

50,000 200,000 25%

=

One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is. A) 1B) 0

29. In responsibility accounting, each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common organizational costs.

A) TRUEB) 0

Some managers believe that residual income is superior to return on investment as a means of measuring performance, since it encourages the manager to make investment decisions that are more consistent with the interests of the company as a whole.

A) 1B) 0

The performance of the manager of Division A is measured by residual income. Which of the following would increase the manager's performance measure?

A) Increase in average operating assets. B) Decrease in average operating assets. C) Increase in minimum required return. D) Decrease in net operating income.

A segment of a business responsible for both revenues and expenses would be called:

A) a cost center. A business segment whose manager has control over cost but has no control over revenue or investments in operating assets.B) an investment center. A business segment whose manager has control over cost, revenue, and investments in operating assets.C) a profit center. D) residual income. The net operating income that an investment center earns above the minimum required return on its operating assets.

One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is.



The performance of the manager of Division A is measured by residual income. Which of the following would increase the manager's performance measure?

A segment of a business responsible for both revenues and expenses would be called:

A business segment whose manager has control over cost but has no control over revenue or investments in operating assets.A business segment whose manager has control over cost, revenue, and investments in operating assets.

The net operating income that an investment center earns above the minimum required return on its operating assets.

AssumptionsSales 900,000 NOI 36,000 Stockholder's Equity 100,000 Average operating assets 180,000 Minimumrequired rate of return 15%

Residual Income Operating Income 36,000 Average Operating Assets 27,000 Residual Income 9,000

ROI Operating Income 36,000 Average Operating Assets 180,000

AssumptionsCM 48,000 FC 96,000 Not Avoided 42,000

CM 48,000 Less Not Avoided 42,000

6,000 Increase

Differential Cost Per Drumb

Assumptions Make BuyDirect Material 12 Outside supplier 27Direct Labor 8 Direct Materials 12Variable OH 3 Direct Labor 8.00 Fixed OH 10 Variable OH 3Redused cost 30% 30% Supervision 0Rental 0 Fixed OH 10Supervision 0 Equipment Rental 0

Total Cost 33.00 27.00

Differential Cost Per Drumb

Make BuyOutside supplier 30Direct Materials 12Direct Labor 8.00 Variable OH 3Supervision 0Fixed OH 10Equipment Rental 0Total Cost 33.00 30.00

30% of fixed Mfg OH will continue. No other changes

Total Differential Cost 10,000 Diff Make Buy Diff

270,000 120,000 80,000 30,000 -

- 6.00 230,000 270,000 (40,000)

Total Differential Cost 10,000 Diff Make Buy Diff

300,000 120,000 80,000 30,000 -

- 3.00 230,000 300,000 (70,000)

Orginal Costing

New Costing

Orginal Costing

New Costing

Some investment projects require that a company expand its working capital to service the greater volume of business that will be generated. Under the net present value method, the investment of working capital should be treated as: A) an initial cash outflow for which no discounting is necessary. B) a future cash inflow for which discounting is necessary. C)both an initial cash outflow for which no discounting is necessary and a future cash inflow for which discounting is necessary. D) irrelevant to the net present value analysis.

Which of the following capital budgeting techniques consider(s) cash flow over the entire life of the project?

Payback

A) Yes Yes B) Yes No C) No Yes D) No No

Internal rate of return

Some investment projects require that a company expand its working capital to service the greater volume of business that will be generated. Under the net present value method, the investment of working capital should be treated as:

both an initial cash outflow for which no discounting is necessary and a future cash inflow for which discounting is necessary.

Which of the following capital budgeting techniques consider(s) cash flow over the entire life of the project?

Some investment projects require that a company expand its working capital to service the greater volume of business that will be generated. Under the net present value method, the investment of working capital should be treated as:

PUR= 200,000.00 SAVE= 50,000.00 i = Discoun 10.00%n = 1 Price Pricex = 10PUR PV = ($1,228,913.42) Buy Not BuySAVE PV = ($307,228.36)SALVAGE $0.00

Words:

Excel Finance Class 27: Asset Valuation Using Discounted Cash Flow Analysis and PV Function

ITEM YEAR(S) CASH FLOW Discount

Annual Cost Savings 5-Jan 50,000.00 10.00% $307,228.36 Initial Investment Now (200,000.00) 1 (200,000.00)Net Present Value $107,228.36

If a new machine will yield a net cash flow of $60,000.00 per month for the next 5 years and your discount rate is 10.00% compounded 1 times a year, what is the maximum amount that

you should pay for the machine?

If a new machine will yield a net cash flow of $60,000.00 per month for the next 5 years and your discount rate is 10.00% compounded 1 times a year, the the maximum amount that you should pay

for the machine is $227,447.21.

PV OF CASH FLOWS

100000300000

12%

5

If a new machine will yield a net cash flow of $60,000.00 per month for the next 5 years and your discount rate is 10.00% compounded 1 times a year, the the maximum amount that you should pay

Period Cash Flow For NPV0 $ (200,000.00) $ (200,000.00)1 50,000.00 $ (150,000.00)2 50,000.00 $ (100,000.00)3 50,000.00 $ (50,000.00)4 50,000.00 $ - 5 50,000.00 $ 50,000.00 6 50,000.00 $ 100,000.00 7 50,000.00 $ 150,000.00 8 50,000.00 $ 200,000.00

Payback 4.00 4RRR 10%NPV $66,746.31IRR 18.62%

Cumulative CF for Payback

T Accounts

Finished GoodsDebit Credit

Date Amt Date AmtBB $13,000 $110,000

$125,000

Bal $28,000

T Accounts

Column1 Column2 Column3 Column4 Column5

a. Raw Material kr 200,000.00 Accounts Payable kr 200,000.00

On the bases of direct labor hoursb. Work In Process kr 185,000.00 Pre deteminded overhead rate:

Raw Material kr 185,000.00

c. Manufacturing Overhead kr 63,000.00 Sales & Admin Expense kr 7,000.00 Accounts Payable kr 70,000.00

d. Work In Process kr 230,000.00 Manufacturing Overhead kr 90,000.00 Sales & Admin Expense kr 110,000.00

c. Salaries & Wages Payable kr 430,000.00

e. Manufacturing Overhead kr 54,000.00 $ 390,000.00 =Accounts Payable kr 54,000.00

f. Advertising Expense kr 136,000.00 Accounts Payable kr 136,000.00

g. Manufacturing Overhead kr 76,000.00 Depreciation Expense kr 19,000.00 Accumulated Depreciation kr 95,000.00

h. Manufacturing Overhead kr 102,000.00 Sales & Admin Expense kr 18,000.00 Accounts Payable kr 120,000.00

i. Work In Process kr 390,000.00 Manufacturing Overhead kr 390,000.00

j. Finished Goods kr 770,000.00 Work In Process kr 770,000.00

k. Finished Goods kr 800,000.00 CoGS kr 800,000.00

On the bases of direct labor hoursPre deteminded overhead rate:

Overhead c 360,000 400Labor Hou 900

Direct Lab 975 $ 390,000.00

$ 360,000.00 = $ 400.00 $ 900.00

400 x 975

Estimated total manufacturingoverhead cost for the coming period

Estimated total units in theallocation base for the coming period

POHR =

T Accounts

Raw Materials Work in Process Debit Credit Debit Credit

Date Amt Date Amt Date Amt Date Amt

BB kr 30,000 b. kr 185,000 BB kr 21,000 j. kr 770,000 a. kr 200,000 b. kr 185,000

d. kr 230,000 i. kr 390,000

Bal kr 45,000 Bal kr 56,000

Manufacturing Overhead COGS Debit Credit Debit Credit

Date Amt Date Amt Date Amt Date Amt c. kr 63,000 i. kr 390,000 k. kr 800,000 d. kr 90,000 e. kr 54,000 g. kr 76,000 h. kr 102,000

Bal kr 5,000 Bal kr 800,000

Saleries & Wages Payable Accounts Payable Debit Credit Debit Credit

Date Amt Date Amt Date Amt Date Amt d. kr 430,000 a. kr 200,000

c. kr 70,000 e. kr 54,000 f. kr 136,000 h. kr 120,000

Bal kr 430,000 Bal kr 580,000

Accumulative Deprecation Salaries Expense Debit Credit Debit Credit

Date Amt Date Amt Date Amt Date Amt g kr 95,000

Bal kr 95,000 Bal kr -

Depreciation Expense Advertiaing Expense Debit Credit Debit Credit

Date Amt Date Amt Date Amt Date Amt g. kr 19,000 f. kr 136,000

Estimated total manufacturingoverhead cost for the coming period

Estimated total units in theallocation base for the coming period

POHR =

Bal kr 19,000 Bal kr 136,000

Sales & Admin Expense Finished Goods Debit Credit Debit Credit

Date Amt Date Amt Date Amt Date Amt c. kr 7,000 BB kr 60,000 k. kr 800,000 d. kr 110,000 j. kr 770,000 h. kr 18,000

Bal kr 135,000 Bal kr 30,000

Matthias Corporation has provided data concerning the company's Manufacturing Overhead account for the month of May. Prior to the closing of the overapplied or underapplied balance to Cost of Goods Sold, the total of the debits to the Manufacturing Overhead account was $53,000 and the total of the credits to the account was $69,000. Which of the following statements is true?

A. Manufacturing overhead applied to Work in Process for the month was $69,000.B. Manufacturing overhead for the month was underapplied by $16,000.C. Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the month was $53,000.D. Actual manufacturing overhead incurred during the month was $69,000.

BB WIP 40,000

750,000 EB WIP (30,000)

760,000

EQUIVALENT UNITS OF PRODUCTION

Transfer to next department 760,000 Ending work in process 12,000 Equivalent units of Production 772,000

COST PER EQUIVALENT UNIT

Cost of BB WIP 8,600 Cost added during the period 223,000 Total Cost (a 231,600

Equivalent units of Production (b) 772,000 0.30

Units Started into production during the month

Units completed and transferred out during month

Cost per equivalent Unit (a) ÷(b)

AssumptionsBB WIP: Units in process 40,000 % Complete materials 70% % Complete conversion 60% Cost in BB Inventory: Material cost 8,600 Conversion cost 4,800 Units started into production during month 750,000 Units transferred out during month ?Costs added to production durning month: Material cost 223,000 Conversion Cost 149,000 EB WIP: Units in process 30,000 % Complete materials 40% % Complete conversion 30%

AssumptionsEquipment purchase price - Decrease Operating Expense - Equipment useful life 0Minimum Rate of Return on Equipment 0%Present Value Factor 5.650 use PV Table

Amount of tangible cost 0 Less: Tangible Benefits 0

Net Present Value 0

Negative NPV of Equipment purchase - Present Value Factor 5.650

=

use PV Table

-

USE PRESENT VALUE OF AN ORDINARY ANNUITY TABLE

Managerial Accounting

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