Application Problems 3Page 120: Brief Exercises 3-7 and 3-9Page 123: Exercise 3-7Pages 164-165: Brief Exercise 4-2, and 4-8Page 170: Exercise 4-8pany, total materials costs are $33,000, and total conversion costs
are $54,000. Equivalent units of production are materials 10,000 and conversion costs
12,000. Compute the unit costs for materials, conversion costs, and total manufacturing
costs.
BE3-7 Trek Company has the following production data for April: units transferred out
40,000, and ending work in process 5,000 units that are 100\% complete for materials and
40\% complete for conversion costs. If unit materials cost is $4 and unit conversion cost is
$7, determine the costs to be assigned to the units transferred out and the units in ending
work in process.
BE3-8 Production costs chargeable to the Finishing Department in June in Hollins Com-
pany are materials $12,000, labor $29,500, and overhead $18,000. Equivalent units of
production are materials 20,000 and conversion costs 19,000. Compute the unit costs for
materials and conversion costs.
BE3-9 Data for Hollins Company are given in BE3-8. Production records indicate that
18,000 units were transferred out, and 2,000 units in ending work in process were 50\%
complete as to conversion costs and 100\% complete as to materials. Prepare a cost recon-
ciliation schedule.
BE3-10 Pix Company has the following production data for March: no beginning work in
process, units started and completed 30,000, and ending work in process 5,000 units that
are 100\% complete for materials and 40\% complete for conversion costs. Pix
FIFO method to compute equivalent units. If unit materials cost is $6 and
ost is $10, determine the costs to be assigned to the units transferred
Hina umrk in process. The total costs to be assigned are $530,00
Materials are entered at the beginning of the process. Conversion costs are incurred uni-
formly during the process.
Instructions
(a) Determine the equivalent units of production for (1) materials and (2) conversion
costs.
(b) Compute unit costs and prepare a cost reconciliation schedule.
E3-7 The Sanding Department of Quik Furniture Company has the following production Prepare a
and manufacturing cost data for March 2017, the first month of operation.
LO 3,4
Production: 7,000 units finished and transferred out; 3,000 units started that are 100\%
complete as to materials and 20\% complete as to conversion costs.
report.
Manufacturing costs: Materials $33,000; labor $21,000; and overhead $36,000.
X
Instructions
Prepare a production cost report.
E3-8 The Blending Department of Luongo Company has the following cost and produc- Dei
tion data for the month of April.
01
$100.000
70.000
Costs:
Work in process, April 1
Direct materials: 100\% complete
Conversion costs: 20\% complete
Cost of work in process, April 1
Costs incurred during production in April
Direct materials
$170,000
$ 800,000
365,000
Overhead cost
Machine hours
Direct labor hours
50,000
100,000
45,000
92,000
overhead rate. (b) Determine the amount of overhead applied for the year. (C) Explain
Overhead is applied on the basis of direct labor hours. (a) Compute the predetermined
how an activity-based costing system might differ in terms of computing a predetermined
overhead rate.
veen
BE4-2 Finney Inc. has conducted an analysis of overhead costs related to one of its prod-
uct lines using a traditional costing system (volume-based) and an activity-based costing
system. Here are its results.
Traditional Costing
ABC
Sales revenue
$600,000
$600,000
Overhead costs:
Product RX3
Product Y12
$ 34,000
36,000
$ 50,000
20,000
$ 70,000
$ 70,000
Explain how a difference in the overhead costs between the two systems may
occurred.
E4-3 Splash Co. identifies the following activities that pertain to manufactus
ead for its production of water polo balls: materials handling, machine serupa
achine maintenance, factory supervision, and quality control. For each activity
Estimated
Overhead
$
84.000
480,000
1,760,000
Activity Cost Pools
10 2). A
Expected Use of
Ordering and receiving
Cost Drivers per Activity
Food processing
12,000 orders
Packaging
60,000 machine hours
440,000 labor hours
totaled 500,000. What is the total overhead applied?
For 2017, the company had 11,000 orders and used 50,000 machine hours, and labor hours
BE4-8 Rich Novelty Company identified the following activities in its production and Class
support operations. Classify each of these activities as either value-added or non-value-
(d) Moving work in process.
(a) Machine setup.
(e) Inspecting and testing.
(b) Design engineering.
(f) Painting and packing.
OT
(LO
added.
(c) Storing inventory.
BE4-9 Pine and Danner is an architectural firm that is contemplating the installation of
activity-based costing. The following activities are performed daily by staff architects
Classify these activities as value-added or non-value-added: (a) designing and drafting, 3
hours; (b) staff meetings, 1 hour; (c) on-site supervision, 2 hours; (d) lunch, 1 hour
(e) consultation with client on specifications, 1.5 hours; and (f) entertaining a prospectiv
client for dinner, 2 hours.
BE4-10 Kwik Pix is a large digital processing center that serves 130 outlets in groc
stores, service stations, camera and photo shops, and drug stores in 16 nearby to
Kuih Piy operates 24 hours a day, 6 days a week. Classify each of the following ac
il mroduct-level, or facility-level,
driver that
might be used to assign overhead costs to its three wine varieties,
es.
E4-8 Wilmington, Inc. manufactures five models of kitchen appliances. The company is
installing activity-based costing and has identified the following activities performed at its
Mesa plant.
1. Designing new models.
2. Purchasing raw materials and parts.
3. Storing and managing inventory.
4. Receiving and inspecting raw materials and parts.
5. Interviewing and hiring new personnel.
6. Machine forming sheet steel into appliance parts.
7. Manually assembling parts into appliances.
8. Training all employees of the company.
9. Insuring all tangible fixed assets.
10. Supervising production.
11. Maintaining and repairing machinery and equipment.
12. Painting and packaging finished appliances.
Having analyzed its Mesa plant operations for purposes of installing activity-based costing
Wilmington, Inc. identified its activity cost centers. It now needs to identify relevant activity
cost drivers in order to assign overhead costs to its products.
Instructions
Using the activities listed above, identify for each activity one or more cost drivers that
night be used to assign overhead to Wilmingtons five products.
4-9 Air United, Inc. manufactures two products: missile range instruments and space
ressure gauges. During April, 50 range instruments and 300 pressure gauges were pro
ortimated. An analysis of estimated overhea
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