Hill Company has the following information for January:

Hill Company has the following information for January:

Cost of direct materials used in production $16,800
Direct labor 43,400
Factory overhead28,000
Work in process inventory, January 1 70,000
Work in process inventory, January 31 74,200
Finished goods inventory, January 1 29,400
Finished goods inventory, January 31 33,600

For January, determine (a) the cost of goods manufactured and (b) the cost of goods sold.

Answer:

a. Work in process inventory, January 1……………………………… 
Cost of direct materials used in production……………………… 

$16,800 
$  70,000 
 Direct labor……………………………………………………………… 43,400  
 Factory overhead………………………………………………………   28,000  
 Total manufacturing costs incurred during January……………      88,200 
 Total manufacturing costs…………………………………………  $158,200 
 Less work in process inventory, January 31………………………      74,200 
 Cost of goods manufactured…………………………………………  $  84,000 
b. Finished goods inventory, January 1………………………………  $  29,400 
 Cost of goods manufactured…………………………………………      84,000 
 Cost of finished goods available for sale…………………………  $113,400 
 Less finished goods inventory, January 31………………………      33,600 
 Cost of goods sold……………………………………………………  $  79,800 

Ebony Company has the following information for July: Cost of direct materials used in production $67,200

Ebony Company has the following information for July:

Cost of direct materials used in production $67,200
Direct labor88,000
Factory overhead44,800
Work in process inventory, July 1 32,800
Work in process inventory, July 31 29,600
Finished goods inventory, July 1 37,600
Finished goods inventory, July 31 27,200

For July, determine (a) the cost of goods manufactured and (b) the cost of goods sold.

Answer:

a. Work in process inventory, July 1………………………………… $  32,800 
Cost of direct materials used in production………………………   $67,200 
Direct labor………………………………………………………………  88,000 
Factory overhead………………………………………………………     44,800 
Total manufacturing costs incurred during July…………………   200,000 
Total manufacturing costs………………………………………… $232,800 
Less work in process inventory, July 31……………………………     29,600 
Cost of goods manufactured…………………………………………  $203,200 
b. Finished goods inventory, July 1………………………………… $  37,600 
Cost of goods manufactured…………………………………………    203,200 
Cost of finished goods available for sale………………………… $240,800 
Less finished goods inventory, July 31……………………………     27,200 
Cost of goods sold……………………………………………………  $213,600 

On August 4, Rothchild Company purchased on account 12,000 units of raw materials at $14 per unit. On August 24

On August 4, Rothchild Company purchased on account 12,000 units of raw materials at $14 per unit. On August 24, raw materials were requisitioned for production as follows: 5,000 units for Job 40 at $8 per unit and 6,200 units for Job 42 at $14 per unit. Journalize the entry on August 4 to record the purchase and on August 24 to record the requisition from the materials storeroom.

Answer:

Aug. 4 Materials 168,000  

  Accounts Payable  168,000 

  $168,000 = 12,000 × $14.   

     

 24 Work in Process* 126,800  

  Materials  126,800 

* Job 40 

 

$ 40,000 

 

= 5,000 × $8 

On February 8, Gross Company purchased on account 72,000 units of raw materials at $8 per unit. On February 19, raw materials were requisitioned for production as follows: 32,000 units for Job 60 at $7 per unit and 37,000 units for Job 61 at $8 per unit. Journalize the entry on February 8 to record the purchase and on February 19 to record the requisition from the materials storeroom.

Answer:


Feb. 8 Materials 576,000  
  Accounts Payable  576,000 
  $576,000 = 72,000 × $8.   
     
 19 Work in Process* 520,000  
  Materials  520,000 
* Job 60 

$224,000 

= 32,000 × $7 
Job 61   296,000 = 37,000 × $8 
Total $520,000  

During August, Rothchild Company incurred factory overhead costs as follows: indirect materials, $17,500; indirect labor

During August, Rothchild Company incurred factory overhead costs as follows: indirect materials, $17,500; indirect labor, $22,000; utilities cost, $9,600; and factory depreciation, $17,500. Journalize the entry to record the factory overhead incurred during August.

Answer:


Factory Overhead 66,600  
Materials  17,500 
Wages Payable  22,000 
Utilities Payable  9,600 
Accumulated Depreciation—Factory  17,500 


During February, Gross Company incurred factory overhead costs as follows: indirect materials, $34,000; indirect labor, $81,000; utilities cost, $10,000; and factory depreciation, $61,000. Journalize the entry to record the factory overhead incurred during February.

Answer:


Factory Overhead 186,000  
Materials  34,000 
Wages Payable  81,000 
Utilities Payable  10,000 
Accumulated Depreciation—Factory  61,000 


During August, Rothchild Company accumulated 3,500 hours of direct labor costs on Job 40 and 4,200 hours on Job 42. The total direct labor was incurred at a rate of $25.00 per direct labor hour for Job 40 and $23.50 per direct labor hour for Job 42. Journalize the entry to record the flow of labor costs into production during August.

Answer:


Work in Process* 186,200  
Wages Payable  186,200 
* Job 40 

$ 87,500 

= 3,500 hours × $25 
Job 42     98,700 = 4,200 hours × $23.50 
Total $186,200  

During February, Gross Company accumulated 15,000 hours of direct labor costs on Job 60 and 18,000 hours on Job 61

During February, Gross Company accumulated 15,000 hours of direct labor costs on Job 60 and 18,000 hours on Job 61. The total direct labor was incurred at a rate of $24.00 per direct labor hour for Job 60 and $26.50 per direct labor hour for Job 61. Journalize the entry to record the flow of labor costs into production during February.

Answer:


Work in Process* 837,000  
Wages Payable  837,000 
* Job 60 

$360,000 


On August 4, Rothchild Company purchased on account 12,000 units of raw materials at $14 per unit. On August 24, raw materials were requisitioned for production as follows: 5,000 units for Job 40 at $8 per unit and 6,200 units for Job 42 at $14 per unit. Journalize the entry on August 4 to record the purchase and on August 24 to record the requisition from the materials storeroom.

Answer:

Aug. 4 Materials 168,000  

  Accounts Payable  168,000 

  $168,000 = 12,000 × $14.   

     

 24 Work in Process* 126,800  

  Materials  126,800 

* Job 40 

 

$ 40,000 

 

= 5,000 × $8 

Giovanni Company produces a product that requires four standard gallons per unit. The standard price is $34.00 per gallon

Giovanni Company produces a product that requires four standard gallons per unit. The standard price is $34.00 per gallon. If 3,500 units required 14,400 gallons, which were purchased at $33.25 per gallon, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance?

Answer:


a. Direct materials price 
variance (favorable) 
–$10,800 [($33.25 – $34.00) × 14,400 gal.] 
b. Direct materials quantity $13,600 [(14,400 gal. – 14,000 gal.) × $34.00] 
 variance (unfavorable)   
c. 

Direct materials cost 
variance (unfavorable) 

$2,800 

(–$10,800 + $13,600) or 
[($33.25 × 14,400 gal.) – ($34.00 × 14,000 gal.)] 
= $478,800 – $476,000 

Product T is produced for $3.90 per pound. Product T can be sold without additional processing for $4.65 per pound,

Product T is produced for $3.90 per pound. Product T can be sold without additional processing for $4.65 per pound, or processed further into Product U at an additional cost of $0.58 per pound. Product U can be sold for $5.30 per pound. Prepare a differential analysis dated August 2, 2014, on whether to sell Product T (Alternative 1) or process further into Product U (Alternative 2).

Answer:

Differential Analysis 

Sell Product T (Alt. 1) or Process Further into Product U (Alt. 2) 

August 2, 2014 

 

 

Sell Product T 

(Alternative 1) 

Revenues, per unit $4.65 $5.30 $0.65 

Costs, per unit –3.90 –4.48* –0.58 

Income (Loss), per unit $0.75 $0.82 $0.07 

    

* $3.90 + $0.58 

Product D is produced for $24 per gallon. Product D can be sold without additional processing for $36 per gallon, or processed further into Product E

Product D is produced for $24 per gallon. Product D can be sold without additional processing for $36 per gallon, or processed further into Product E at an additional cost of $9 per gallon. Product E can be sold for $43 per gallon. Prepare a differential analysis dated February 26, 2014, on whether to sell Product D (Alternative 1) or process further into Product E (Alternative 2).

Answer:


Differential Analysis 
Sell Product D (Alt. 1) or Process Further into Product E (Alt. 2) 
February 26, 2014 

Sell 
Product D 
(Alternative 1) 
Process 
Further into 
Product E 
(Alternative 2) 
Revenues, per unit $36 $43 $7 
Costs, per unit –24 –33* –9 
Income (Loss), per unit $12 $10 –$2 
    
* $24 + $9 
The company should sell Product D without further processing. 

Dvorak Company produces a product that requires five standard pounds per unit. The standard price is $2.50 per pound

Dvorak Company produces a product that requires five standard pounds per unit. The standard price is $2.50 per pound. If 1,000 units required 4,500 pounds, which were purchased at $3.00 per pound, what is the direct materials (a) price variance, (b) quantity variance, and (c) cost variance?

Answer:

a. Direct materials price 

variance (unfavorable) 

$2,250 [($3.00 – $2.50) × 4,500 lbs.] 

b. Direct materials quantity –$1,250 [(4,500 lbs. – 5,000 lbs.) × $2.50] 

 variance (favorable)   

c. 

 

Direct materials cost 

variance (unfavorable) 

 

$1,000 

 

($2,250 – $1,250) or 

[($3.00 × 4,500 lbs.) – ($2.50 × 5,000 lbs.)] 

= $13,500 – $12,500 

Product R is normally sold for $52 per unit. A special price of $39 is offered for the export market. The variable production cost is $31 per unit

Product R is normally sold for $52 per unit. A special price of $39 is offered for the export market. The variable production cost is $31 per unit. An additional export tariff of 25% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order. Prepare a differential analysis dated October 23, 2014, on whether to reject (Alternative 1) or accept (Alternative 2) the special order.

Answer:

Differential Analysis 

Reject Order (Alt. 1) or Accept Order (Alt. 2) 

October 23, 2014 

 

 

Reject Order 

(Alternative 1) 

Revenues, per unit $0.00 $39.00 $39.00 

Costs:    

Variable manufacturing costs, per unit 0.00 –31.00 –31.00 

Export tariff, per unit 0.00 –9.75* –9.75 

Income (Loss), per unit $0.00 –$  1.75 –$  1.75 

    

* $39.00 × 25% 

The company should not accept the special order. 

Crystal Lighting Inc. produces and sells lighting fixtures. An entry light has a total cost of $80 per unit, of which $54 is product cost

Crystal Lighting Inc. produces and sells lighting fixtures. An entry light has a total cost of $80 per unit, of which $54 is product cost and $26 is selling and administrative expenses. In addition, the total cost of $80 is made up of $40 variable cost and $40 fixed cost. The desired profit is $55 per unit. Determine the markup percentage on product cost.

Answer:

Markup percentage on product cost

Desired Profit + Selling and Admin. Exp. 

Total Product Cost 

Markup percentage on product cost: 

* $80 – $26 

Product A is normally sold for $9.60 per unit. A special price of $7.20 is offered for the export market. The variable production cost is $5.00 per unit

Product A is normally sold for $9.60 per unit. A special price of $7.20 is offered for the export market. The variable production cost is $5.00 per unit. An additional export tariff of 15% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order. Prepare a differential analysis dated March 16, 2014, on whether to reject (Alternative 1) or accept (Alternative 2) the special order.

Answer:

Differential Analysis 

Reject Order (Alt. 1) or Accept Order (Alt. 2) 

March 16, 2014 

 

Reject 

Order 

(Alternative 1) 

Revenues, per unit $0.00 $7.20 $7.20 

Costs:    

Variable manufacturing costs, per unit 0.00 –5.00 –5.00 

Export tariff, per unit 0.00 –1.08* –1.08 

Income (Loss), per unit $0.00 $1.12 $1.12 

    

* $7.20 × 15% 

The company should accept the special order. 

Green Thumb Garden Tools Inc. produces and sells home and garden tools and equipment. A lawnmower has a total cost of $230 per unit

Green Thumb Garden Tools Inc. produces and sells home and garden tools and equipment. A lawnmower has a total cost of $230 per unit, of which $160 is product cost and $70 is selling and administrative expenses. In addition, the total cost of $230 is made up of $120 variable cost and $110 fixed cost. The desired profit is $58 per unit. Determine the markup percentage on product cost.

Answer:









Markup percentage on product cost
Desired Profit + Selling and Admin. Exp. 
Total Product Cost 
Markup percentage on product cost: 
* $230 – $70 

Product A has a unit contribution margin of $24. Product B has a unit contribution margin of $30

Product A has a unit contribution margin of $24. Product B has a unit contribution margin of $30. Product A requires four testing hours, while Product B requires six testing hours. Determine the most profitable product, assuming the testing is a constraint.

Answer:








Product A Product B 
Unit contribution margin……………………………………………… $24 $30 
÷ Testing hours per unit………………………………………………     4     6 
Unit contribution margin per production bottleneck hour……… $  6 $  5 
Product A is the most profitable in using bottleneck resources. 

Product K has a unit contribution margin of $120. Product L has a unit contribution margin of $100

Product K has a unit contribution margin of $120. Product L has a unit contribution margin of $100. Product K requires five furnace hours, while Product L requires four furnace hours. Determine the most profitable product, assuming the furnace is a constraint.

Answer:

Product K Product L 

Unit contribution margin……………………………………………… $120 $100 

÷ Furnace hours per unit………………………………………………   5   4 

Unit contribution margin per production bottleneck hour……… $  24 $  25 

Product L is the most profitable in using bottleneck resources.