Douglas Manufacturing Company has two production departments: Cutting and Assembly

ACCT 560 Week 2 Assignment

E3-4 Douglas Manufacturing Company has two production departments: Cutting and Assembly. July 1 inventories are Raw Materials $4,200, Work in Process-Cutting $2,900, Work in Process-Assembly $10,600, and Finished Goods $31,000. During July, the following transactions occurred.
1. Purchased $62,500 of raw materials on account.
2. Incurred $56,000 of factory labor. (Credit Wages Payable.)
3. Incurred $70,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Cutting $15,700 and Assembly $8,900.
5. Used factory labor for Cutting $29,000 and Assembly $27,000.
6. Applied overhead at the rate of $15 per machine hour. Machine hours were Cutting 1,680 and Assembly 1,720.
7. Transferred goods costing $67,600 from the Cutting Department to the Assembly Department.
8. Transferred goods costing $134,900 from Assembly to Finished Goods.
9. Sold goods costing $150,000 for $200,000 on account.

Journalize the transactions.

Click here for the solution: Douglas Manufacturing Company has two production departments: Cutting and Assembly

Mabry Manufacturing Company uses a job order cost system in each of its three manufacturing departments

P2-4A Mabry Manufacturing Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K.

In establishing the predetermined overhead rates for 2008 the following estimates were made for the year.

Department
D E K
Manufacturing overhead $1,050,000 $1,500,000 $840,000
Direct labor costs $1,500,000 $1,250,000 $450,000
Direct labor hours 100,000 125,000 40,000
Machine hours 400,000 500,000 120,000
During January, the job cost sheets showed the following costs and production data.
Department
D E K
Direct materials used $140,000 $126,000 $78,000
Direct labor costs $120,000 $110,000 $37,500
Manufacturing overhead incurred $89,000 $124,000 $74,000
Direct labor hours 8,000 11,000 3,500
Machine hours 34,000 45,000 10,400

Required:
a) Compute the predetermined overhead rate for each department
b) Compute the total manufacturing costs assigned to jobs in January in each department
c) Compute the under- or overapplied overhead for each department at January 31

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If two service departments service the same number of departments, which service department's costs are allocated first when using the step method

1. If two service departments service the same number of departments, which service department's costs are allocated first when using the step method?

2. Which of the following service department cost allocation methods is most widely used by manufacturing companies?

3. Which of the following statements is (are) false regarding the effective use of management control systems.
(A) In general, cost allocations should not be used in management control systems because clear control over the cost being allocated cannot be determined.
(B) The primary reason to use a dual rate allocation system is to focus a manager's performance evaluation on factors under the manager's direct control.

4. The amount of resources used in an activity-based costing (ABC) system for a specific activity is computed by multiplying the:

5. Which of the following statements is false?

6. In general, the first budget prepared is the

7. Relative performance evaluations (RPE) are not designed to

8. Which of the following items would be classified as a batch-level cost in an activity-based cost management (ABM) system?

9. Which of the following activities is most likely to be classified as value-added for a manufacturing company?

10. The unused resource capacity is the difference between the resources supplied and the resources


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Hal-Marts, Inc., has two sales departments: equipment and clothing

Hal-Marts, Inc., has two sales departments: equipment and clothing. During February, these two departments reported the following operating results:

Equipment Clothing
Sales $490,000 $250,000
Contribution Margin 35% 50%
Traceable Fixed Costs $29,200 $26,800

In addition, fixed costs common to both departments amounted to $54,400.

Complete the following responsibility income statement for Hal-Marts, Inc. Follow the contribution margin approach, and show percentages as well as dollar amounts. Conclude your income statement with the company’s income from operations.

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Princess Cruise Lines has the following service departments; concierge, valet, and maintenance

Princess Cruise Lines has the following service departments; concierge, valet, and maintenance. Expense for these departments are allocated to Mediterranean and Trans-Atlantic cruises. Expenses for the departments are totaled (both variable and fixed components are combined) and as follows:

Concierge $2,500,000
Valet $1,750,000
Maintenance $4,250,000

The sea miles logged are 6,000,000 for the Mediterranean and 18,000,000 for the Trans-
Atlantic voyages.

Based upon the sea miles logged, allocate the service department costs.

Click here for the solution: Princess Cruise Lines has the following service departments; concierge, valet, and maintenance

The Franc Zeppo Venture manufactures a product that goes through two processing departments

The Franc Zeppo Venture manufactures a product that goes through two processing departments. Information relating to the activity in the first department during April is given below :

Work in process, April 1: 50,000 units (80% completed for materials and 60% completed for conversion.
Work in process, April 30: 45,000 units (70% completed for materials and 60% completed for conversion.

The department started 380,000 units into production during the month and transferred 385,000 completed units to the next department.

Compute and calculate the equivalent units of production for the first department for April, assuming the company uses the weighted-average method of accounting for units and costs.

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Pacific Airlines has three service departments; ticketing, baggage handling, and aircraft maintenance

Pacific Airlines has three service departments; ticketing, baggage handling, and aircraft maintenance. Costs of these departments are allocated to two revenue producing departments, domestic and international flights. Costs for the service departments are not separated into fixed and variable and the totals are as follows:

Ticketing $4,000,000
Baggage handling $2,000,000
Aircraft maintenance $6,000,000

Air miles are as follows: Domestic 5,000,000
International 20,000,000

(a) Allocate the service department costs based on air miles.
(b) Evaluate World Airlines use of air miles as a basis for allocation. Do you think the cause-and-effect relationship is strong?
(c) Suggest alternative methods to allocate the service department costs.

Click here for the solution: Pacific Airlines has three service departments; ticketing, baggage handling, and aircraft maintenance

3-38 (Job cost sheet, markup, single rate versus departmental rates) Modern Metalworks Company has two departments, milling and assembly

3-38 (Job cost sheet, markup, single rate versus departmental rates) Modern Metalworks Company has two departments, milling and assembly. The company uses a job costing system that employs a single, plantwide support cost driver rate to apply support costs to jobs on the basis of direct labor hours. That is, the plantwide cost driver rate is computed by dividing plantwide support costs by total plantwide direct labor hours. The following estimates are for October: Support costs- Milling $120,000, Assembly $160,000 Direct Labor Hours- Milling, 8000, Assembly 12000 Machine Hours- 12000, Assembly 6000 The following information pertains to job 714, which was started and completed during October: Direct Labor hours- Milling 10, Assembly 40 Machine hours- Milling 18, Assembly 8 Direct materials costs- Milling $800, Assembly $50 Direct labor costs- $100, Assembly $600

a. Prepare a job cost sheet for job 714

b. Assume next that instead of using a single, plantwide support cost driver rate, the company uses machine hours as the cost driver for the application of support costs in the milling department, and it uses direct labor hours as the cost driver in the assembly department. Prepare a job cost sheet for job 714.

c. Using the costs you computed in (a) and (b), determine the bid price that Modern Metalworks will quote if it uses a 25% markup on total manufacturing cost.

Click here for the solution: 3-38 (Job cost sheet, markup, single rate versus departmental rates) Modern Metalworks Company has two departments, milling and assembly

3-46 (Job bid price, direct, sequential, and reciprocal allocations) Small Pump Manufacturer

3-46 (Job bid price, direct, sequential, and reciprocal allocations) Small Pump Manufacturer Service Departments Production Departments Item Maintenance Power Casting Assembly Support Costs $750,000 $450,000 $150,000 $110,000 Machine Hours 0 80000 80000 40000 Kilowatt-hours 40000 0 200000 160000 Direct Labor Hours 0 0 100000 60000 Management allocates maintenance department costs using machine hours Management allocates power deptepartment costs using kilowatt hours Separate cost driver rates are determined on machine hours basis for casting dept and on direct labor hours basis for assembly dept 1 machine hour per pump manufacture in casting department .5 labor hours to assemble pump in assembly dept Direct labor and material costs = $32.00 per pump Potential Sell: 2 year contract to purchase 1000 pumps every month Add 25% markup to full manufacturing cost to determine bid BID PRICE for. a) Direct Method b) Sequential Method begins by allocating maintenance department costs c) Reciprocal Method
Click here for the solution: 3-46 (Job bid price, direct, sequential, and reciprocal allocations) Small Pump Manufacturer