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.

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Tessmer Manufacturing Company produces inventory in a highly automated assembly plant in Olathe, KS

Tessmer Manufacturing Company produces inventory in a highly automated assembly plant in Olathe, KS. The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operation, the following data was collected:

Machine-hours Kilowatt-hours Total Overhead Costs
January 3,800 4,520,000 $138,000
February 3,650 4,340,000 136,800
March 3,900 4,500,000 139,200
April 3,300 4,290,000 136,800
May 3,250 4,200,000 126,000
June 3,100 4,120,000 120,000

Question 1: Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.

Question 2: Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver.

Question 3: For July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt-hours of power. The overhead costs totaled $114,000. Which cost driver was the best predictor for July?


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BIKE Company starts with $3,000 cash to finance its business plan to produce bike helmets with a simple assembly process

Understanding Revenue Recognition

For this assignment, turn to page 364 in your textbook (Chapter 6 of Financial Statements Analysis), and complete Case 6-1, Understanding Revenue Recognition.

BIKE Company starts with $3,000 cash to finance its business plan to produce bike helmets with a simple assembly process. During the first month of business the company signs sales contracts for 1,300 units (sales price of $9 per unit), produces 1,200 units (production cost of $7 per unit), ships 1,100 units, and collects in full for 900 units. Production costs are paid at the time of production. The company has only two other costs:

This is the entire problem. Do you think it will be completed by tonight? Sorry but i need it by then.

1. Commission of 10% of the selling price when the company collects from the customer;
2. Shipping costs of $0.20 per unit paid at time of shipment. Selling price and all costs per unit have been constant and are likely to remain the same.

A. Prepare comprehensive (side by side) balance sheets and income statements for the first month of BIKE Company for each of the following three alternatives:
1. Revenue is recognized at the time of shipment
2. Revenue is recognized at the time of collection
3. Revenue is recognized at the time of production

Note: net income for each of the three alternatives is (1) $990, (2) $810, and (3) $1080 respectively.

B. The method where revenue is recognized at the time of collection, known as the installment method, is except the bull for financial reporting in unusual and special cases. Why is BIKE Company likely to prefer this method for tax purposes? (one line simple answer)

C. Comment on the usefulness of the installment method for a credit analyst is using both the balance sheet and income statement.


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Lindon Company uses 4,500 units of Part X each year as a component in the assembly of one of its products

Lindon Company uses 4,500 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $69,000 as follows:

Direct Materials...... $16,000
Direct Labor........ 18,000
Variable Manufacturing Overhead .....10,000
Fixed Manufacturing Overhead....... 25,000
Total Costs ....$69,000

An outside supplier has offered to provide Part X at a price of $11 per unit. If Lindon stops producing the part internally, one-third of the manufacturing overhead would be eliminated.

Required: Prepare a make or buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.

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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.

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