RETL EXAM 2 OPEN ENDED

Material Purchase (JE) 184,500

Material Inv 184,500
A/P Cash 184,500

Requisition to Factory - DM (JE) 169,800

WIP Inv 169,800
Material Inv 169,800

Pay payroll (JE) 100,000

Factory Labor 100,000
Cash 100,000

Use Time Tickets - DL (JE) 42,000

WIP Inv 42,000
Factory Labor 42,000

Indirect Material - Overhead (JE) 20,000

Manufactured Overhead 20,000
Material Inv 20,000

Indirect Labor (JE) 100,000-42,0000=58,000

Manufactured Overhead 58,000
Factory Labor 58,000

Depreciation Factory (JE) 16,800

Manufactured Overhead 16,800
Accumulated Depreciation 16,800

Applied Overhead (JE) 143,300

WIP Inv 143,300
Manufactured Overhead 143,300

Completed Production (JE) 365,800

FG Inventory 365,800
WIP Inventory 365,800

Sale of Goods (JE) 1) 1,350,000 2) 369,550

Record the Sale
A/R 1,350,000
Sales 1,350,000

Take out of Inventory
COGS 369,550
FG Inv 369,550

PdOHRate = _____

Budgeted OH Cost / Budgeted Direct Amount

Job - Mat Req - Time Ticket - Status
J101 - 10,000 - 5,000 - Sold —— (COGS)
J102 - 2,500 - 2,000 - Completed —— (FG)
J103 - 21,000 - 10,000 - In-Process —— (WIP)
J104 - 25,000 - 20,000 - Sold —— (COGS)
J105 - 1,000 - 500 - In-Process —— (WIP)

The Man OH Rate is based on 50% of the direct labor cost

JOB - J101 - J102 - J103 - J104 - J105
DM - 10,000 - 2,500 - 21,000 - 25,000 - 1,000
DL - 5,000 - 2,000 - 10,000 - 20,000 - 500
MOH - 2,500 - 1,000 - 5,000 - 10,000 - 250
Total - 17,500 - 5,500 - 36,000 - 55,000 - 1,750
——— SOLD COGS - FG - WIP - COGS - WIP

Give following totals…
1) WIP Inventory =
2) FG Inventory =
3) COGS =

1) Job 103 + 105 = 36,000 + 1,750 = 37,750
2) Job 102 = 5,500
3) Job 101 + 104 = 17,500 + 55,000 = 72,500

The Mountain Spring Water Company had 5,000 liters in beginning WIP inventory (20%) complete). During the period 58,000 liters were completed. The ending WIP inventory was 3,000 liters (90%) complete). What are the equivalent units for conversion costs under the weighted average method.

Units to Account For
C + T Out —- 58,000
EWIP —— 3,000
Total ———- 61,000

Find Equivalent Units DM ——— CC
C + T Out —————- 58,000 ——- 58,000
EWIP ———————-- 3,000 ——— 2,700
EU ———————— 61,000 ——— 60,700

Lipinski Company completed and transferred out 90,000 units during the current period. Based on the following information, determine the cost per equivalent unit for Direct Materials and Conversion Cost.

———————————————- DM ——— DL/OH
Costs of Beg Goods in Process -— 500,000 —- 200,000
Costs Incurred this Period ———— 2,000,000 —- 5,000,000
Total Cost to Account for ———— ______ —— _______
Equivalent Units of Production — 100,000 —— 120,000
Cost Per EU ————————- _______ ——- _______

Total Cost to Account For —- 2,500,000 —— 5,200,000
Cost Per EU —— $25 —— $43.33

Job Cost =
Process =

individual/custom
mass production

The following estimated overhead cost information is available for Herbert Love Corporation

Activity —— Allocation Base —— Overhead Cost
Purchasing - # of purchase orders — 400,000
Receiving — # of shipment received — 100,000
Machine Setups - # of setups —— 300,000
Quality Control - # of Inspections —- 100,000

During the year 8,000 purchase orders were issued; 25,000 shipments received; 4,000 machine setups; and 7,500 inspections. Direct labor hours were 10,000.

What is the cost allocation for each of the four activities above using ABC?

Purchase - 400,000 / 8,000 = $50 per purchase order
Receiving - 100,000 / 25,000 = $4 per shipment received
Machine Setup - 300,000 / 4,000 = $75 per setup
QC - 100,000 / 7,500 = $13.33 per inspection

Activities ——- Cost Allocation
Purchasing —- $20 per purchase order
Receiving —— $5 per shipments received
Machine Setups —- $50 per setup
QC —-- $10 per inspection

Batch A used the following; 20 purchase orders; 50 shipments received; 10 setups; 15 inspections; and 50 Direct labor hours.

What is the total overhead allocation using ABC?

Batch A
Purchasing — 20($20) = 400
Receiving —- 50 ($5) = 250
Machine Setups —- 10 ($50) = 500
QC — 15($10) = 150
Total OH Cost = $1,300

Match the following to managerial or financial accounting

Principles and practices are relatively flexible  

Managerial

Match the following to managerial or financial accounting

It contains mostly monetary information, and some nonmonetary information

Managerial

Match the following to managerial or financial accounting

Focuses mainly on past results

Financial

Match the following to managerial or financial accounting
Focuses on current performance and future preferences

Managerial

Match the following to managerial or financial accounting

Primary users are company managers

Managerial

Diez Company produces sporting equipment, including leather footballs. Assume that the cost object is a football. Classify each of the following costs as direct or indirect.

Laces to hold a football together

Direct

Diez Company produces sporting equipment, including leather footballs. Assume that the cost object is a football. Classify each of the following costs as direct or indirect.

Electricity used in production plant

Indirect

Diez Company produces sporting equipment, including leather footballs. Assume that the cost object is a football. Classify each of the following costs as direct or indirect.

Depreciation on factory building

Indirect

Diez Company produces sporting equipment, including leather footballs. Assume that the cost object is a football. Classify each of the following costs as direct or indirect.

Labor used on football production line

Direct

Diez Company produces sporting equipment, including leather footballs. Assume that the cost object is a football. Classify each of the following costs as direct or indirect.

Depreciation (straight line) on leather cutting equipment

Indirect

Difference between financial and managerial accounting

Financial accounting is for people outside the company (like investors, banks, and the IRS) to look back at how the business did.
Managerial accounting is for people inside the company (like bosses and managers) to look forward and make daily business decisions

A company manufactures tennis balls. Classify each of the following costs as either direct materials, direct labor, or factory overhead.

Rubber used to form the cores

Direct Material

A company manufactures tennis balls. Classify each of the following costs as either direct materials, direct labor, or factory overhead.

Depreciation on factory equipment

Factory Overhead

A company manufactures tennis balls. Classify each of the following costs as either direct materials, direct labor, or factory overhead.

Factory managers salary

Factory Overhead

A company manufactures tennis balls. Classify each of the following costs as either direct materials, direct labor, or factory overhead.

Factory insurance used up

Factory Overhead

A company manufactures tennis balls. Classify each of the following costs as either direct materials, direct labor, or factory overhead.

Wages paid to factory machine operators

Direct Labor

A company manufactures tennis balls. Classify each of the following costs as either direct materials, direct labor, or factory overhead.

Indirect materials used in making goods

Factory Overhead

Classify each of the following costs as either a product cost or a period cost for a manufacturer.

Rent on factory building

Product

Classify each of the following costs as either a product cost or a period cost for a manufacturer.

Direct materials used in making goods

Product

Classify each of the following costs as either a product cost or a period cost for a manufacturer.

Salesperson salary

Period

Classify each of the following costs as either a product cost or a period cost for a manufacturer.

Office Supplies used

Period

Classify each of the following costs as either a product cost or a period cost for a manufacturer.

Factory utilities

Product

Classify each of the following costs as either a product cost or a period cost for a manufacturer.

Rent on office building

Period

Classify each of the following costs as either a product cost or a period cost for a manufacturer.

Factory insurance

Product

Classify each of the following costs as either a product cost or a period cost for a manufacturer.

Sales commissions

Period

A company manufactures guitars. Identify each of the following costs as either a prime cost, a conversion cost, or both.

Wood to build the guitar bridge

Prime

A company manufactures guitars. Identify each of the following costs as either a prime cost, a conversion cost, or both.

Rent on factory building

Conversion

A company manufactures guitars. Identify each of the following costs as either a prime cost, a conversion cost, or both.

Factory utilities  

Conversion

A company manufactures guitars. Identify each of the following costs as either a prime cost, a conversion cost, or both.

Tuning pegs used in guitars

Prime

A company manufactures guitars. Identify each of the following costs as either a prime cost, a conversion cost, or both.

Lacquer to seal guitar wood

Conversion

A company manufactures guitars. Identify each of the following costs as either a prime cost, a conversion cost, or both.

Wages paid to assembly workers

Both

Difference between a prime and conversion cost

• In Prime Cost, labor is grouped with the materials.

• In Conversion Cost, labor is grouped with the overhead/factory costs

Difference between product and period cost

Product costs are tied directly to making the item

Period costs are day-to-day business expenses attached to a specific block of time (like a month or year) and get written off immediately