department of business and administration
DEPARTMENT OF BUSINESS AND ADMINISTRATION BUS2003 Test 1 September 29, 2010 Name:____________________________________________________
Student Number: __________________________________________
Instructions: Please answer the following questions on the examination test sheets. If you need more room, please use the back of the pages. Show your calculations in detail.
Grading: Q1 /13 Q2 /15 Q3 /5 Total /33
BUS2003
Test 1
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Question 1: (13 marks) The following information is from Marchant Manufacturing Co. for September: Direct materials used in production Direct labour Total manufacturing cost Direct materials inventory, Sept. 1 Work-in-process inventory, Sept. 1 Finished goods inventory, Sept. 1 Purchases of direct materials Cost of goods manufactured Administrative expense Selling expense Sales Gross margin Net income
$ 95,000 $ 67,000 $234,000 $ 24,000 $ 6,000 $101,000 $102,000 $233,000 $ 41,000 $ 56,000 $344,000 $127,000 $ 30,000
Required: a) Compute the cost of goods sold. (2 marks) b) Compute the balance in finished goods inventory at September 30. (3 marks) c) Compute the balance in work-in-process inventory at September 30. (3 marks) d) Compute the balance in raw materials inventory at September 30. (3 marks) e) Compute the total manufacturing overhead. (2 marks) (Hint: The easiest method of solving this problem is to sketch out the income statement and the schedule of cost of goods manufactured, enter the given amounts, and then enter the unknowns as plug figures.) Question 1 Solution
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Question 2: (15 marks) Carver Test Systems manufactures automated testing equipment. The company uses a normal job-order costing system and applies overhead on the basis of machine hours (MH). At the beginning of the year, estimated manufacturing overhead was $1,960,000, and the estimated machine hours was 98,000. Data regarding several jobs at Carver are presented below. Job Number XJ-107 ST-211 XD-108 SL-205 RX-115
Beginning Balance (WIP) $ 118,600 121,450 21,800 34,350 0
Costs and MH added during the month Direct Material Direct Labour Machine Hours (MH) $ 4,000 $ 8,400 150 2,500 12,160 300 86,400 36,360 3,100 71,800 32,175 2,700 18,990 21,845 1,400
By the end of the month, all jobs but RX-115 were completed, and all completed jobs had been delivered to customers except for SL-205. Required: a) Compute the predetermined overhead rate to be used in costing jobs. (2 marks) b) What is the total cost of the finished job XJ-107? (4 marks) c) What was the balance in Finished Goods inventory at the end of the month? (5 marks) d) Assume total actual manufacturing overhead for the month was $175,000. Calculate the amount of over or under applied manufacturing overhead for the month. Be sure to indicate if the amount is over or under applied. (4 marks) Question 2 Solution: a) Predetermined overhead rate = $1,960,000 รท 98,000 MH = $20 per MH (2 marks) b) XJ-107 Begin balance DM DL MOH (150 x $20) Total
$118,600 4,000 8,400 3,000 $134,000
0.5 marks 1 mark 1 mark 1 mark cwf 0.5 marks
C) The Finished Goods inventory consists of job SL-205 only. (1 mark) The balance in the account is computed as follows:
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4 marks *Overhead applied = 2,700 machine-hours X $20 per MH = $54,000 d) Applied MOH (150+300+3,100+2,700+1,400) x $20 Actual MOH Underapplied MOH
153,000 2 marks 175,000 22,000 2 marks
Question 3: (5 marks) Stony Electronics Corporation manufactures a portable radio designed for mounting on the wall of the bathroom. The following list represents some of the different types of costs incurred in the manufacture of these radios: 1) The cost of electricity to power plant equipment. 2) The cost of maintaining and repairing equipment in the plant. 3) The cost of printing promotional materials for trade shows. 4) The cost of solder used in assembling the radios. 5) The cost of basic telephone service for the executive offices. Required: Classify each of the items above as product (inventoriable) cost or period (noninventoriable) costs for the purpose of preparing external financial statements. 1) Product. 2) Product. 3) Period. 4) Product. 5) Period.
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Student Number: __________________________________________
Instructions: Please answer the following questions on the examination test sheets. If you need more room, please use the back of the pages. Show your calculations in detail.
Grading: Q1 /13 Q2 /15 Q3 /5 Total /33
BUS2003
Test 1
page 1 of 5
Question 1: (13 marks) The following information is from Marchant Manufacturing Co. for September: Direct materials used in production Direct labour Total manufacturing cost Direct materials inventory, Sept. 1 Work-in-process inventory, Sept. 1 Finished goods inventory, Sept. 1 Purchases of direct materials Cost of goods manufactured Administrative expense Selling expense Sales Gross margin Net income
$ 95,000 $ 67,000 $234,000 $ 24,000 $ 6,000 $101,000 $102,000 $233,000 $ 41,000 $ 56,000 $344,000 $127,000 $ 30,000
Required: a) Compute the cost of goods sold. (2 marks) b) Compute the balance in finished goods inventory at September 30. (3 marks) c) Compute the balance in work-in-process inventory at September 30. (3 marks) d) Compute the balance in raw materials inventory at September 30. (3 marks) e) Compute the total manufacturing overhead. (2 marks) (Hint: The easiest method of solving this problem is to sketch out the income statement and the schedule of cost of goods manufactured, enter the given amounts, and then enter the unknowns as plug figures.) Question 1 Solution
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BUS2003
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Question 2: (15 marks) Carver Test Systems manufactures automated testing equipment. The company uses a normal job-order costing system and applies overhead on the basis of machine hours (MH). At the beginning of the year, estimated manufacturing overhead was $1,960,000, and the estimated machine hours was 98,000. Data regarding several jobs at Carver are presented below. Job Number XJ-107 ST-211 XD-108 SL-205 RX-115
Beginning Balance (WIP) $ 118,600 121,450 21,800 34,350 0
Costs and MH added during the month Direct Material Direct Labour Machine Hours (MH) $ 4,000 $ 8,400 150 2,500 12,160 300 86,400 36,360 3,100 71,800 32,175 2,700 18,990 21,845 1,400
By the end of the month, all jobs but RX-115 were completed, and all completed jobs had been delivered to customers except for SL-205. Required: a) Compute the predetermined overhead rate to be used in costing jobs. (2 marks) b) What is the total cost of the finished job XJ-107? (4 marks) c) What was the balance in Finished Goods inventory at the end of the month? (5 marks) d) Assume total actual manufacturing overhead for the month was $175,000. Calculate the amount of over or under applied manufacturing overhead for the month. Be sure to indicate if the amount is over or under applied. (4 marks) Question 2 Solution: a) Predetermined overhead rate = $1,960,000 รท 98,000 MH = $20 per MH (2 marks) b) XJ-107 Begin balance DM DL MOH (150 x $20) Total
$118,600 4,000 8,400 3,000 $134,000
0.5 marks 1 mark 1 mark 1 mark cwf 0.5 marks
C) The Finished Goods inventory consists of job SL-205 only. (1 mark) The balance in the account is computed as follows:
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4 marks *Overhead applied = 2,700 machine-hours X $20 per MH = $54,000 d) Applied MOH (150+300+3,100+2,700+1,400) x $20 Actual MOH Underapplied MOH
153,000 2 marks 175,000 22,000 2 marks
Question 3: (5 marks) Stony Electronics Corporation manufactures a portable radio designed for mounting on the wall of the bathroom. The following list represents some of the different types of costs incurred in the manufacture of these radios: 1) The cost of electricity to power plant equipment. 2) The cost of maintaining and repairing equipment in the plant. 3) The cost of printing promotional materials for trade shows. 4) The cost of solder used in assembling the radios. 5) The cost of basic telephone service for the executive offices. Required: Classify each of the items above as product (inventoriable) cost or period (noninventoriable) costs for the purpose of preparing external financial statements. 1) Product. 2) Product. 3) Period. 4) Product. 5) Period.
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