Cost o Goods Manufacturing

ACG 2071 Managerial Accounting
Product Costing and Cost Flows - Sample Problems for Chs 28-34
Answers appear in red.
DRAFT
Problem 1 - The balance sheet dated December 31, 2003, has a balance in the Finished Goods Inventory
account of $26,200. The December 31, 2004, balance sheet has a balance in the Finished Goods Inventory
account of $24,000. Work in Process Inventory account has a beginning balance of $20,000 and an ending
balance of $30,000. If the cost of goods manufactured is $340,000, how much is cost of goods sold?
Beginning FG inventory
$ 26,200
+ CGM
340,000
= Available
366,200
- Ending FG inventory
(24,000)
= Cost of goods sold
$342,200
Problem 2 -Alex Companys Work in Process Inventory account has a beginning balance of $60,000 and an
ending balance of $50,000. Current manufacturing costs total $200,000. How much is cost of goods
manufactured?
$60,000 + $200,000 - $50,000 = $210,000
Problem 3 Hernandez, Inc. manufactures calculators. The company employs an actual costing system.
During May, Hernandezs transactions included the following:
Direct labor cost incurred
$5,400
Total manufacturing overhead cost
6,650
Direct materials purchased
11,500
Raw materials inventory, beginning
160
Raw materials inventory, ending
280
Sales
23,000
Selling expenses
2,100
Work in process inventory, beginning
220
Work in process inventory, ending
250
A. Briefly list any additional information you need to calculate cost of goods sold for this company. (Be
specific.)
Beginning finished goods inventory and ending finished goods inventory (You have enough information to
calculate cost of goods manufactured so you don't need to be told that amount.)
B. How much is the cost of direct materials issued to production during May?
$ 160
11,500
Less Raw materials inventory, ending
(280)
Cost of direct materials issued to
$11,380
production
C. How much is cost of goods manufactured for May?
Materials issued to production
$11,380
5,400
Manufacturing overhead cost
6,650
Total manufacturing costs
22,430
Add: Work in process inventory,
220
beginning
Less: Work in process inventory,
(250)
ending
Cost of Goods Manufacturing
$23,400
Problem 4 Culvyhouse Company uses an actual product

for 2003:
Raw materials purchased
$72,000
Direct materials used
70,000
Indirect materials used
4,000
Direct labor used
66,000
Indirect direct labor used
7,000
A. Calculate the cost of goods manufactured.
Cost of direct materials used
Cost of direct labor used
Cost of MOH: $18,000 + $4,000 + $7,000
Add beginning WIP
Less ending WIP
Cost of goods manufactured
B. Calculate cost of goods sold.
Add CGM (part A)
Less ending FG inventory
costing system. It reported the following amounts

Beginning work-in-process inventory
Ending work-in-process inventory
Selling and administrative expenses incurred
Other manufacturing overhead costs incurred
Beginning finished goods inventory
Ending finished goods inventory
$70,000
66,000
29,000
$165,000
21,000
(16,000)
$170,000
$6,000
170,000
(9,000)
$167,000
Problem 5 - Listed below are selected changes due to various transactions in the manufacturing process
using an actual costing system. Identify which account is changed as a result of each action listed in items
1 through 10 below by printing the code of the account(s) in the space provided. Some changes may have
more than one answer.
Accounts
RM - Raw Materials Inventory
FG - Finished Goods Inventory
WIP - Work-in-Process Inventory
MOH - Manufacturing Overhead
CGS - Cost of Goods Sold
Answers
WIP
WIP
RM
RM
WIP
FG
WIP
WIP
FG
CGS
Changes
1. Increases when manufacturing overhead is incurred
2. Increases when indirect materials are transferred to production
3. Increases when raw materials are purchased on account.
4. Decreases when direct materials are used in production
5. Increases when direct labor costs are incurred
6. Increases when goods are finished.
7. Decreases when goods are finished.
8. Increases when indirect labor costs are incurred
9. Decreases when goods are sold.
10. Increases when goods are sold.
Problem 6 - Norris, Inc. manufactures calculators. Norris uses an actual costing system. During June,
Norriss transactions and accounts included the following:
$8,800 Sales
7,500
Direct labor cost (3,100 hours)
Indirect materials issued from Supplies
3,600
4,600
Finished goods inventory, beginning
5,800
Finished goods inventory, ending
Total manufacturing overhead incurred
49,600 .
A. How much is the cost of direct materials issued to production during June?
Beginning inventory
$ 4,600
1
2
1
6
9
+ Raw material purchases

= Available
Less ending raw materials
= Cost of materials used
143,500
148,100
(5,800)
$142,300
B. Calculate the cost of goods manufactured.

MATERIALS:
Beginning inventory
=Available
LABOR
OVERHEAD INCURRED
MANUFACTURING COSTS
Add beginning WIP
Less ending work in process
4,600
143,500
148,100
(5,800)
$142,300
55,000
49,600
246,900
8,800
(7,500)
$248,200
C. How much is the cost of inventory on the May 31st balance sheet?
Raw
materials
$ 4,600
Work in
process
8,800
Finished
goods
12,300
Total
inventory at
May 31st
$25,700
Problem 7 - Heath Company uses an actual product costing system. The company reported the following
amounts for 2003:
Beginning raw materials
inventory
Ending raw materials inventory
Beginning finished goods
inventory
Ending finished goods
inventory
$120,000
16,000
5,000
11,000
8,000
Direct labor used

Manufacturing overhead
costs incurred
Selling and administrative
expenses
Beginning work-in-process
inventory
A. Calculate the cost of materials used in production.

Beginning raw materials inventory
= Materials available for use
Less ending raw materials inventory
= Materials used in production
$ 16,000
120,000
$136,000
5,000
$131,000

Materials used in production (part A)
Direct labor used
Manufacturing overhead costs incurred
Add beginning work in process
$131,000
44,000
36,000
$211,000
17,000
$44,000
36,000
21,000
17,000
16,000

(16,000)
$212,000
Problem 8 - Peters, Inc. manufactures homework machines. It uses an actual costing system. Peter's keeps
a 'Supplies' account for it's indirect materials. During June, Peters transactions and accounts included the
following:
$11,600
Sales
12,300
Direct labor cost
Indirect materials issued to production
3,200
General administrative expenses
9,400
7,700
5,100
A. How much is cost of goods manufactured?
Direct labor used
Manufacturing overhead costs incurred
B. Calculate the cost of goods sold
Less ending finished goods inventory
$5,100
178,000
$183,100
(7,700)
$175,400
72,400
56,100
$303,900
10,500
(12,800)
$301,600
$12,300
301,600
(11.600)
$302,300
C. How much will the company report as product costs on the June 30th balance sheet?
Raw materials
$11,600
Work in process
12,800
Finished goods
7,700
= Total inventory at 6-30-03
$32,100
Problem 9 - The manufacturing operations of Honcho, Inc. had the following balances for the month of
March:
Inventories
3/1/03
3/31/03
Raw Materials
10,000
12,000
Work in process
6,000
7,000
Finished goods
30,000
22,000
f Honcho transferred $38,000 of completed goods out of work in process during March, how much was the
amount of the cost of goods sold?
Amounts transferred out of work in process are moved into finished goods as 'cost of goods manufactured'.
Beginning finished goods plus cost of goods manufactured less ending finished goods = cost of goods sold
$30,000 + $38,000 - $22,000 = $46,000
Problem 10 - Saman, Inc. manufactures coasters and uses an actual costing system. During August,
Samans accounts included the following balances and transactions:
Work in process, beginning
$25,200
Work in process, ending
27,600
Finished goods beginning
7,300
Finished goods, ending
6,800
Administrative expenses
Materials purchased
Raw materials, beginning
Manufacturing overhead cost incurred
Sales
Marketing expenses
12,000
20,400
78,000
3,300
76,400
20,100
167,000
11,000
A. How much is ending raw materials at August 31

Beginning inventory
$ 3,300
+ Material purchases
78,000
- Direct materials used
(76,400)
= Ending raw materials
$4,900
B. How much is cost of goods manufactured?
Direct materials
$76,400
Direct labor
20,400
20,100
116,900
Add beginning WIP
25,200
Less ending WIP
(27,600)
$114,500
C. How much is cost of goods sold?
$7,300
Add CGM (part B)
114,500
(6,800)
$115,000
Problem 11 Deegan, Inc. manufactures weather machines and uses an actual costing system. During June,
Deegans accounts included the following balances and transactions:
$ 700 Direct materials purchased
$45,000
4,850 Direct labor cost incurred
16,400
9,500 Administrative expenses
13,000
cost incurred
Marketing expenses
11,00 Work in process inventory, beginning
7,800
0
Sales
98,00 Work in process inventory, ending
6,600
0
A.
A. How much is the cost of direct materials issued to production during June? $40,850
$ 700
45,000
Goods available
45,700
Less raw materials inventory, ending
(4,850)
Cost of direct materials issued to production
$40,850
B. How much is cost of goods manufactured? $67,950
Direct materials used in production (from part A)
Add: Work in process inventory, beginning
Less: Work in process inventory, ending
Cost of Goods Manufactured
$40,850
16,400
9,500
66,750
7,800
(6,600)
$67,950
C. Briefly list any additional information you need to calculate cost of goods sold for this company. (Be
specific.)
Beginning finished goods inventory and ending finished goods inventory
Note that you already have cost of good manufactured from part B, so it should not be listed here as an
additional item needed.
Problem 12 Cost of goods manufactured equals $44,000 for 2006. Finished goods inventory is $2,000 at
the beginning of the year and $5,500 at the end of the year. Total manufacturing overhead is $4,500.
Beginning and ending work in process for 2006 are $4,000 and $5,000 respectively. How much is cost of
goods sold for the year?
Beginning FG + CGM - CGS = ending FG
$2,000 + $44,000 - x = $5,500
CGS = $40,500
Problem 13 Sound Company uses an actual costing system. It reported the following amounts for May,
2006:
$254,000
12,000
7,900
7,400
8,000
Direct labor incurred
51,000
Selling and administrative expenses
22,300
Actual manufacturing overhead costs
36,800
15,100
12,000
A. Calculate the cost of direct materials used in production.
Beginning work in process
Raw materials used in production (part A)
Direct labor used
Manufacturing overhead costs
Total manufacturing costs added
$ 12,000
254,000
$266,000
(7,900)
$258,100
$15,100
$258,100
51,000
36,800
C. How much will Sound report as total inventories on its May 31 balance sheet?
Raw materials
$7,900
Work in process
12,000
Finished goods
8,000
Total inventory at May 31
$27,900
Problem 14 - Eng Manufacturing Company developed the following data:

Beginning work in process inventory
$ 10,000
150,000
Actual manufacturing overhead
85,000
295,000
Ending work in process
15,000
How much are total manufacturing costs for the period?
$346,100
(12,000)
$349,200
Total manufacturing costs for the period are the costs incurred that are added during the current period:
Beginning work in process (given)
$ 10,000
Total current manufacturing costs
??
Less ending work in process (given)
(15,000)
Cost of goods manufactured (given)
$295,000
Since the beginning and ending WIP amounts and CGM is known, work backwards to determine how much
the total current period manufacturing costs are: $10,000 - $15,000 - $295,000 = $300,000. Note that DM,
DL, and MOH are added together to get total current manufacturing costs for the period.
Problem 15 - The accounting records of Cinotti Manufacturing Company include the following information:
Dec. 31, 2004
Dec. 31, 2003
Work in process inventory
$ 15,000
$ 12,000
Finished goods inventory
45,000
51,000
Materials purchased
331,000
Raw materials inventory
?
24,000
325,000
Manufacturing overhead incurred
132,000
Direct labor
120,000
Selling expenses
70,000
Cinotti uses an actual cost system. Calculate the following:
1.
2.
Raw materials inventory at 12-31-04

Less materials used in production
$ 24,000
331,000
$355,000
(325,000)
$30,000
Total manufacturing costs added to Work in Process Inventory during 2004

Materials used in production
Direct labor used
Manufacturing overhead costs
Total manufacturing costs added to WIP
3.
4.
5.
Cost of goods manufactured during 2004

Total manufacturing costs added (From part 2)
Total inventories on Cinottis December 31, 2004 balance sheet
Raw materials (from part 1)
Work in process
Finished goods
Total inventory at 6-30-03
$325,000
120,000
132,000
$577,000
$577,000
12,000
(15,000)
$574,000
$30,000
15,000
45,000
$90,000
Assume CGM is $500,000. How much is cost of goods sold for 2004?
$51,000
500,000
(45,000)
Cost of goods sold
$506,000
Problem 16 - Earl, Inc. manufactures baseballs uses a normal costing system and allocates overhead based
on direct labor cost. During June, Earls accounts included the following balances and transactions:

Marketing expenses
Cost of materials purchased
Direct materials used in production
$
33,300
27,000
24,000
32,000
138,600
143,000

Sales
A. How much is ending raw materials at June 30 $7,100

Goods available
Less cost of direct materials issued to production
B. How much is cost of goods manufactured for June? $210,900
C. How much is cost of good sold?
Cost of goods manufactured (part B)
Cost of goods sold
$
11,500
8,400
9,600
21,500
18,900
285,000
$ 11,500
138,600
150,100
(143,000)
$ 7,100
$143,000
32,000
33,300
208,300
21,500
(18,900)
$210,900
$8,400
210,900
(9,600)
$209,700
Problem 17 - The manufacturing operations of Darden, Inc. had the following balances for the month of
March:
Inventories
3/1/03
3/31/03
Raw Materials
$10,000
$12,000
Work in process
6,000
7,000
Finished goods
30,000
22,000
If Darden reported cost of goods sold totaling $46,000 in March, how much did it transfer out of workin
process as completed goods?
$30,000 + ? - $22,000 = $46,000 so CGM = $38,000
Problem 18 - Alderson Bucket Company incurred the following costs: $100 of plastic, 25 hours at $10 per
hour, $50 of indirect materials, $50 of indirect labor, $200 for advertising, and $75 to ship the buckets to
the customers. How much are total product costs?
$100 + (25 x $10) + $50 + $50 = $450; Advertising and shipping to customers (delivery costs) are period
costs since they do not relate to the production of the products.
Problem 20 - Top of the Head Comb Company incurred the costs listed below during May to manufacture
combs. The company uses a JIT inventory system.
Plastic resin
$3,500
Factory machine blades (replaced daily)
500
Cost to ship to customers
600
Production supervisors salary
2,100
Product advertising costs
1,200
Production labor 42 hours at $20 per hour
Calculate total product costs assuming 10,000 combs are produced.

Plastic resin
$3,500
Factory machine blades (replaced daily)
500
Production supervisors salary
2,100
Production labor -42 hours at $20 per hour
840
Total product costs
$6,940
Cost to ship to customers is delivery expense, a product cost. Product advertising costs are period costs as
well. Note that these costs are no part of the cost of getting the products ready to sell.
How much is the cost per comb?
$6,940/10,000 = $0.694 each
Problem 21 Mitchell, Inc. manufactures calculators and employs an actual costing system. During March,
Mitchells transactions and accounts included the following:
Sales
$320,000
Raw materials inve
Raw materials acquired (cash paid)
135,000
Raw materials inve
Raw materials received on account
30,000
Finished goods inve
42,000
Finished goods inve
Cost to deliver products to customers
800
Work in process inv
72,000
Work in process inv
A. How much is the cost of direct materials transferred to production during June?
Raw materials purchased ($135,000 + $30,000)
Goods available
$ 6,500
165,000
171,500
(5,800)
$165,700
$165,700
42,000
72,000
279,700
18,700
(19,700)
$278,700
Problem 22 - CT, Inc. reported $22,000 in work in process at June 1 and $21,300 at June 30. Finished goods
was $4,500 on June 1 and $5,100 on June 30. Direct material used in June totaled $88,000. CT incurred
$46,000 for Junes manufacturing overhead. Cost of goods manufactured totaled $199,000. How much are
total manufacturing costs for June?
WIP
Beginning 22,000
199,000
CGM
Mfg. costs X
Ending
21,300
Beginning WIP + Total manufacturing costs - CGM = Ending WIP

$22,000 + X - $199,000 = $21,300; so Total Mfg. Costs = $198,300
Problem 23 - Zimmerman, Inc. manufactures calculators and employs an actual costing system. During
June, Zimmermans transactions and accounts included the following:
$117,000
12,000

52,000
72,800
$6,500
5,800
11,200
12,400
26,000
22,000
$ 6,500
Direct materials purchased ($117K + $12K)
129,000
(5,800)
$129,700
Materials issued to production (part A)
$129,700
52,000
72,800
254,500
26,000
(22,000)
$258,500
Problem 25 -The following information has been collected from Green Companys accounting records for
the month of April:
Direct materials added to Work in Process Inventory
$ 160,000
Indirect materials added to Manufacturing Overhead
40,000
Direct labor added to Work in Process Inventory
150,000
Indirect labor added to Manufacturing Overhead
65,000
Manufacturing overhead added to Work in Process Inventory
100,000
Depreciation Expense included in Manufacturing Overhead
50,000
Beginning work in process inventory
22,000
415,000
How much is the balance of Work in Process inventory if Green uses a normal costing method?
Direct materials added to Work in Process Inventory
$ 160,000
Direct labor added to Work in Process Inventory
150,000
Manufacturing overhead added to Work in Process Inventory
100,000
Total manufacturing costs added
$410,000
22,000
Less CGM
(415,000
Ending work in process
$17,000
Problem 26 Hernandez, Inc. manufactures calculators. The company employs a normal costing system. Any
amount of over or underapplied overhead is immaterial. During May, Hernandezs transactions included
the following:
$5,400
Total manufacturing overhead cost applied
6,650
Total manufacturing overhead cost incurred
6,300
11,500
1,100
160
280
Sales
23,000
Selling expenses
2,100

220
250
A. How much is the cost of direct materials issued to production during May?
$ 160
11,500
Indirect materials issued
(1,100)
(280)
$10,280
B. How much is cost of goods manufactured for May?
Materials issued to production
$10,280
5,400
Manufacturing overhead cost applied
6,650
21,330
220
(250)
$22,300
Note: Indirect materials issued to production are considered manufacturing overhead costs and as such,
are already included in the total manufacturing overhead cost amount given.
Problem 27 Culvyhouse Company uses a normal product costing system. Any amount of over or
underapplied overhead is immaterial. It reported the following amounts for 2003:
$72,000
70,000
4,000
Selling and administrative expenses incurred
Direct labor used
66,000
7,000
29,000
applied
$21,000
16,000
23,000
17,000
6,000
9,000
A. Calculate the cost of goods manufactured.

Cost of direct materials used
$70,000
Cost of direct labor used
66,000
Cost of MOH applied
29,000
Manufacturing costs
$165,000
Add beginning WIP
21,000
Less ending WIP
(16,000)
$170,000
B. Calculate cost of goods sold. Ignore any over or underapplied overhead.
$6,000
Add CGM (part A)
170,000
(9,000)
$167,000
Problem 28 - Listed below are selected changes due to various transactions in the manufacturing process
using a normal costing system. Identify which account is changed as a result of each action listed in items
1 through 10 below by printing the code of the account(s) in the space provided. Some changes may have
more than one answer.
Accounts
RM - Raw Materials Inventory
FG - Finished Goods Inventory
WIP - Work-in-Process Inventory
MOH - Manufacturing Overhead
CGS - Cost of Goods Sold
Answers
Changes
MOH
MOH
RM
RM
WIP
FG
WIP
MOH
FG
CGS
WIP
MOH
1. Increases when manufacturing overhead is incurred

2. Increases when indirect materials are transferred to production
3. Increases when raw materials are purchased on account.
4. Decreases when direct materials are used in production
5. Increases when direct labor costs are incurred
6. Increases when goods are finished.
7. Decreases when goods are finished.
8. Increases when indirect labor costs are incurred
9. Decreases when goods are sold.
10. Increases when goods are sold.
11. Increases when manufacturing overhead is applied
12. Decreases when manufacturing overhead is applied
Problem 29 - Norris, Inc. manufactures calculators. Norris uses a normal costing system. Any amount of
over or underapplied overhead is immaterial. During June, Norriss transactions and accounts included the
following:
$8,800
Sales
7,500
Direct labor cost (3,100 hours)
3,600
4,600
5,800
Total manufacturing overhead applied
49,600
A. How much is the cost of direct materials issued to production during June?
Beginning inventory
$ 4,600
143,500
- Indirect materials issued
(3,600)
= Available
144,500
(5,800)
$138,700
MATERIALS:
Beginning inventory
=Available
LABOR
OVERHEAD APPLIED
MANUFACTURING COSTS
Add beginning WIP
4,600
143,500
(3,600)
144,500
(5,800)
$138,700
55,000
49,600
243,300
8,800
(7,500)
$244,600
C. How much is the cost of inventory on the May 31st balance sheet?
Raw materials
$ 4,600
Work in process
8,800
Finished goods
12,300
Total inventory at May 31st
$25,700
Problem 30 - Heath Company uses a normal product costing system. Any amount of over or underapplied
overhead is immaterial. The company applies manufacturing overhead based on 80% of direct labor cost.
The company reported the following amounts for 2003:

Beginning raw materials
inventory
inventory
Ending finished goods
inventory
$120,000
16,000
5,000
11,000
8,000
Direct labor used
$44,000
costs incurred
Selling and administrative
expenses
Beginning work-in-process
inventory
A. Calculate the cost of materials used in production.

36,000
21,000
17,000
16,000
$ 16,000
120,000
$136,000
5,000
$131,000

Materials used in production (part A)
Direct labor used
Manufacturing overhead costs applied (80%*44,000)
$131,000
44,000
35,200
$210,200
17,000
(16,000)
$211,200
Problem 31 - Peters, Inc. manufactures homework machines. It uses a normal costing system. Any amount
of over or underapplied overhead is immaterial. Actual manufacturing overhead for the year is
$55,500. Overhead is applied based on direct labor cost. During June, Peters transactions and accounts
included the following:
$11,600 Sales
$324,00
0
12,300
Direct labor cost
72,400
3,200
178,000
General administrative expenses
9,400
12,800
4,500
10,500
5,100
56,100
A. How much is cost of goods manufactured?
Less indirect materials used
Direct labor used
Manufacturing overhead costs applied
$5,100
178,000
$183,100
(3,200)
(4,500)
$175,400
72,400
56,100
$303,900
10,500
(12,800)
$301,600
B. Calculate the cost of goods sold after adjustment for over/underapplied overhead.
$12,300
301,600
(11.600)
$302,300
Overapplied overhead ($55,500-$56,100)

Adjusted cost of goods sold
(600)
$301,700
C. How much is total inventory on the June 30th balance sheet?

Raw materials
$11,600
Work in process
12,800
Finished goods
4,500
= Total inventory at 6-30-03
$28,900
Problem 32 - The manufacturing operations of Honcho, Inc. had the following balances for the month of
March:
Inventories
3/1/03
3/31/03
Raw Materials
$10,000
$12,000
Work in process
6,000
7,000
Finished goods
30,000
22,000
If Honcho transferred $38,000 of completed goods out of work in process during March, what was the
amount of the cost of goods sold?
$30,000 + $38,000 - $22,000 = $46,000
Problem 33 - Under Company estimates the following overhead costs for 2003:
Equipment depreciation
$ 30,000
Equipment maintenance
64,000
Factory management salaries
150,000
Factory rent
50,000
Total manufacturing overhead
$294,000
Under Company incurred the following costs for 2003 for job 23:
Direct material
$80,000
Direct labor
60,000
Other jobs incurred $320,000 of direct labor. Under Company is also budgeting $350,000 in direct labor
costs and 20,000 machine hours for 2003. Actual manufacturing overhead for 2003 was $300,000.
A. Calculate the predetermined overhead rate using direct labor costs as the allocation base.
$294,000/$350,000 = $ 0.84 per direct labor dollar
B. Which of the allocation bases is preferred? Why?
Since most of the overhead costs are related to equipment, machine hours is the preferred allocation base.
C. How much overhead will Under apply to job 23?
$0.84 x $60,000 = $50,400
D. What is the total cost of job 23?
$50,400 + $80,000 + $60,000 = $190.400
Problem 34 - Stranahan Company allocates overhead based on machine hours. Estimated overhead costs
for the year total $217,000 and the company estimates that it will use 31,000 machine hours during the
year. Actual overhead for the year was $220,000 and the company used 30,000 machine hours. If Job 45
requires 1,000 machine hours, how much overhead will be allocated to Job 45?
$217,000/31,000 machine hours = $7.00 per machine hour
$7.00 per machine hour * 1,000 machine hours = $7,000
Problem 35 - Fane Company estimates that its employees will work 80,000 direct labor hours during the
coming year. Total overhead costs for the year are estimated to be $1,000,000 and the direct labor costs
are expected to be $1,300,000. Actual overhead for the year was $980,000 and the company used 82,000
direct labor hours. If the company allocates overhead based on direct labor hours, what is the
predetermined overhead rate?
$1,000,000/80,000 = $12.50 per direct labor hour
Problem 36 -Hernandez, Inc. manufactures calculators. The company uses a normal costing system. The
company allocates overhead at $25 per direct labor hour. Over or underapplied overhead is not material.
During May, Hernandezs transactions included the following:
Direct labor cost incurred @ $20 an hour
$5,400
6,800
11,500
1,100
6,650
160
280
Sales
23,000
Selling expenses
2,100
220
250
A. Briefly list any additional information you need to calculate cost of goods sold for this company. (Be
specific.)
Beginning finished goods inventory and ending finished goods inventory (You have enough information to
calculate cost of goods manufactured so you don't need that amount.)
B. How much is the cost of direct materials issued to production during May?
C. How much overhead would be applied during May?
Direct labor cost/Cost per hour = number of direct labor hours incurred
$5,400/$20 = 270 hours
Applied = 270 hours x $25 = $6,750
$ 160
11,500
(1,100)
(280)
$10,280
D. How much is over or underapplied overhead for May?

$6,750 - $6,800 = $50 underapplied
Problem 37 - At the end of the year, Deary Company
related to its job cost system:
Raw Materials Inventory
$ 40,00
0
Finished Goods
60,000
had the following balances in selected accounts
Information concerning manufacturing overhead and

Actual manufacturing overhead $290,00
0
Estimated manufacturing
$300,00
overhead
0
Actual direct labor cost per
$17
hour
labor for the year follows:

Direct labor hours
incurred
Direct labor hours
estimated
MOH applied based on
Work in Process
Inventory
Cost of Goods Sold
$100,00
0
800,000
15,600
15,000
Direct labor
hours
A. Calculate the predetermined manufacturing overhead rate.

Estimated MOH/ Est. DL hours =
$300,000/15,000 =
$20 per DL hour
Note: This is the number we use to apply MOH to jobs as we are working on them.in this case, for each
direct labor hour our people work, we add $20 for MOH costs.
B.
How much overhead did Deary apply to jobs during the year?
Must be applied based on the estimated cost per DL hour calculated in part A since we dont know how
much the actual cost will be until the end of the period.
$20 x 15,600 hours =
$312,000
C. How much is CGS after Deary properly allocates any under or over-applied manufacturing overhead?
Step 1: Determine how much is over or underapplied:
Actual amount in the MOH expense account
$290,000
Applied (from part B)
(this is how much we took out of the MOH expense account)
312,000
Overapplied (a negative balance left in the MOH expense account)
($22,000)
[NOTE: This amount cannot stay therewe must take it out and move it all to CGS.
CGS = $800,000 - $22,000 = $778,000
Problem 38 - Saman, Inc. manufactures coasters and allocates overhead based on direct labor cost. Saman
uses a normal cost system. During August, Samans accounts included the following balances and
transactions:
$25,200
27,600
7,300
6,800
12,000
20,400
Materials purchased
78,000
3,300
76,400
20,100
2,200
Sales
167,000
Marketing expenses
11,000
21,,000
A. How much is ending raw materials at August 31
Beginning inventory
+ Material purchases
- Direct materials used
= Ending raw materials
B. How much is cost of goods manufactured?
Direct materials
Direct labor
Add beginning WIP
Less ending WIP
3,300
78,000
(2,200)
(76,400)
$2,700
$76,400
20,400
20,100
116,900
25,200
(27,600)
$114,500
C. How much is cost of goods sold? (Be sure to consider the under or overapplied overhead.)
$7,300
Add CGM (part B)
114,500
(6,800)
$115,000
Underappplied($21,000-$20,100)
900
Adjusted cost of goods sold
$115.900
Problem 39 - Hager Inc. applies overhead based on direct labor cost using a normal cost system. The
company estimated the following annual amounts:
Estimated manufacturing overhead
$42,000
Estimated direct labor
1,600 hours at $15 per hour
Actual amounts for the year were:
$44,000
Actual direct labor
A. How much is the predetermined overhead rate?
Estimated manufacturing overhead/Estimated direct labor cost =
$42,000/(1,600*$15) = $1.75 per direct labor dollar
B. How much overhead was applied during the year?
Overhead rate x DL$ incurred =
$1.75 x [1,550*$16] = $43,400
C. Determine the amount of over or underapplied overhead.
Applied - Actual = $43,400 - $44,000 = $600 underapplied
Problem 40 - Jiffy Fabricators applies overhead based on direct labor cost. The company provided the
following annual amounts:
Estimated direct labor
2,000 hours at $12.50 per hour
Actual direct labor
$30,000
$31,000
A. How much overhead was applied during the year? $29,640
Overhead application rate = Estimated MOH cost/Estimated DL$
= $30,000/[2,000*$12.50] = $1.20 per DL$
Overhead applied = $1.20 x [1,900*$13] = $29,640
B. Determine the amount of over or underapplied overhead. $1,360 Under applied
Applied MOH Actual MOH = $29,640 $31,000 = $1,360 underapplied
Remember me saying that some of you would forget that 'estimated MOH' does not appear anywhere in
the accounting records?
Problem 41 - Deegan, Inc. manufactures bliggles and allocates overhead based on direct labor cost.
During June, Deegans accounts included the following balances and transactions:
$ 700
850
9,500
Marketing expenses
11,000
9,000
Sales
98,000
Under and overapplied overhead are considered immaterial.
A. How much is the cost of direct materials issued to production during June? $40,850
Goods available
Less indirect materials to production
$ 700
45,000
45,700
(850)
(4,000)
$40,850
B. How much is cost of goods manufactured? $67,950

$40,850
16,400

9,500
66,750
7,800
(6,600)
$67,950
Note: Indirect materials issued to production are considered manufacturing overhead costs and as such,
are already included in actual manufacturing overhead.
Dec. 31, 2004
Dec. 31, 2003
Work in process inventory
$ 15,000
$ 12,000
Finished goods inventory
45,000
51,000
Materials purchased
331,000
?
24,000
325,000
124,000
Direct labor
120,000
Selling expenses
70,000
Manufacturing overhead is applied at a rate of 110% of direct labor cost. Calculate the following:
1.
2.

Less materials used in production
$ 24,000
331,000
$355,000
(325,000)
$30,000

Materials used in production
Direct labor used
Manufacturing overhead costs applied (110%*$120,000
Total manufacturing costs added to WIP
3.
4.
5.
$325,000
120,000
132,000
$577,000
Cost of goods manufactured during 2004

Total manufacturing costs added (From part 2)
Total inventories on Cinottis December 31, 2004 balance sheet
Raw materials (from part 1)
Work in process
Finished goods
Total inventory
Assume CGM is $500,000. How much is cost of goods sold for 2004?
Cost of goods sold
$577,000
12,000
(15,000)
$574,000
$30,000
15,000
45,000
$90,000
$51,000
500,000
(45,000)
$506,000
Problem 43 - Earl, Inc. manufactures baseballs and allocates overhead based on direct labor cost. During
June, Earls accounts included the following balances and transactions:

$33,300 Raw materials, beginning
1,400
24,000
32,000
Cost of materials purchased
140,000 Work in process, ending
143,000 Marketing expenses
35,000
Sales
Under and overapplied overhead are considered immaterial. Ignore over/ underapplied elimination
B and C.
A. How much is ending raw materials at June 30
Goods available
Less cost of direct materials issued to production
Less indirect materials to production
B. How much is cost of goods manufactured for June?
C. How much is cost of good sold?
Cost of goods manufactured (part B)
Cost of goods sold
$ 11,500
8,400
9,600
21,500
18,900
27,000
285,000
in parts
$ 11,500
140,000
151,500
(143,000)
(1,400)
$ 7,100
$143,000
32,000
33,300
208,300
21,500
(18,900)
$210,900
$8,400
210,900
(9,600)
$209,700
D. Is this company using an actual or normal costing system?

Normal costing
Problem 44 - Walker Company applies manufacturing overhead based on direct labor hours. Information
concerning manufacturing overhead and labor for May of 2005 as follows:
$163,800
$158,600
2,500 hours @ $22 = $55,000
Direct labor estimated
2,600 hours @ $21 = $54,600
A. How much is the manufacturing overhead rate?
Estimated manufacturing overhead/estimated direct labor hours =
$158,600 / 2,600 hours = $61.00 per DL hour
B. How much overhead did Walker apply during the year?
Overhead rate times actual DL hours =
$61 x 2,500 = $152,500
C. How much is over or underapplied overhead at May 31?
Actual overhead - applied overhead =
$163,800 - $152,500 = $11,300 underapplied
Problem 45 - Harmon Company began jobs 35, 36, 37, and 38 during July. At the beginning of July, jobs 31,
33, and 34 were in production, while jobs 30 and 32 were completed and waiting to be shipped to
customers. Jobs 31, 33, 34, 36, and 37 were completed during July. Jobs 30, 31, 32, 34, and 36 were
shipped to customers during July.
Which jobs were completed and transferred out during July? 31, 33, 34, 36, 37
Which jobs are in work in process at July 31? 35 and 38
Which jobs are in finished goods at July 31? 33 and 37
Calculations:
WIP beginning = 31, 33, 34
Jobs added = 35, 36, 37, 38
Jobs worked on = 31, 33, 34, 35, 36, 37, 38
Less jobs completed and transferred out = 31, 33, 34, 36, 37
Ending jobs remaining in WIP = 35 and 38
Ending jobs remaining in FG = 33 and 37
Problem 46 - The underapplied balance of the Manufacturing Overhead account is $30,000. The amount is
considered material. The ending balances of Raw materials, Work in Process, Finished Goods, and Cost of
Goods Sold are $10,000, $25,000, $50,000, and $425,000, respectively. What amount of the underapplied
balance should be allocated to Cost of Goods Sold?
Since the amount is considered material, the underapplied amount must be allocated to the three
accounts with overhead in them: Work in Process, Finished Goods, and Cost of Goods Sold, based on their
balances:
Work in Process
$25,000
Finished Goods
50,000
Cost of Goods Sold
425,000
Total
$500,000
Allocated to CGS: $425,000/$500,000 x $30,000 = $25,500
Problem 47 - Hoart Company applies overhead based on direct labor hours and calculated an overhead
rate of $2. Job 55 used $500 of direct materials, 100 machine hours, $750 of direct labor. The labor rate
per hour is $15. How much is the cost of job 55?
Number of hours = $750/$15 = 50 DL hours
DM + DL + MOH = $500 + $750 + 50*$2 = $1,350
Problem 24 Gottberg Company bases its predetermined overhead rates on machine-hours. At the
beginning of the year, the company estimated its manufacturing overhead for the year would be $56,000
and there would be a total of 40,000 machine-hours. Actual manufacturing overhead for year amounted to
$58,000 and the actual machine-hours totaled 44,800. How much manufacturing overhead was applied for
the year?
Applied at the rate of: $56,000/40,000 = $1.40 per machine hour;
$1.40 x 44,800 MH = $62,720; Actual amounts cannot be used to determine the rate because they are not
known until the end of the year.
Problem 48 - Moss Company applies manufacturing overhead based on direct labor hours. It provided the
following information from its accounting records for 2003:
Expected production
30,000 labor hours
Actual production
28,000 labor hours
Budgeted overhead
$1,500,000
Actual overhead
$1,450,000
Jobs 102 & 103 are completed during the period.
A. What is the overhead application rate?
$1,500,000/30,000 = $50 per hour
B. How much overhead will be applied to job 103 if its total labor cost was $4,320 and labor is $18 per
hour?
Number of labor hours = $4,320/$18 = 240 hours
Overhead applied = 240 hours*$50 = $12,000
Problem 49- Sat Companys factory overhead account showed a $8,000 underapplied overhead balance on
December 31. Other accounts showed the following balances at year end:
Raw materials
$100,000
Work in Process
40,000
Finished Goods
60,000
Cost of Goods Sold
700,000
Which will be the balances of each account listed below after disposing the $8,000?
Cost of Goods Sold
$700,000 + $8,000 = $708,000
Work in Process
$40,000 no change
Finished Goods
$60,000 no change
Work in Process
$40,000 no change
Underapplied overhead is moved to cost of goods sold since most of the overhead cost would likely be in
that account by year end.
Problem 50 - Benny Company allocates overhead at $4 per direct labor dollar. Job 52 required 6 cases of
direct materials at a cost of $6 per case and took employees of 5 hours to complete. Employees earn $10
per hour. How much is the total cost of Job 52?
DM = 6 x $6 = $36
DL = $10 x 5 hrs. = $50
MOH = $4 x $50 = $200
Total cost = $286
Problem 51 - Clinton's Furniture Company estimates its annual factory overhead to be $47,000. The
company assigns factory overhead using the number of pieces produced. Clinton budgets annual
production at 70,000 pieces of glassware. At year-end, you find out Clinton incurred $52,000 of factory
overhead for the year. Suppose the company produced 75,000 pieces in 2002.
A. What is the total amount of factory overhead applied to production for the year?
($47,000/70,000) x 75,000 = $50,357
B. How much is factory overhead under- or over-applied?
Answer: $50,357 - $52,000 = $1,643 underapplied
Problem 52 - Actual manufacturing overhead costs $120,000; estimated manufacturing overhead costs
$100,000; actual machine hours 25,000; and estimated machine hours 20,000. The only cost driver is
machine hours.
A. Using job order costing, how much is the 2002 predetermined overhead application rate?
$100,000/20,000 = $5.00 per hour
B. How much is the amount of manufacturing overhead allocated to jobs during 2003?
$100,000/20,000 = $5.00/machine hour; $5.00 x 25,000 = $125,000
Problem 53 - Dougan, Inc. allocates overhead based on a predetermined overhead rate of $16.00 per
direct labor hour. Employees are paid $12.00 per hour. Job 24 requires 4 pounds of direct material at a cost
of $30.00 per pound. It is estimated it will take employees a total of 20 hours to complete the job. Actual
manufacturing overhead costs totaled $80,000 for the year for the company. How much is the cost of Job
24?
Direct materials (4 x $30)
$120
Direct labor ($12 x 20)
240
Manufacturing overhead ($16 x 20)

Total job cost
320
$680
Problem 54 - Duckworth Company uses a predetermined overhead rate based on direct labor hours to
apply manufacturing overhead to jobs. At the beginning of the year, the company estimated
manufacturing overhead would be $100,000 and direct labor hours would be 10,000. The actual figures for
the year were $110,000 for manufacturing overhead and 10,500 direct labor hours. How much is over or
underapplied overhead for the year?
$110,000
Applied overhead:
Rate x DL hours incurred =
[$100,000/10,000] x 10,500 =
105,000
Underapplied overhead
$5,000
Problem 55 - Carr Company has the following estimated costs for next year:
Direct materials
$ 30,00 Salary of production
$70,00
0
supervisor
0
Direct labor
110,000 Indirect materials
10,000
Factory operating costs
144,000 Advertising expense
32,000
Carr applies manufacturing overhead on the basis of machine hours. Carr estimates that 20,000 direct
labor and 32,000 machine hours will be worked during the year. Actualdirect labor and machine hours for
the year were 19,600 and 33,000, respectively. Actual overhead was $226,000 for the year. How much
overhead is over or underapplied at year end?
Overhead rate = Estimated Overhead/Estimated Activity
= [$144,000 + $70,000 + $10,000]/32,000 = $7.00 per machine hour
Applied = $7.00 x 33,000 machine hours = $231,000
Overapplied overhead = Actual overhead - applied overhead = $226,000 - $231,000 =
$5,000
Problem 56 - Martin Company applies manufacturing overhead based on direct labor hours. Information
concerning manufacturing overhead and labor for the year follows:
Actual manufacturing overhead $150,00 Direct labor hours
4,800
0
incurred
$140,00 Direct labor hours
5,000
overhead
0
estimated
How should the manufacturing overhead allocation rate be calculated?
$140,000 5,000 = $28
Problem 57 - The following amounts were reported by Winkler Company before adjusting its overapplied
manufacturing overhead of $20,000.
Raw Materials
$40,00
Work in Process
$100,00
Inventory
0
Inventory
0
Finished Goods
Cost of Goods Sold
840,000
60,000
How much will Winkler report as cost of goods sold after it disposes of its overapplied overhead?
Since overhead is overapplied, too much was added to the product accounts. To remove overapplied, you
must subtract. Since the amount is immaterial, the entire amount is removed from cost of goods sold:
$840,000 - $20,000 = $820,000.
Problem 58 - On Monday, Janu Flowers purchases roses costing $8,000. On Tuesday, Janu uses $5,000 of
the flowers to begin preparing for Friday evening's Lovers Dance. On Wednesday, Janu paid $1,500 of labor
for its employees for working on the job. Overhead is applied at 80% of direct labor cost. What is the
ending account balance of Finished Goods after these transactions when the job is complete?
Materials = $5,000 + Labor $1,500 + Mfg. overhead ($1,500*80%) $1,200 = $7,700
Problem 59 - During 2003 Lawson Manufacturing expected to produce 100,000 units with $300,000 of
overhead, $500,000 of material, and $200,000 in labor. Actual production was 110,000 units with an
overhead cost of $280,000, $550,000 in materials used; and $220,000 in labor. All of the goods were
completed and transferred to Finished Goods.
A. What amount was transferred to Finished Goods?
Overhead is applied based on the estimates of overhead and activity:
$300,000/100,000 = $3 per unit produced;
As activity occurs (i.e., units are produced) the company applies overhead. In this case, the company adds
$3 to WIP each time one unit is produced. Total applied: 110,000 units x $3 = $330,000 applied. Total cost
transferred: DM + DL + OH applied = $550,000 + $220,000 + $330,000 = $1,100,000
B. How much is the amount of over/under applied overhead?
Applied = $330,000 less actual $280,000 = $50,000 overapplied
Problem 60 - Hernandez, Inc. pays its employees $12 per hour. It allocates overhead at $3 per direct labor
hour. Job R45 required 5 pounds of direct materials at a cost of $5 per pound and took employees of 2
hours to complete. How much is the total cost of Job R45?
DM + DL + MOH = total cost
[5 x $5] + [2 x $12] + [2 x $3] = $55
Problem 61 - Builder Bob Company allocates overhead at $9 per direct labor hour. Job A45 required 5 boxes
of direct materials at a cost of $30 per box and took employees 12 hours to complete. Employees earn $15
per hour. How much is the total cost of Job A45?
DM + DL + MOH = (5 x $30) + ($15 x 12) + ($9 x 12) = $438
Problem 62 - Holl Company incurred direct materials costs of $30,000 during the year. Manufacturing
overhead applied was $28,000 and is applied based on direct labor costs. The predetermined overhead
rate is 70%. How much are Holl Companys total manufacturing costs for the year?
$28,000 = .70(DL); so DL = $40,000;
DM + DL + MOH = total manufacturing costs for the year
$30,000 + $40,000 + $28,000 = $98,000
Problem 63 - Bell Manufacturing assigns overhead based on direct labor dollars. The company incurred the
following for Job B22: $2,500 for direct materials and 20 hours of direct labor. Employees are paid $11 per
hour. The following estimates were made by the company at the beginning of the year for 2004 operations:
Expected annual direct labor hours
10,000
Expected annual direct labor cost
$250,000
Expected manufacturing overhead costs
$300,000
How much is overhead applied to job B22?
Rate = $300,000/$250,000 = $1.20 per DL dollar;
Overhead applied at $1.20 for each dollar of labor incurred on the job: $1.20 x [$11 x 20] = $264
Problem 64 - Zing Manufacturing assigns overhead based on direct labor dollars. The company incurred the
following for job A24: $200 for direct materials and 30 hours of direct labor. Employees are paid $12 per
hour. The predetermined overhead rate was calculated at $1.10 based on direct labor dollars. Estimated
manufacturing overhead for the year was $38,000. The company expected to complete 100 jobs during
the year. How much is the total cost of job A24?
Direct materials
$200
Direct labor [30 hours x $12]
360
MOH [$1.10 x $360 of labor]
396
Total job cost
$956
Problem 65 - McCargo Repair has the job 26 ($4,000) in beginning work in process, and job 25 ($3,000) in
beginning finished goods. Additional job costs incurred during the year were: Job 27 $5,000, Job 28 $4,500,
and Job 29 $5,500. Jobs 26, 27 and 29 are completed. Jobs 25, 26 and 29 are sold. What is the cost of
ending finished goods?
Only job 27; Cost = $5,000
Jobs 26, 27, and 29 were transferred from WIP into FG to join job 25 during the year. Jobs (25, 26, and 29)
were moved out to CGS when sold. This leaves only job 27 in FG.
Problem 66 - McLeod Companys factory overhead account showed a $4,000 overapplied balance on
Raw materials
$25,000
Work in Process
20,000
Finished Goods
30,000
Cost of Goods Sold
450,000
Determine the balances of the accounts listed below after disposing the $4,000.
A.
B.
C.
D.
Cost of Goods Sold = $450,000 - $4,000 = $446,000

Work in Process = $20,000 Finished Goods = $30,000
Raw Materials = $25,000
Problem 67 - Timber Company uses a predetermined overhead rate of $7.00 per machine hour. If
estimated overhead costs were $350,000, overhead costs incurred were $360,000, estimated machine
hours were 50,000, and machine hours worked were 51,000 this year, how much is applied overhead?
Overhead is applied based on the actual activity. The activity for the $7 rate is 'machine hour.' Every time
one machine hour is incurred, $7 is added as MOH to WIP. The rate was calculated by taking total
estimated MOH costs divided by estimated machine hours:
$350,000/50,000 = $7. Applied = $7 x 51,000 = $357,000
Problem 68 - Fibbe Company estimated it would incur $65,000 of manufacturing overhead during 2004. An
analysis indicates that overhead applied totaled $68,000. The actual manufacturing overhead cost during
the year was $66,000. How much is over or under applied overhead?
Actual manufacturing overhead costs increase the MOH expense account. Applied MOH costs decrease it.
The difference is over or under applied. Note that the estimated MOH amount does not get recorded into
the accounting records.
Actual MOH costs
($66,000)
Applied MOH
68,000
Overapplied overhead
$2,000
Problem 69 - Calky, Inc. completed Job No. G23 during 2004. The job cost sheet listed the following:
Direct materials
$15,000
Direct labor
$5,000
$10,000
Units produced
1,000 units
Units sold
800 units
How much is the cost of the finished goods on hand from this job?
Accrual basis accounting tells us that the costs to produce are the costs that become inventory:
Costs of all 1,000 units = DM + DL + MOH = $15,000 + $5,000 + $10,000 = $30,000
Cost per unit to produce = $30,000/1,000 = $30 per unit
Cost of goods on hand (ending inventory) = $30 x (1,000 - 800) = $6,000
Problem 70 - Puerto Company allocates overhead based on a predetermined overhead rate of $3.00 per
direct labor hour. Job 51 required 2 cases of direct material at a cost of $10.00 per case and took
employees who earn $12.00 per hour a total of 3 hours to complete. What is the total cost of Job 51?
DM + DL + MOH = [2 cases x $10] + [3 hrs x $12] + [3 hrs. x $3] = $65
Problem 71 Singleton Company applies overhead based on an overhead rate of $0.25 per direct labor
dollar. Job 24 used $800 of direct materials, 620 machine hours, and 150 hours of direct labor. The labor
rate per hour is $18. How much is the cost of job 24?
Direct materials
$800
Direct labor (150*$18)
2,700
MOH ($2,700*$0.25)
675
Cost of job 24
$4,175
Problem 72 - Hang Companys factory overhead account showed a $9,000 underapplied overhead balance
on December 31. Other accounts showed the following balances at year end:
Raw materials
$100,000
Work in Process
120,000
Finished Goods
80,000
Cost of Goods Sold
2,200,000
How much will cost of goods sold be after disposing of the $9,000?
Cost of goods sold adjusted balance = $2,200,000 + $9,000 = $2,209,000
Underapplied overhead is added to the accounts to which it is allocated because not enough overhead was
allocated.
Problem 73 - Yetter Company applies manufacturing overhead based on direct labor hours. Information
concerning manufacturing overhead and labor for May of 2005 as follows:
Actual manufacturing
$180,000
overhead
$188,600
overhead
4,000 hours @ $23 =
$92,000
4,100 hours @ $22 =
$90,200
A. How much is the predetermined overhead rate?
Since the actual amount of overhead and actual direct labor incurred is not known until the end of the
period, we must use estimated amounts to determine the POHR.
Estimated MOH/ Estimated DLH = $188,600/$4,100 = $46 per Direct labor hour
B. How much overhead should be applied in total during May?
Each time one direct labor hour is incurred, we must apply (add) $46 of manufacturing overhead.
$46/DLH x 4,000 hours = $184,000
C.
How much is over or underapplied overhead at May 31?

Actual MOH - Applied MOH = Over/Underapplied
$180,000 - $184,000 = $4,000 overapplied
Problem 74 Zimmerman, Inc. manufactures calculators and employs a normal costing system. During
June, Zimmermans transactions and accounts included the following:
$124,000
12,000
7,000
52,000
72,800
82,000
$6,500
5,800

11,200
12,400
26,000
22,000
$ 6,500
Direct materials purchased ($124K + $12K)
136,000
(7,000)
(5,800)
$129,700
Materials issued to production (part A)
$129,700
52,000
72,800
254,500
26,000
(22,000)
$258,500
Because this is job costing and a normal costing system is used, only applied overhead is added to WIP.
Problem 75 - Niebaum Company uses a normal product costing system. Any amount of over or
underapplied overhead is material. Niebaum's accounts showed underappliedoverhead of $5,000 at
Raw materials
$ 30,000
Work in process
50,000
Finished goods
80,000
Sales revenue
830,000
Cost of goods sold
620,000
Calculate gross profit after the disposal of under or overapplied manufacturing overhead.
Sales
$830,000
Cost of goods sold:
$620,000
Adjustment for underapplied overhead
5,000
New cost of goods sold
625,000
Gross Profit
$205,000
Problem 77 - Dasani, Inc. considers any over or underapplied overhead to be immaterial.
reported the following amounts for 2006:
$88,00
0
83,00
0
6,00 Selling and administrative expenses
0
incurred
42,00 Other manufacturing overhead costs
Direct labor used
0
incurred
5,000
45,000 Ending finished goods inventory
applied
A.
The company
$17,00
0
19,000
16,000
36,000
7,000
10,000
Calculate total manufacturing costs if the company uses an actual costing system.
$83,000
Direct labor cost
42,000
Manufacturing overhead:
6,000
5,000
36,000

$172,000
Note that an actual costing system allocates the actual manufacturing overhead costs directly to WIP.
B.
Calculate the cost of goods manufactured assuming a normal costing system.

Direct labor cost
Manufacturing overhead applied
Add Beginning WIP
Less Ending WIP
CGM
$83,000
42,000
45,000
$170,000
17,000
(19,000)
$168,000
Problem 78 - Winfrey, Inc. manufactures calculators. The company employs a normal costing system and
keep all materials in a materials storeroom. Wallaces related transactions for June follow:
$17,800 Work in process inventory, beginning
Materials purchased on account
42,500
Materials purchased for cash
11,500
Payment made for materials purchased in May
3,300
Total manufacturing overhead cost
23,500
How much is the cost of direct materials issued to production during June?
Direct materials purchased ($42,500 + $11,500)
$ 1,400
54,000
(2,200)
(1,150)
$52,050
Problem 79 - Daniels Manufacturing used 30 hours of direct labor and $340 of direct materials for job 66.
Employees are paid $13 per hour. Fringe benefits cost $3 per hour. The overhead rate was calculated at
$24 based on direct labor hour. Estimated manufacturing overhead for the year was $52,000. The
company expected to complete 60 jobs during the year. How much is the total cost of job 66?
Direct materials
$ 340
Direct labor: ($13 + $3)*30
480
MOH applied: $24*30 DLH
720
Total job cost
$1,540
Problem 80 Salonga Company applies manufacturing overhead based on direct labor dollars. Information
for June follows:
5,100 hours @ $20 = $102,000
5,240 hours @ $20 = $104,800
$172,920
$178,160
Direct materials incurred
$234,000
A. How much is the manufacturing overhead rate?
Estimated MOH / Estimated DL$ = $178.160 / $104,800 = $1.70 per DL$
Note that both amounts are estimated because this rate is created at the beginning of the accounting
period and actual amounts are not know.
B. How much overhead did Salonga apply during June?
MOH rate * Actual DL$ = $1.70*$102,000 = $173,400
C. 1. Post all necessary amounts to the t-account in
which you would find the amount of over or
underapplied overhead at June 30.
2. Label the account with the correct name.
Manufacturing Overhead
172,920
173,400
$10,20
11,100
1,400
1,150
2,200
480 Overapplied
3. Calculate the balance and label if over or
underapplied.
D. Briefly state the two reasons that manufacturing overhead is applied.
1-Timely information is needed for decision making and the actual OH cost is not know until the end of the
period.
2- It is not feasible nor in other cases possible to trace indirect costs to products or services.
Dec. 31,
Dec. 31,
2004
2003
Work in process
$ 15,000
$ 12,000
inventory
Finished goods
45,000
51,000
inventory
Materials purchased
331,000
?
24,000
325,000
132,000
incurred
Direct labor
120,000
Selling expenses
70,000
Cinotti uses an actual cost system. Calculate the following:
A.
B.

A. Similar to the calculation of a bank balance--beginning plus increases less decreases equals ending
balance.
$24,000
Add Materials purchased
331,000
Less direct materials used
(325,000)
$30,000
B. Total manufacturing costs consist of the three manufacturing costs incurred in production which are
added to work in process during the year:
$325,000
132,000
Direct labor
120,000
Total manufacturing costs incurred
$577,000

Cost o Goods Manufacturing

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ACG 2071 Managerial Accounting

Problem 4 Culvyhouse Company uses an actual product

costing system. It reported the following amounts

+ Raw material purchases

B. Calculate the cost of goods manufactured.

Direct labor used

A. Calculate the cost of materials used in production.

B. Calculate the cost of goods manufactured.

Less ending work in process

A. How much is ending raw materials at August 31

Problem 14 - Eng Manufacturing Company developed the following data:

Raw materials inventory at 12-31-04

Total manufacturing costs added to Work in Process Inventory during 2004

Cost of goods manufactured during 2004

Manufacturing overhead cost incurred

Raw materials, beginning

A. How much is ending raw materials at June 30 $7,100

Calculate total product costs assuming 10,000 combs are produced.

Beginning WIP + Total manufacturing costs - CGM = Ending WIP

Direct labor cost incurred

Work in process inventory, beginning

A. Calculate the cost of goods manufactured.

1. Increases when manufacturing overhead is incurred

Raw materials purchased

Direct labor used

A. Calculate the cost of materials used in production.

B. Calculate the cost of goods manufactured.

Overapplied overhead ($55,500-$56,100)

C. How much is total inventory on the June 30th balance sheet?

D. How much is over or underapplied overhead for May?

had the following balances in selected accounts

Information concerning manufacturing overhead and

labor for the year follows:

A. Calculate the predetermined manufacturing overhead rate.

B. How much is cost of goods manufactured? $67,950

Manufacturing overhead cost applied

Raw materials inventory at 12-31-04

Total manufacturing costs added to Work in Process Inventory during 2004

Cost of goods manufactured during 2004

Manufacturing overhead cost applied

D. Is this company using an actual or normal costing system?

Cost of Goods Sold

Allocated to CGS: $425,000/$500,000 x $30,000 = $25,500

Manufacturing overhead ($16 x 20)

Cost of Goods Sold = $450,000 - $4,000 = $446,000

How much is over or underapplied overhead at May 31?

Finished goods inventory, beginning

Total manufacturing costs

Calculate the cost of goods manufactured assuming a normal costing system.

Raw materials inventory at 12-31-04

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