The Daniels Tool & Die Corporation has been in existence for
a little over three years. The company’s sales have been increasing
each year as it builds a reputation. The company manufactures dies
to its customers’ specifications and therefore uses a job-order
cost system. Factory overhead is applied to the jobs based on
direct labour hours—the absorption-costing (full) method.
Overapplied or underapplied overhead is treated as an adjustment to
Cost of Goods Sold. The company’s income statements and other data
for the last two years are as follows:
DANIELS TOOL & DIE CORPORATION 2015–2016 Comparative Income Statements |
||||||
2015 | 2016 | |||||
Sales | $833,900 | $1,015,100 | ||||
Cost of goods sold | ||||||
Finished goods, January 1 | 24,000 | 17,800 | ||||
Cost of goods manufactured | 544,600 | 654,400 | ||||
Total available | 568,600 | 672,200 | ||||
Finished goods, December 31 | 17,800 | 13,300 | ||||
Cost of goods sold before overhead adjustment | 550,800 | 658,900 | ||||
Underapplied factory overhead | 35,800 | 14,100 | ||||
Cost of goods sold | 586,600 | 673,000 | ||||
Gross profit | 247,300 | 342,100 | ||||
Selling expenses | 81,900 | 94,500 | ||||
Administrative expenses | 69,000 | 74,400 | ||||
Total operating expenses | 150,900 | 168,900 | ||||
Operating income | $96,400 | $173,200 |
Daniels Tool & Die Corporation Inventory Balances | |||||||||
January 1, 2015 | December 31, 2015 | December 31, 2016 | |||||||
Raw material | $21,700 | $29,900 | $10,400 | ||||||
Work in process | $40,500 | $47,700 | $63,400 | ||||||
Direct labour hours (used in WIP) | 1,350 | 1,630 | 2,280 | ||||||
Finished goods | $24,000 | $17,800 | $13,300 | ||||||
Direct labour hours (used in FG) | 1,470 | 1,010 | 840 |
Daniels used the same predetermined overhead rate in applying
overhead to its production orders in both 2015 and 2016. The rate
was based on the following estimates:
Fixed factory overhead | $24,790 | |
Variable factory overhead | $153,698 | |
Direct labour hours (used in WIP) | 24,790 | |
Direct labour costs (used in FG) | $148,740 |
In 2015 and 2016, the actual direct labour hours used were 20,200
and 23,800, respectively. Raw materials put into production were
$291,500 in 2015 and $370,600 in 2016. The actual fixed overhead
was $42,300 for 2015 and $23,240 for 2016, and the planned direct
labour rate was the direct labour achieved.
For both years, all of the administrative costs were fixed. The
variable portion of the selling expenses results from a 5%
commission that is paid as a percentage of the sales revenue.
1. For the year ended December 31, 2016, prepare a revised income statement for Daniels Tool & Die Corporation using the variable-costing method. (Round answers to 0 decimal places, e.g. 5,275.)
Ans : The Daniels Tool & Die Corporation
Revised Statement of Income as per variable cost method |
|||
Particulars | Amount | ||
Sales (A) | $1,015,100 | ||
Variable cost of goods sold |
|||
Raw material | $390,100 | ||
Labor cost | $143,820 | ||
Prime cost | $533,920 | ||
Variable factory overheads |
$115,840 | ||
Sales commission ($1,015,100*5%) |
$50,755 | ||
Total Variable cost (B) | $700,515 | ||
Fixed cost | |||
Fixed factory overheads |
$23,240 | ||
Administration expenses |
$74,400 | ||
Selling expenses other then sales commission | ($94,500-$50,755) |
$43,745 |
|
Total fixed Cost (C) | $141,385 | ||
Operating Income (A-B-C) | $173,200 |
Working Note
1)
Direct labor hour rate |
Estimated Direct labor cost / Estimated labor hours |
$148,740/24,790 | |
$6 |
in the given case
Direct labor hours (used in WIP) |
24,790 |
However Direct labor hour used in WIP it is actually Estimated Direct labor cost .
2)
Computation of Direct labor Cost |
|
opening stock (hours) | 1010 |
production (hours) | 23800 |
less | |
Finished goods Labor hour | 840 |
Labor hrs used for production of cost of goods sold | 23970 |
$6 | |
Labor cost | $143,820 |
3)
Raw material cost |
|
Opening Stock | $29,900 |
Raw material purchased | $370,600 |
Closing Stock | $10,400 |
$390,100 |
4)
Computation of factory overheads |
Amount ($) | |
Cost of goods sold before overhead adjustment |
$658,900 | |
Underapplied factory overhead |
$14,100 | |
Cost of goods sold |
$673,000 | |
less | ||
Raw material cost |
$390,100 | |
Labor cost | $143,820 | |
Factory overheads |
$139,080 | |
less | ||
Actual fixed factory overheads |
$23,240 | |
Variable factory overhead |
$115,840 |
The Daniels Tool & Die Corporation has been in existence for a little over three years....
The Daniels Tool & Die Corporation has been in existence for a little over three years. The company’s sales have been increasing each year as it builds a reputation. The company manufactures dies to its customers’ specifications and therefore uses a job-order cost system. Factory overhead is applied to the jobs based on direct labour hours—the absorption-costing (full) method. Overapplied or underapplied overhead is treated as an adjustment to Cost of Goods Sold. The company’s income statements and other data...
Problem 8-35A (Part Level Submission) The Daniels Tool & Die Corporation has been in existence for a little over three years. The company’s sales have been increasing each year as it builds a reputation. The company manufactures dies to its customers’ specifications and therefore uses a job-order cost system. Factory overhead is applied to the jobs based on direct labour hours—the absorption-costing (full) method. Overapplied or underapplied overhead is treated as an adjustment to Cost of Goods Sold. The company’s...
The Daniels Tool & Die Corporation has been in existence for a little over three years. The company's sales have been increasing each year as it builds a reputation. The company manufactures dies to its customers' specifications and therefore uses a job-order cost system. Factory overhead is applied to the jobs based on direct labour hours—the absorption-costing (full) method. Over-applied or under-applied overhead is treated as an adjustment to cost of goods sold. The company's income statements and other data...
Question follows, fill in the blank: Thank you, I really appreciate it!! Problem 8-35A (Part Level Submission) The Daniels Tool & Die Corporation has been in existence for a little over three years. The company's sales have been increasing each year as it builds a reputation. The company manufactures dies to its customers' specifications and therefore uses a job-order cost system. Factory overhead is applied to the jobs based on direct labour hours-the absorption-costing (full) method. Overapplied or underapplied overhead...
The administrative offices and manufacturing plant of Billings Tool & Die share the same building. The following information (in $000s) appears in the accounting records for last year. $ 1,659 900 1,160 855 16 13 3,670 477 Administrative costs Building and machine depreciation (75% of this amount is for factory) Building utilities (90% of this amount is for factory) Direct labor Direct materials inventory, December 31 Direct materials inventory, January 1 Direct materials purchases Factory supervision Finished goods inventory, December...
Axteks Corporation has the following cost records for the year ended December 31, 2020: Indirect factory labour $5,180 Direct materials used 252,700 Work in process (1/1/2020) 31,900 Work in process (12/31/2020) 25,800 Finished goods (1/1/2020) 35,300 Finished goods (12/31/2020) 29,200 Factory utilities 41,600 Depreciation, factory equipment 34,800 Direct labour 301,400 Indirect materials 22,300 Factory manager’s salary 63,100 Selling and administrative expenses 348,000 Net sales 1,233,000 Factory machinery rent 42,800 Prepare a cost of goods manufactured schedule for 2020. Axteks Corporation...
Boston Company has the following balances as of the year ended December 31, 2015. Direct Materials Inventory $15,000 Dr. WIP Inventory 34,500 Dr. Finished Goods Inventory 49,500 Dr. Cost of Goods Sold 74,500 Dr. Additional information is as follows: Cost of direct materials purchased during 2015 $41,000 Cost of direct materials requisitioned in 2015 47,000 Cost of goods completed during 2015 102,000 Factory overhead applied (120% of direct labour) 48,000 Underapplied factory overhead 4,000 Required (SHOW ALL WORK):a. Compute beginning direct materials inventory.b. Compute beginning WIP inventory.c. Compute beginning finished goods inventory.d. Compute actual factory overhead incurred.
The administrative offices and manufacturing plant of Billings Tool & Die share the same building. The following information (in $000s) appears in the accounting records for last year: Administrative costs $ 1,651 Building and machine depreciation (75% of this amount is for factory) 1,000 Building utilities (90% of this amount is for factory) 1,330 Direct labor 835 Direct materials inventory, December 31 12 Direct materials inventory, January 1 10 Direct materials purchases 3,690 Factory supervision 491 Finished goods inventory,...
Question 7 xteks Corporation has the following cost records for the year ended December 31, 2020 Indirect factory labour Direct materials used Work in process (1/1/2020) $5,480 253,600 31,000 27,200 35,300 29,100 41,500 Work in process (12/31/2020) Finished goods (1/1/2020) Finished goods (12/31/2020) Factory utilities Depreciation, factory equipment Direct labour 34,400 303,300 Indirect materials Factory manager's salary Selling and administrative expenses Net sales Factory machinery rent 22,600 63,100 341,300 1,243,000 42,900 Prepare a cost of goods manufactured schedule for 2020....
Daniels Co. produced 150,000 lamps during the past calendar year. Daniels had 2,500 floor lamps in finished goods inventory at the beginning of the year. At the end of the year, there were 11,500 floor lamps in finished goods inventory. The lamps sell for $50 each. Daniels accounting records provide the following information for the past year: Purchases of direct materials $1,675,000 Direct materials inventory, January 1 380,000 Direct materials inventory, December 31 327,000 Direct labor 2,000,000 Indirect labor...