Question

  

Assignment #3 _ Product Costing

PART 1 (25 marks)

G-Force Woodcraft manufactures customized household furnishings. The company uses a perpetual inventory system and has a highly labour intensive production process, so it assigns manufacturing overhead based on direct labour cost. G-Force expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2016.

At the end of December 2018, G-Force reported work in process inventory (Job 551) of $93,000

The following events occurred during January 2019.

i) Purchased materials on account, $392,000

ii) Incurred manufacturing wages of $400,000

iii) Requisitioneddirectmaterialsanduseddirectlabourinmanufacturing

Job 551 Job 552 Job 553 Job 554

Direct Materials Direct Labour

$70,200 $61,200 97,500 115,600

105,300 78,200 117,000 85,000

iv) Issuedindirectmaterialstoproduction,$30,000

v) Charged indirect manufacturing wages to production, $60,000

vi) Othermanufacturingoverheadcostsincurredonunits551to554amountedto$134,000

vii) Allocated overheads to jobs at the predetermined rate

viii)Units completed: 551, 552 & 554

ix) Sold units 551 & 554 (billed customers at a margin of 331⁄3% on sales)

Required:

(a) Compute G-Force’s predetermined manufacturing overhead rate for 2019.

(b) Calculate the total manufacturing costs for each job.

(10 marks)

(d) Post the manufacturing overhead transactions to the Manufacturing Overhead T-account, clearly showing the balance before closing the account. State the journal entries necessary to dispose of

the variance. Assume that the manufacturing overhead variance is immaterial. (4 marks)

(e) What is the balance in the Cost of Goods Sold account after the adjustment? (2 marks)

(f) Compute G-Forcer’s gross profit earned on the jobs, after adjusting for the manufacturing overhead variance (11⁄2 marks)

(g) Post the appropriate entries to Work in Process Inventory account & determine the account balance on January 31. (2 marks)

(c) Using the total figures, record the above transactions in the general journal.

(11⁄2 marks)

(4 marks)

“Don’t wait for your boat of success to come in; row out to meet it” Uriel Salmon Page 2

Assignment #3 _ Product Costing

PART 2 (25 marks)

Wilkin Products Ltd. makes a single product using two processes. Quality control check takes place during the process, at which point, rejected units are separated from good units.

The following details relate to production for the month of April 20X7, for Process 2.

(i) Work-in-process, beginning inventory: -0-

(ii) Transfer from Process 1: 15,000 units valued at $51.40 each

(iii) Other manufacturing costs incurred during April:

Direct material added Direct labour Manufacturing overhead

$513,000 $365,000 $211,000

(iv) Normal losses were estimated to be 5% of input during the period. The scrap value of any loss is $40 per unit.

(v) At inspection 1,750 units were rejected as scrap. These units had reached the following degree of completion:

Input material 100% Direct material added 50% Conversion costs 30%

(vi) 12,000 units were completed and transferred to Finished Goods Inventory.

(vii) Work-in-process at the end of April had reached the following degree of completion:

Input material 100% Direct material added 80% Conversion costs 40%

Required:

(a) Prepare a statement of equivalent production to determine the equivalent units for direct materials (From Process 1 & Direct Material Added), and conversion costs and the cost per equivalent unit for direct materials and conversion costs. (10 marks)

(b) Calculate the:

- Total cost of units completed and transferred to Finished Goods inventory

- Cost of abnormal losses

- Cost of ending work-in-process inventory in Process 2 (3 marks)

(c) Prepare Wilkin’s Work-In-Process Inventory - Process 2 T-account, clearly showing the ending balance. (5 marks)

(d) State the journal entries necessary to record the assignment of direct materials, direct manufacturing wages and manufacturing overhead applied to Process 2. Also give the journal entries to record the cost of goods completed and transferred to finished goods. (5 marks)

(e) Given that 20% of the unexpected losses were as a result of pilferage, prepare the abnormal spoilage statement, clearly showing Wilkin Product’s true loss. (2 marks)

  

Answer 1

Solved first four subparts as per HomeworkLib policy. Please post remaining separately:

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Part a
Estimated manufacturing overheads	a	$                          2,205,000
Estimated direct labor cost	b	$                          3,150,000
Predetermined overhead rate	a/b	70.00%	of DL
Part b
		Job 551	Job 552	Job 553	Job 554	Total
Beginning WIP		$                                93,000				$         93,000
Direct Material		$                                70,200	$      61,200	$      97,500	$   115,600	$       344,500
Direct Labor		$                              105,300	$      78,200	$   117,000	$      85,000	$       385,500
Overhead applied 70% of DL		$                                73,710	$      54,740	$      81,900	$      59,500	$       269,850
Total Manufacturing cost		$                              342,210	$   194,140	$   296,400	$   260,100	$   1,092,850
Part d
Manufacturing overheads
Debit		Credit
Indirect Material	$      30,000	Applied overheads:
Indirect manufacturing wages	$      60,000	Job 551	$      73,710
Other Overheads	$   134,000	Job 552	$      54,740
		Job 553	$      81,900
		Job 554	$      59,500
		Ending Balance	$      45,850
Manufacturing overheads	$      45,850
Cost of Goods Sold		$                                45,850
(To dispose off overapplied overheads)
Part e
		Job 551	Job 554	Total
Total Manufacturing cost		$                              342,210	$   260,100	$   602,310
Less: Overapplied overheads				$   (45,850)
Balance in COGS				$   556,460