Question # 1 (A)

Case 1 case 2 Case 3

Raw Material

Beginning inventory 24,600 8,000 45,000

Ending inventory 20,000 12,400 59,200

Purchases 262,000 19,400 248,400

Direct Material used 266,600 15,000 234,200

Work in process

Beginning inventory 11,600 12,560 93,780

Ending inventory 12,000 12,560 85,200

Finished goods

Beginning inventory 254,200 2,800 334,480

Ending inventory 173,400 4,600 367,400

Cost of goods manufactured 679,200 58,000 1,518,220

Total manufacturing cost 679,600 58,000 1,526,800

Cost of goods sold 760,000 56,200 1,485,300

Gross margin 328,000 13,400 1,874,600

Direct labor 173,000 23,200 862,000

Manufacturing overhead 240,000 19,800 430,600

Sales 1,088,000 69,600 3,359,900

Calculation for Question # 01(A)

Raw Material

Direct Material Used = Beginning inventory + Purchases - Ending Inventory

= 24,600 + 262,000 - 20,000

= 266,600

Purchases = Direct Material Used+ Ending Inventory - Beginning Inventory

= 15,000 + 12,400 - 8,000

= 19,400

Ending Inventory = Beginning inventory + Purchases - Direct Material Used

= 45,000 + 248,400 - 234,200

= 59,200

Work in Process

Beginning Inventory = Manufacturing Cost + Ending Inventory - Cost of goods Manufactured

= 1,526,800 + 85,200 - 1,518,220

= 93,780

Direct Labor

Direct Labor = Prime Cost - Direct Material Used

Prime Cost = Manufacturing Cost - Manufacturing Overhead

= 1,526,800 - 430,600

= 1,096,200

Direct Labor = Prime Cost - Direct Material Used

Direct Labor = 1,096,200 - 234,200

= 862,000
Finished Goods

Ending Inventory = Cost of goods Manufactured+ Beginning Inventory- Cost of Goods Sold

= 679,200 + 254,200 - 760,000

= 173,400

Cost of Goods Sold = Cost of goods Manufactured+ Beginning Inventory- Ending Inventory

= 1,518,220 + 334,480 - 367,400

= 1,485,300

Question # 1 (B)

A Hotel pays the phone company 100 per month plus .25 for each call made during January
6,000 calls were made in February 5,000 calls were made

Solution

Part 1

Hotel Phone’s bill for January = Fixed Cost + Variable Cost

= 100 + .25(6000)

= 100 + 1500

= 1600

Hotel Phone’s bill for February = Fixed Cost + Variable Cost

= 100 + .25(5000)

= 100 + 1250

= 1350

Part 2

Cost per Phone call in January = Total Phone bill / No. of calls

= 1600 / 6000

= 0.26667
Cost per Phone call in February = Total Phone bill / No. of calls

= 1350 / 5000

= 0.27

Part 3

Variable Cost of January Phone’s bill= 1500

Fixed Cost of January Phone’s bill = 100

Total Phone’s Bill of January = 1600

Part 4

Average cost of Phone call in January= Total Phone bill / No. of calls

= 1600 / 6000

= 0.26667

Question # 01 (C)

Part 1

Statement of Goods Manufactured

Opening Inventory (Materials) 12,500

Add: Purchases 245,000
Less: Ending Inventory (32,000)
Direct Material Used 225,500
Add: Direct Labor 125,000
Prime Cost 350,500
Add: Manufacturing Overhead 74,100
Manufacturing Cost 424,600
Add: Work in Process (Opening) 6,300
Less: Work in Process (Closing) (16,500)
Cost of Goods Manufactured 414,400

Manufacturing Overhead Calculation:

other factory overhead 17,600
Repair and maintenance 10,000

Insurance-factory 12,000
Depreciation-factory 22,000
Indirect material 8,000

Indirect labor 4,500

Manufacturing Overhead 74,100

Part 2
For income statement, we need to calculate Cost of Goods Sold
Cost of Goods Sold = Cost of Goods Manufactured + Finished Goods (opening) -
Finished Goods (closing)
= 414,400 + 12,500 - 25,000
= 401,900
Income Statement
Sales 678,600
Less: Sales Return (15,000)
Net Sales 663,600
Less: Cost of Goods Sold (401,900)
Gross Profit 261,700
Less: Administrative Expense (70,000)
Less: Marketing Expense (55,000)
Net Income 136,700

Question # 01 (D)
Calculations extracted from the data
As we know,
Total cost of Manufacturing = Direct Material + Direct Labor+ Factory Overhead
Since we have to find all these three with the given data
First, we have to find applied Factory Overhead
Applied factory overhead is 27% of total manufacturing cost
Since, Applied factory overhead = 27% of 1,000,000
Therefore, Applied Factory overhead = 270,000
Now, we have to find Direct Labor from the given data
That is, applied factory overhead is equal to 75% of Direct Labor.
So, 270,000 = 75% * Direct Labor
270,000 / 75% = Direct Labor
Direct Labor = 360,000
Now, we move to find Direct Material from the equation, That is,
Total cost of Manufacturing = Direct Material + Direct Labor+ Factory Overhead
1,000,000 = Direct Material + 360,000 + 270,000
Direct Material = 1,000,000 - 360,000 - 270,000
= 370,000
Now we have to find opening and closing inventory of work in process
So, as per the given information, opening inventory of work in process is 80% of closing
inventory of work in process, so we can assume closing inventory as X. So, the opening
inventory of work in process would be 80% of X, or we can write as 0.8X.

As we know,

Cost of Goods Manufactured = Total manufacturing cost + Opening inventory -

Ending Inventory

970,000 = 1,000,000 + 0.8X - X

970,000 = 1,000,000 - 0.2X

0.2X = 1,000,000 - 970,000

0.2X = 30,000

X = 30,000 / 0.2

X = 150,000

So, Closing Inventory of work in process is 150,000

And, Opening Inventory of work in process is 80% of Closing Inventory i.e. 80% of 150,000,
and it would be 120,000

Statement of Goods Manufactured

 Direct Material Used 370,000
Add: Direct Labor 360,000
Prime Cost 730,000
Add: Manufacturing Overhead 270,000
Manufacturing Cost 1,000,000
Add: Work in Process (Opening) 120,000
Less: Work in Process (Closing) (150,000)
Cost of Goods Manufactured 970,000

Part 2

Journal Entries

Particulars Debit Credit

Work in process 370,000
Raw Material Used 370,000

Work in Process 360,000

Direct Labor Cost 360,000

Work in process 270,000

Factory Overhead 270,000

Question # 02(A)

Cost of Work in process Beginning

Job # 103, 104, 105, 106 were in Work in process beginning

i.e. 1,000 + 2,500 +7,500 +10,000

= 21,000

Cost of Work in Process Ending

Job # 02 is not completed yet so it must be pending in Work in process ending inventory

i.e. = 7,500

Cost of Finished Goods

Job # 103, 104, 105, and 106 were finished during the period

i.e. 1,000 + 2,500 + 4,500 + 3,000 + 7,500 + 10,000

= 28,500
Cost of Goods Sold

Job # 101 and 105 were sold during the period

i.e. 5,000 + 7,000

= 12,000

Cost of Finished Goods Beginning

Job # 101 were in finished goods inventory at the beginning

i.e. = 5,000

Cost of Finished Goods Ending

Job # 103, 104 and 106 are completed during the period and yet not sold.

i.e. 1,000 + 2,500 + 4,500 + 3,000 + 10,000

= 21,000
Sales

Job # 101 and 105 are sold at a price 20% above than the cost. So, it would be 120% of their
cost.

i.e. (5,000 + 7,500) * 120%

= 15,000

Question # 02(B)

Part (a)

Total Cost incurred in job in the month of March

= Direct material + Direct Labor + Factory Overhead

= 37,500 + (1800*15) + (1800*10)

= 37,500 + 27,000 + 18,000

= 82,500

Part (b)

Cost of Goods Manufactured

First, we have to find Work in process ending for Job # 23, as it is only job that is uncompleted
at the end of the period.

= Direct material + Direct Labor + Factory Overhead

= 15,000 + 9,000 + (9,000 / 15) * 10

= 15,000 + 9,000 + 6,000

= 30,000

Now we have to find work in process beginning Inventory

For Job # 18

= Direct material + Direct Labor + Factory Overhead

= 50,000 + 36,000 + (3000*3)

= 50,000 + 36,000 + 9,000

= 95,000
For Job # 19

= Direct material + Direct Labor + Factory Overhead

= 18,000 + 12,000 + (8000*5)

= 18,000 + 12,000 + 40,000

= 70,000

Now, we can easily Find Cost of Goods Manufactured

= Beginning Work in process + Cost incurred during March- Ending Work in process

= (95,000 + 70,000) + 82,500 - 30,000

= 165,000 + 82,500 - 30,000

= 217,500

Part (d)

Cost of Goods Sold

= Cost of Goods Manufactured + Beginning Finished Goods - Ending Finished Goods

= 217,500 +0 - 27,250

= 190,250

Part (c)

Jobs were sold at profit of 20% on cost, so the sales price of Jobs were 120% of the cost

i.e. = Cost of Goods Sold * 120%

= 190,250 * 120%

= 228,300