eBook

Cost of Materials Issuances

An incomplete subsidiary ledger of wire cable for July is as follows:

a. Complete the materials issuances and balances for the wire cable subsidiary ledger. Assume a first-in, first-out cost flow.

Received Issued Balance Receiving
Report
Number

Quantity

Unit Price Materials
Requisition
Number

Quantity

Amount

Date

Quantity

Amount

Unit Price July 1 250 $1,500 $ 6.00 309 400 $7.50 July 5 fill in the blank 1 $fill in the blank 2 $fill in the blank 3 fill in the blank 4 $fill in the blank 5 $fill in the blank 6 7401 480 $fill in the blank 7 July 10 fill in the blank 8 $fill in the blank 9 $fill in the blank 10 422 800 $8.00 July 20 fill in the blank 11 $fill in the blank 12 $fill in the blank 13 fill in the blank 14 $fill in the blank 15 $fill in the blank 16 7639 650 $fill in the blank 17 July 26 fill in the blank 18 $fill in the blank 19 $fill in the blank 20

b. Determine the balance of wire cable at the end of July.
$fill in the blank 21

c. Determine the total amount of materials transferred to Work in Process for July.
$fill in the blank 22

d. All of the following statements about a materials ledger are true except:

A materials ledger is a subsidiary ledger. A materials ledger contains the individual accounts for each type of material. Comparing quantities on hand as reported in the materials ledger with predetermined order points enables management to order materials before a lack of materials causes idle time. A materials ledger cannot assist management with information about materials on order. A materials ledger cannot assist management with information about materials on order.

eBook

Financial Statements of a Manufacturing Firm

The following events took place for Bridger Bikes Inc. during July 20Y6, the first month of operations, as a producer of road bikes:

• Purchased $340,000 of materials.
• Used $329,000 of direct materials in production.
• Incurred $160,000 of direct labor wages.
• Applied factory overhead at a rate of 80% of direct labor cost.
• Transferred $590,000 of work in process to finished goods.
• Sold goods with a cost of $550,000.
• Sold goods for $918,000.
• Incurred $132,500 of selling expenses.
• Incurred $80,000 of administrative expenses.

a. Prepare the July income statement for Bridger Bikes Inc. Assume that Bridger Bikes uses the perpetual inventory method.

Bridger Bikes Inc. Income Statement
For the Month Ended July 31, 20Y6

Cash Gross profit Income from operations Revenues Selling expenses Revenues

$Revenues

Administrative expenses Cash Cost of goods sold Gross profit Income from operations Cost of goods sold

Cost of goods sold

Cost of goods sold Gross profit Income from operations Revenues Selling expenses Gross profit

$Gross profit

Cost of goods sold Gross profit Income from operations Revenues Selling expenses Selling expenses

$Selling expenses

Administrative expenses Cost of goods sold Gross profit Income from operations Revenues Administrative expenses

Administrative expenses Administrative expenses

Administrative expenses Cost of goods sold Gross profit Income from operations Revenues Income from operations

$Income from operations Feedback

Revenues less the cost of goods sold is equal to gross profit. Gross profit less the selling and administrative expenses is equal to the income from operations.

b. Determine the inventory balances at the end of the first month of operations.

Materials inventory $fill in the blank cc2b5608b03df99_1 Work-in-process inventory $fill in the blank cc2b5608b03df99_2 Finished goods inventory $fill in the blank cc2b5608b03df99_3 Feedback

eBook

Activity-Based Costing for a Hospital

Deer Lodge Regional Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:

Activity Activity Rate Room and meals $225 per day Radiology $300 per image Pharmacy $50 per physician order Chemistry lab $125 per test Operating room $3,000 per operating room hour

The records of two representative patients were analyzed, using the activity rates. The activity information associated with the two patients is as follows:

Patient Franklin Patient Kramer Number of days 1 days 4 days Number of images 2 images 5 images Number of physician orders 1 orders 8 orders Number of tests 2 tests 5 tests Number of operating room hours 0.6 hours 2.8 hours

Determine the activity cost associated with each patient.

Activity Cost Patient Franklin $fill in the blank 1 Patient Kramer

eBook

Activity-Based Costing in an Insurance Company

Umbrella Insurance Company carries three major lines of insurance: auto, workers’ compensation, and homeowners. The company has prepared the following report for 20Y2:

Umbrella Insurance Company Product Profitability Report For the Year Ended December 31, 20Y2
Auto Workers’
Compensation
Homeowners Premium revenue $ 7,200,000 $ 6,500,000 $ 9,200,000 Less estimated claims (5,040,000) (4,550,000) (6,440,000) Underwriting income $ 2,160,000 $ 1,950,000 $ 2,760,000

Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows:

Activity Rates New policy processing $160 per new policy Cancellation processing $240 per cancellation Claim audits $500 per claim audit Claim disbursements processing $120 per disbursement Premium collection processing $25 per premium collected

Activity-base usage data for each line of insurance were retrieved from the corporate records and are shown below.

Auto Workers’ Comp. Homeowners Number of new policies 1,500 1,450 4,100 Number of canceled policies 350 250 2,000 Number of audited claims 320 100 700 Number of claim disbursements 400 180 750 Number of premiums collected 7,500 1,500 12,000

a. Complete the product profitability report through the administrative activities.

Umbrella Insurance Company Product Profitability Report
For the Year Ended December 31, 20Y2
Auto Workers’ Comp. Homeowners Premium revenue $7,200,000 $6,500,000 $9,200,000 Less estimated claims (5,040,000) (4,550,000) (6,440,000) Underwriting income $2,160,000 $1,950,000 $2,760,000 Administrative activities: New policy processing $fill in the blank f9379eff1f8efb0_1 $fill in the blank f9379eff1f8efb0_2 $fill in the blank f9379eff1f8efb0_3 Cancellation processing fill in the blank f9379eff1f8efb0_4 fill in the blank f9379eff1f8efb0_5 fill in the blank f9379eff1f8efb0_6 Claim audits fill in the blank f9379eff1f8efb0_7 fill in the blank f9379eff1f8efb0_8 fill in the blank f9379eff1f8efb0_9 Claim disbursements processing fill in the blank f9379eff1f8efb0_10 fill in the blank f9379eff1f8efb0_11 fill in the blank f9379eff1f8efb0_12 Premium collection processing fill in the blank f9379eff1f8efb0_13 fill in the blank f9379eff1f8efb0_14 fill in the blank f9379eff1f8efb0_15 Total administrative expenses $fill in the blank f9379eff1f8efb0_16 $fill in the blank f9379eff1f8efb0_17 $fill in the blank f9379eff1f8efb0_18 Operating income $fill in the blank f9379eff1f8efb0_19 $fill in the blank f9379eff1f8efb0_20 $fill in the blank f9379eff1f8efb0_21 Feedback

a. Underwriting income less administrative expenses is equal to income from operations.

b. Determine the underwriting income as a percent of premium revenue.

Auto fill in the blank 817287fcffbefdc_1 % Workers’ Comp. fill in the blank 817287fcffbefdc_2 % Homeowners fill in the blank 817287fcffbefdc_3 %

c. Determine the operating income as a percent of premium revenue, rounded to one decimal place.

Auto fill in the blank 817287fcffbefdc_4 % Workers’ Comp. fill in the blank 817287fcffbefdc_5 % Homeowners fill in the blank 817287fcffbefdc_6 %

d. All of the following are true regarding the three insurance lines except:

Each line has a different percentage of underwriting income to premium revenue. The lines consume administrative activities differently. The Homeowners line has a much higher rate of cancellation relative to the other two lines. The Workers’ Compensation line consumes the fewest administrative activities. Each line has a different percentage of underwriting income to premium revenue.

eBook

Schedules for Unfinished and Completed Jobs

Waddell Equipment Company uses a job order cost system. The following data summarize the operations related to production for April 20Y4, the first month of operations:

1. Materials purchased on account, $36,000.
2. Materials requisitioned and factory labor used: Job Materials Factory Labor No. 401 $5,500 $6,650 No. 402 4,000 4,775 No. 403 2,400 1,875 No. 404 7,100 8,500 No. 405 3,200 4,000 No. 406 1,850 2,200 For general factory use 3,150 1,500
3. Factory overhead costs incurred on account, $6,000.
4. Depreciation of machinery and equipment, $1,550.
5. The factory overhead rate is $40 per machine hour. Machine hours used:
   Job Machine Hours No. 401 38 No. 402 30 No. 403 18 No. 404 56 No. 405 24 No. 406 14 Total 180
6. Jobs completed: 401, 402, 403, and 405.
7. Jobs were shipped and customers were billed as follows: Job 401 $22,750, Job 402 $16,600, Job 403 $8,400.

Instructions:

1. Prepare a schedule summarizing manufacturing costs by job for April.

Waddell Equipment Company Schedule Summarizing Manufacturing Costs
For the Month of April 30, 20Y4
Job Direct Materials Direct Labor Factory Overhead Total No. 401 $fill in the blank 22673bfacffef9e_1 $fill in the blank 22673bfacffef9e_2 $fill in the blank 22673bfacffef9e_3 $fill in the blank 22673bfacffef9e_4 No. 402 fill in the blank 22673bfacffef9e_5 fill in the blank 22673bfacffef9e_6 fill in the blank 22673bfacffef9e_7 fill in the blank 22673bfacffef9e_8 No. 403 fill in the blank 22673bfacffef9e_9 fill in the blank 22673bfacffef9e_10 fill in the blank 22673bfacffef9e_11 fill in the blank 22673bfacffef9e_12 No. 404 fill in the blank 22673bfacffef9e_13 fill in the blank 22673bfacffef9e_14 fill in the blank 22673bfacffef9e_15 fill in the blank 22673bfacffef9e_16 No. 405 fill in the blank 22673bfacffef9e_17 fill in the blank 22673bfacffef9e_18 fill in the blank 22673bfacffef9e_19 fill in the blank 22673bfacffef9e_20 No. 406 fill in the blank 22673bfacffef9e_21 fill in the blank 22673bfacffef9e_22 fill in the blank 22673bfacffef9e_23 fill in the blank 22673bfacffef9e_24 Total $fill in the blank 22673bfacffef9e_25 Feedback

Multiply the factory overhead rate by the number of machine hours for each job. Include the direct materials, direct factory labor, and factory overhead for each job.

2. Prepare a schedule of jobs finished in April.

Waddell Equipment Company Schedule of Jobs Finished
For the Month of April 30, 20Y4
Job Direct Materials Direct Labor Factory Overhead Total No. 401 $fill in the blank b2b5bdfa5fc7f87_1 $fill in the blank b2b5bdfa5fc7f87_2 $fill in the blank b2b5bdfa5fc7f87_3 $fill in the blank b2b5bdfa5fc7f87_4 No. 402 fill in the blank b2b5bdfa5fc7f87_5 fill in the blank b2b5bdfa5fc7f87_6 fill in the blank b2b5bdfa5fc7f87_7 fill in the blank b2b5bdfa5fc7f87_8 No. 403 fill in the blank b2b5bdfa5fc7f87_9 fill in the blank b2b5bdfa5fc7f87_10 fill in the blank b2b5bdfa5fc7f87_11 fill in the blank b2b5bdfa5fc7f87_12 No. 405 fill in the blank b2b5bdfa5fc7f87_13 fill in the blank b2b5bdfa5fc7f87_14 fill in the blank b2b5bdfa5fc7f87_15 fill in the blank b2b5bdfa5fc7f87_16 Total $fill in the blank b2b5bdfa5fc7f87_17 Feedback

Include the direct materials, direct labor, and factory overhead for each finished job.

3. Prepare a schedule of jobs sold in April.

Waddell Equipment Company Schedule of Jobs Sold
For the Month of April 30, 20Y4
Job No. 401 $fill in the blank f9db5c030ffc02a_1 No. 402 fill in the blank f9db5c030ffc02a_2 No. 403 fill in the blank f9db5c030ffc02a_3 Total $fill in the blank f9db5c030ffc02a_4 Feedback

Include the total costs for each job sold. Recall that these costs become part of the cost of goods sold account.

What account does this schedule support for the month of April?

Cost of goods sold Finished goods Work in process

Feedback

Include the total costs for each job sold. Recall that these costs become part of the cost of goods sold account.

4. Prepare a schedule of completed jobs on hand as of April 30, 20Y4.

Waddell Equipment Company Schedule of Completed Jobs on Hand
For the Month of April 30, 20Y4
Job Direct Materials Direct Labor Factory Overhead Total Finished Goods, April 30 (Job 405) $fill in the blank 122226fda02dfa7_1 $fill in the blank 122226fda02dfa7_2 $fill in the blank 122226fda02dfa7_3 $fill in the blank 122226fda02dfa7_4 Feedback

Include the direct materials, direct labor, and factory overhead for each job finished but not sold. Remember that this is listed as finished goods inventory.

What account does this schedule support?

Cost of goods sold Finished goods Work in process

Feedback

Include the direct materials, direct labor, and factory overhead for each job finished but not sold. Remember that this is listed as finished goods inventory.

5. Prepare a schedule of unfinished jobs as of April 30, 20Y4.

Waddell Equipment Company Schedule of Unfinished Jobs
For the Month of April 30, 20Y4
Job Direct Materials Direct Labor Factory Overhead Total No. 404 $fill in the blank a3f2e902dfbdfb3_1 $fill in the blank a3f2e902dfbdfb3_2 $fill in the blank a3f2e902dfbdfb3_3 $fill in the blank a3f2e902dfbdfb3_4 No. 406 fill in the blank a3f2e902dfbdfb3_5 fill in the blank a3f2e902dfbdfb3_6 fill in the blank a3f2e902dfbdfb3_7 fill in the blank a3f2e902dfbdfb3_8 Balance of Work in Process, April 30 $fill in the blank a3f2e902dfbdfb3_9 Feedback

Include the direct materials, direct labor, and factory overhead for each job that remained unfinished. Remember that this is listed as work-in-process inventory.

What account does this schedule support?

Cost of goods sold Finished goods Work in process Work in process

Feedback

Include the direct materials, direct labor, and factory overhead for each job that remained unfinished. Remember that this is listed as work-in-process inventory.

6. Determine the gross profit for April based upon the jobs sold. Ignore the difference between actual and applied factory overhead.
$fill in the blank bc198ffa407a042_1