AC 505 w4 Discussion Midterm Preparation Review

The following data were taken from the cost records of the Beca Company for last year:
	Depreciation, factory equipment		$30,000
	Depreciation, office equipment		7,000
	Supplies, factory		1,500
	Maintenance, factory equipment		20,000
	Utilities, factory		8,000
	Sales commissions		30,000
	Indirect labor		54,500
	Rent, factory building		70,000
	Purchases of raw materials		124,000
	Direct labor cost		80,000
	Advertising expense		90,000
	Inventories:	Beginning		Ending
	Raw materials	$ 9,000		$11,000
	Work in process	6,000		21,000
	Finished goods	69,000		24,000
Required: Prepare a schedule of cost of goods manufactured in the text box below.

Solution:

Beca Company
Schedule of Cost of Goods Manufactured
Raw Materials, beg invty		9000
add Purchases of raw materials		124000
Total		133000
less Raw Materials, end invty		11000
Cost of materials used		122000
add Direct Labor cost		80000
Factory overhead:
Deprn, factory equipment	30000
Supplies, factory	1500
Maintenance, factory	20000
Utilities, factory	8000
Indirect labor	54500
Rent, factory bldg	70000
Total Factory overhead		184000
Total cost		386000
add Work in process, beg.		6000
Total		392000
less: Work in process, end		21000
Cost of Goods Manufactured		371000

Banerjee Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.
Work in process, beginning:	200
Units in process
Stage of completion with respect to materials			60%
Stage of completion with respect to conversion			20%
Costs in the beginning inventory:
Materials		$756
Conversion		$1,508
Units started into production during the month	18,000
Units completed and transferred out	17,700
Costs added to production during the month:
Materials		$116,569
Conversion		$675,432
Work in process, ending:
Units in process	500
Stage of completion with respect to materials			70%
Stage of completion with respect to conversion			80%
Required:
Using the weighted-average method:
a. Determine the equivalent units of production for materials and conversion costs.
b. Determine the cost per equivalent unit for materials and conversion costs.
c. Determine the cost of units transferred out of the department during the month.
d. Determine the cost of ending work in process inventory in the department.
Banerjee Inc.		Percent Complete
	Units	Materials	Conversion
Beginning work in process	200	60%	20%
Units started into production	18,000
Units completed and transferred to the next dept	17,700
Ending work in process	500	70%	80%
a.
Units transferred to the next dept		17700	17700
Ending work in process:
Materials: 500 units x 70% complete		350
Conversion: 500 units x 80% complete			400
Equivalent units of production		18050	18100
Ref. p. 156
b.
Cost of beginning work in process invty		$756	$1,508
Costs added during the period		$116,569	$675,432
Total costs (a)		$117,325	$676,940
Equivalent units of production (b)		18050	18100
Cost per equivalent unit (a)/(b)		$6.50	$37.40
c.
Units completed and transferred out
Units transferred to the next dept		17700	17700
Cost per equivalent unit		$6.50	$37.40
Costs of units transferred out (a)x(b)		115,050.00	661,980.00
d.
Ending work in process invty
Equivalent units of production (materials:
500 units x 70% complete; conversion:		350
500 units x 80% complete (a)			400
Cost per equivalent unit (b)		$6.50	$37.40
Cost of ending work in process invty (axb)		$2,275.00	$14,960.00

Solo Company is a small merchandising firm. During the next month, the company expects to sell 500 units. The company has the following revenue and cost structure:
Selling price per unit				$60
Cost per unit				$15
Sales Commissions				10% of sales
Advertising expense				$5,000 per month
Administrative Expense			$3,000 per month plus 20% of sales
Required:
a. Calculate the expected gross margin next month
b. Calculate the expected contribution margin next month
c. Calculate the expected total administrative expense next month
d. Calculate the expected net operating income next month
Sales	$60	500	units	$30,000
less Cost per unit	$15	500		$7,500
Gross Margin				$22,500
Less Advertising Expense			5000
Administrative Expense		3000	9000
Total expenses				14000
Net operating income				$8,500
a. Expected gross margin next month				$22,500
b. Expected contribution margin
Sales			$30,000
Less Cost per unit		$7,500
Variable admin expense		$6,000	$13,500
Contribution margin			$16,500
c. Expected total administrative expense				9000
d. Net operating income				$8,500

Author: Lucille McElroy 8/5/11