Monday 29 October 2018

Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates:

Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates:

Activity Cost PoolActivity Rate
Supporting direct labor$26per direct labor-hour
Order processing$284per order
Custom design processing$186per custom design
Customer service$379per customer


Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months:

 Standard
Model
Custom
Design
Number of gliders 20 3
Number of orders 1 3
Number of custom designs 0 3
Direct labor-hours per glider 26.35 28.00
Selling price per glider$1,850$2,400
Direct materials cost per glider$564$634


The company’s direct labor rate is $19.50 per hour.

Required:
Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters.



Big Sky Outfitters
Customer Margin—Activity-Based Costing
Sales ($1,850 per standard model glider × 20 standard model gliders + $2,400 per custom designed glider × 3 custom designed gliders)  $44,200
Costs:    
Direct materials ($564 per standard model glider × 20 standard model gliders + $634 per custom designed glider × 3 custom designed gliders)$13,182  
Direct labor ($19.50 per direct labor-hour × 26.35 direct labor-hours per standard model glider × 20 standard model gliders + $19.50 per direct labor-hour × 28 direct labor-hours per custom designed glider × 3 custom designed gliders) 11,915  
Supporting direct labor ($26 per direct labor-hour × 26.35 direct labor-hours per standard model glider × 20 standard model gliders + $26 per direct labor-hour × 28 direct labor-hours per custom designed glider × 3 custom designed gliders) 15,886  
Order processing ($284 per order × 4 orders) 1,136  
Custom design processing ($186 per custom design × 3 custom designs) 558  
Customer service ($379 per customer × 1 customer) 379 43,056
Customer margin  $1,144

Wednesday 3 October 2018

Gunes Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:

In a process costing system, costs are traced directly to jobs.
False

When materials are purchased in a process costing system, a work in process account is debited with the cost of the materials.
False
In a process costing system, overhead is allocated to departments after being applied to units of product.
False
In a process costing system, manufacturing overhead cost is also called conversion cost.
False
The units in beginning work in process inventory plus the units started into production must equal the units transferred out of the department plus the units in ending work in process inventory.
True
Gunes Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:

Cost

Percent
Complete
Materials costs
$
10,600



65%

Conversion costs
$
12,800



30%


A total of 8,500 units were started and 7,400 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Cost
Materials costs
$
142,100

Conversion costs
$
359,500


The ending inventory was 50% complete with respect to materials and 35% complete with respect to conversion costs.

The cost of ending work in process inventory in the first processing department according to the company’s cost system is closest to:
Multiple Choice
Top of Form
$61,227
$48,071
Correct
$42,859
$122,453
Bottom of Form
Explanation
Weighted-average method

Materials

Conversion
Units transferred to the next department

7,400



7,400

Ending work in process:







Materials: 1,900 units × 50%

950





Conversion: 1,900 units × 35%





665

Equivalent units of production

8,350



8,065




Materials

Conversion
Cost of beginning work in process inventory
$
10,600


$
12,800

Costs added during the period

142,100



359,500

Total cost (a)
$
152,700


$
372,300

Equivalent units of production (b)

8,350



8,065

Cost per equivalent unit (a) ÷ (b)
$
18.287


$
46.162




Materials

Conversion

Total
Ending work in process inventory:











Equivalent units of production (a)

950



665





Cost per equivalent unit (b)
$
18.287


$
46.162





Cost of ending work in process inventory (a) × (b)
$
17,373.05


$
30,698.02

$
48,071.07




Bistrol Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:

Cost

Percent
Complete
Materials costs
$
15,700



75%

Conversion costs
$
7,700



20%


A total of 8,400 units were started and 7,500 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Cost
Materials costs
$
186,300

Conversion costs
$
329,800


The ending inventory was 70% complete with respect to materials and 60% complete with respect to conversion costs.

How many units are in ending work in process inventory in the first processing department at the end of the month?
Multiple Choice
Top of Form
7,600
900
1,700
Correct
1,200
Bottom of Form
Explanation
Units in ending work in process = Units in beginning work in process + Units started into production – Units transferred to the next department = 800 + 8,400 – 7,500 = 1,700


Bistrol Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:


Cost

Percent
Complete
Materials costs
$
15,700



75%

Conversion costs
$
7,700



20%



A total of 8,400 units were started and 7,500 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:


Cost
Materials costs
$
186,300

Conversion costs
$
329,800



The ending inventory was 70% complete with respect to materials and 60% complete with respect to conversion costs.

What are the equivalent units for conversion costs for the month in the first processing department?

Garrison 16e Rechecks 2017-08-28
Multiple Choice
Top of Form
9,200
8,520
Correct
7,500
1,020
Bottom of Form
Explanation
Weighted-average method

Conversion
Units transferred to the next department

7,500

Ending work in process:
Conversion: 1,700 units × 60%

1,020

Equivalent units of production

8,520



Bistrol Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:

Cost

Percent
Complete
Materials costs
$
15,700



75%

Conversion costs
$
7,700



20%


A total of 8,400 units were started and 7,500 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Cost
Materials costs
$
186,300

Conversion costs
$
329,800


The ending inventory was 70% complete with respect to materials and 60% complete with respect to conversion costs.

The cost per equivalent unit for materials for the month in the first processing department is closest to:
Multiple Choice
Top of Form
$21.44
$21.96
$20.25
$23.25
Correct
Bottom of Form
Explanation
Weighted-average method

Materials
Units transferred to the next department

7,500

Ending work in process:
Materials: 1,700 units × 70%

1,190

Equivalent units of production

8,690




Materials
Cost of beginning work in process inventory
$
15,700

Costs added during the period

186,300

Total cost (a)
$
202,000

Equivalent units of production (b)

8,690

Cost per equivalent unit (a) ÷ (b)
$
23.245




Bistrol Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:

Cost

Percent
Complete
Materials costs
$
15,700



75%

Conversion costs
$
7,700



20%


A total of 8,400 units were started and 7,500 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Cost
Materials costs
$
186,300

Conversion costs
$
329,800


The ending inventory was 70% complete with respect to materials and 60% complete with respect to conversion costs.

The cost per equivalent unit for conversion costs for the first department for the month is closest to:
Multiple Choice
Top of Form
$41.59
$38.71
$39.61
Correct
$36.68
Bottom of Form
Explanation
Weighted-average method

Conversion
Units transferred to the next department

7,500

Ending work in process:
Conversion: 1,700 units × 60%

1,020

Equivalent units of production

8,520




Conversion
Cost of beginning work in process inventory
$
7,700

Costs added during the period

329,800

Total cost (a)
$
337,500

Equivalent units of production (b)

8,520

Cost per equivalent unit (a) ÷ (b)
$
39.613




Bistrol Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 800 units. The costs and percentage completion of these units in beginning inventory were:

Cost

Percent
Complete
Materials costs
$
15,700



75%

Conversion costs
$
7,700



20%


A total of 8,400 units were started and 7,500 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Cost
Materials costs
$
186,300

Conversion costs
$
329,800


The ending inventory was 70% complete with respect to materials and 60% complete with respect to conversion costs.

The total cost transferred from the first processing department to the next processing department during the month is closest to: (Round "Cost per equivalent unit" to 3 decimal places.)

Garrison 16e Rechecks 2017-07-13
Multiple Choice
Top of Form
$516,100
$471,435
Correct
$539,500
$578,294
Bottom of Form
Explanation
Weighted-average method

Materials

Conversion
Units transferred to the next department

7,500



7,500

Ending work in process:







Materials: 1,700 units × 70%

1,190





Conversion: 1,700 units × 60%





1,020

Equivalent units of production

8,690



8,520




Materials

Conversion
Cost of beginning work in process inventory
$
15,700


$
7,700

Costs added during the period

186,300



329,800

Total cost (a)
$
202,000


$
337,500

Equivalent units of production (b)

8,690



8,520

Cost per equivalent unit (a) ÷ (b)
$
23.245


$
39.613




Materials

Conversion

Total
Units completed and transferred out:











Units transferred to the next department (a)

7,500



7,500





Cost per equivalent unit (b)
$
23.245


$
39.613





Cost of units completed and transferred out (a) × (b)
$
174,337.50


$
297,097.50


$
471,435.00




Which of the following journal entries would be used to record direct labor costs in a company having two processing departments (Department A and Department B)?
Multiple Choice
Top of Form



Work in Process
XXX

Salaries and Wages Payable

XXX




Salaries and Wages Expense
XXX

Salaries and Wages Payable

XXX




Work in Process-Department A
XXX

Work in Process-Department B
XXX

Salaries and Wages Payable

XXX

  • Correct



Salaries and Wages Payable
XXX

Work in Process

XXX

Bottom of Form