Managerial Accounting 8ed Chapter3

CHAPTER 3

PROBLEM 3-43 (35 MINUTES)
1. Predetermined overhead rate = budgeted overhead ÷ budgeted direct-labor cost = $2,730,000 ÷ $2,100,000 = 130% of direct labor cost
2. Additions (debits) total $7,802,500 [$2,800,000 + $2,175,000 + ($2,175,000 x 130%)].
3. The finished-goods inventory consisted of job no. 3154, which cost $175,750 [$78,000 + $42,500 + ($42,500 x 130%)].
4. Since there is no work in process at year-end, all amounts in the Work-in-Process account must be transferred to Finished-Goods Inventory. Thus:
Finished-Goods Inventory 7,880,900*
Work-in-Process Inventory 7,880,900

*Beginning balance in Work-in-Process Inventory + additions to the account: $78,400 + $7,802,500 = $7,880,900

5. BBBC’s applied overhead totals 130% of direct-labor cost, or $2,827,500 ($2,175,000 x 130%). Actual overhead was $2,777,000, itemized as follows, resulting in overapplied overhead of $50,500.

Indirect materials used $ 32,500
Indirect labor 1,430,000
Factory depreciation 870,000
Factory insurance 29,500
Factory utilities 415,000
Total $2,777,000

Manufacturing Overhead 50,500 Cost of Goods Sold 50,500 PROBLEM 3-43 (CONTINUED)
6. The company’s cost of goods sold totals $7,654,650:
Finished-goods inventory, Jan. 1……………. $ 0
Add: Cost of goods manufactured………….. 7,880,900
Cost of goods available for sale……………... $ 7,880,900
Less: Finished-goods inventory, Dec. 31….. 175,750
Unadjusted cost of goods sold………………. $ 7,705,150
Less: Overapplied overhead…………………. 50,500
Cost of goods sold……………………………... $ 7,654,650

7. No, selling and administrative expenses are operating expenses of the firm and are treated as period costs rather than product costs. Such costs are unrelated to manufacturing overhead and cost of goods sold.

PROBLEM 3-46 (35 MINUTES)
1. Predetermined overhead rate = budgeted overhead ÷ budgeted