Georgia pacific a manufacturer incurs the following costs

Module 1 Review Questions I. Cost analysis and identification. Georgia Pacific, a manufacturer, incurs the following costs:

a. Classify each cost as either a product or a period cost. If a product cost, identify it as a prime or a conversion cost.

b. Classify each product cost as either a direct cost or an indirect cost using the product as the cost object.

II. Manufacturing statement preparation

Given the following selected account balances of Randa Company, prepare its manufacturing statement for the year ended on December 31, 2013. Include a listing of the individual overhead account balances in this statement. Sales....................................................................................................................................... $1,252,000 Raw Materials inventory, Dec. 31, 2012................................................................................. 39,000 Goods in process inventory, Dec. 31, 2012........................................................................... 55,900 Finished goods inventory, Dec. 31, 2012............................................................................... 64,750 Raw materials purchases....................................................................................................... 177,600 Direct labor............................................................................................................................. 227,000 Factory computer supplies used............................................................................................ 19,840 Indirect labor........................................................................................................................... 49,000 Repairs – factory equipment.................................................................................................. 7,250 Rent cost of factory building................................................................................................... 59,000 Advertising expense............................................................................................................... 96,000 General and administrative expense...................................................................................... 131,300 Raw materials inventory, Dec. 31, 2013................................................................................. 44,700 Goods in process inventory, Dec. 31, 2013........................................................................... 43,500 Finished goods inventory, Dec. 31, 2013............................................................................... 69,300

III. Income Statement Preparation

Use the information from problem II above to prepare an income statement for Randa Company (a manufacturer). Assume that its cost of goods manufactured is $546,390.

IV. Inventory computation and reporting

Shown here are annual financial data at December 31, 2013, taken from two different companies.

Pinnacle Retail

Slope Board Manufacturing

Beginning inventory

Merchandise $150,000

Finished goods $300,000

Cost of purchases 250,000

Cost of goods manufactured 586,000

Ending inventory

Merchandise 100,000

Finished goods 200,000

1. Compute the cost of goods sold section of the income statement at December 31, 2013, for each company. Include the proper date, title and format in the solution.

2. Write a half-page memorandum to your instructor (a) identifying the inventory accounts

and (b) describing where each is reported on the income statement and balance sheet for both companies.

V. Analysis of cost flows

As of the end of June, the job cost sheets at Racing Wheels, Inc. show the following total costs accumulated on three custom jobs:

 Job 102 was started in production in May and the following costs were assigned to it in May: direct materials, $12,000; direct labor, $3,600; and overhead, $1,800.

 Jobs 103 and 104 are started in June. Overhead cost is applied with a predetermined rate based on direct labor cost.

 Jobs 102 and 103 are finished in June, and Job 104 is expected to be finished in July. No raw materials are used indirectly in June.

Using this information, answer the following questions. (Assume this company’s predetermined overhead rate did not change across these months).

1. What is the cost of the raw materials requisitioned in June for each of the three jobs? What is the total cost of raw materials requisitioned for June?

2. How much direct labor cost is incurred during June for each of the three jobs? What is total direct labor cost incurred in June?

3. What predetermined overhead rate is used during June? How much total cost is transferred to finished goods during June?

VI. Cost flows in a job order cost system

The following information is available for Lock-Down Company, which produces special-order security products and uses a job order cost accounting system.

Complete the following amounts for the month of May.

1. Cost of direct materials used. 2. Cost of direct labor used. 3. Cost of goods manufactured. 4. Cost of goods sold.* 5. Gross profit. 6. Overapplied or underapplied overhead.

*Do not consider any underapplied or overapplied overhead.

VII. Journal Entries for Materials, Labor, and Overhead

Use information from Problem VI to prepare journal entries for the following events for the month of May. Remember that a journal entry must debit at least one account and credit at least one account. Please use proper account titles.

1. Raw materials purchased for cash. 2. Direct materials usage. 3. Indirect materials usage. 4. Factory payroll costs Paid in cash.

5. Direct labor usage. 6. Indirect labor usage. 7. Factory overhead excluding indirect materials and indirect labor (record credit to Other

Accounts). 8. Application of overhead to goods in process. 9. Allocation of overapplied or underapplied overhead to Cost of Goods Sold.

VIII. Factory Overhead Calculation, Allocation, and Analysis

Red Wing Company applies factory overhead based on direct labor costs. The company incurred the following costs during 2013: direct materials costs, $637,500; direct labor costs, $2,500,000; and factory overhead costs applied, $1,000,000.

1. Calculate the predetermined overhead rate for year 2013. 2. Assuming that the company’s $57,000 ending Goods in Process Inventory account for

year 2013 had $18,000 of direct labor costs; determine the inventory’s direct materials costs.

3. Assuming that the company’s $337,485 ending Finished Goods Inventory account for year 2013 had $137,485 of direct materials costs, determine the inventory’s

(a). direct labor costs and (b). its overhead costs.