Larned corporation recorded the following transactions for the just completed month.

Question 1

Larned Corporation recorded the following transactions for the just completed month.

a. $80,000 in raw materials were purchased on account.

b. $71,000 in raw materials were used in production. Of this amount, $62,000 was for direct materials and the remainder was for indirect materials.

c. Total labor wages of $112,000 were paid in cash. Of this amount, $101,000 was for direct labor and the remainder was for indirect labor.

d. Depreciation of $175,000 was incurred on factory equipment.

Required:

Record the above transactions in journal entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

No. Transaction General Journal Debit Credit

1 a

2 b

3 c

4 d

Question 2

"I think we goofed when we hired that new assistant controller," said Ruth Scarpino, president of Provost Industries. "Just look at this report that he prepared for last month for the Finishing Department. I can’t understand it."

Finishing Department costs:

Work in process inventory, April 1,100 units; materials 100% complete; conversion 60% complete

$

8,629

*

Costs transferred in during the month from the preceding department, 2,600 units

28,673

Materials cost added during the month

11,657

Conversion costs incurred during the month

24,430

Total departmental costs

$

73,389

Finishing Department costs assigned to:

Units completed and transferred to finished goods, 3,100 units at $23.670 per unit

$

73,389

Work in process inventory, April 30, 600 units; materials 0% complete; conversion 40% complete

0

Total departmental costs assigned

$

73,389

*Consists of cost transferred in, $4,294; materials cost, $2,045; and conversion cost, $2,290.

"He's struggling to learn our system," replied Frank Harrop, the operations manager. "The problem is that he's been away from process costing for a long time, and it's coming back slowly."

"It's not just the format of his report that I'm concerned about. Look at that $23.670 unit cost that he's come up with for April. Doesn't that seem high to you?" said Ms. Scarpino.

"Yes, it does seem high; but on the other hand, I know we had an increase in materials prices during April, and that may be the explanation," replied Mr. Harrop. "I’ll get someone else to redo this report and then we can see what’s going on."

Provost Industries manufactures a ceramic product that goes through two processing departments—Molding and Finishing. The company uses the weighted-average method in its process costing.

Required:

1-a. Calculate the equivalent units of production.

1-b. Calculate the cost per equivalent unit. (Round your answers to 2 decimal places.)

1-c. How much cost should have been assigned to the ending work in process inventory? (Round your intermediate calculations to 2 decimal places.)

1-d. How much cost should have been assigned to the units completed and transferred to finished goods? (Round your intermediate calculations to 2 decimal places.)

Transferred Materials Conversion Totals

In costs

1a Equivalent units of production

1b Cost per Equivalent unit

1c Cost of ending work in process inventory $

1d Cost of units completed and transferred out $

Question 3.

“Blast it!” said David Wilson, president of Teledex Company. “We’ve just lost the bid on the Koopers job by $3,000. It seems we’re either too high to get the job or too low to make any money on half the jobs we bid.”

Teledex Company manufactures products to customers’ specifications and uses a job-order costing system. The company uses a plantwide predetermined overhead rate based on direct labor cost to apply its manufacturing overhead (assumed to be all fixed) to jobs. The following estimates were made at the beginning of the year:

Department

Fabricating

Machining

Assembly

Total Plant

Manufacturing overhead

$

355,250

$

406,000

$

91,350

$

852,600

Direct labor

$

203,000

$

101,500

$

304,500

$

609,000

Jobs require varying amounts of work in the three departments. The Koopers job, for example, would have required manufacturing costs in the three departments as follows:

Department

Fabricating

Machining

Assembly

Total Plant

Direct materials

$

3,300

$

200

$

1,700

$

5,200

Direct labor

$

3,400

$

500

$

6,500

$

10,400

Manufacturing overhead

?

?

?

?

Required:

1. Using the company's plantwide approach:

a. Compute the plantwide predetermined rate for the current year.

b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.

2. Suppose that instead of using a plantwide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Under these conditions:

a.Compute the predetermined overhead rate for each department for the current year.

b. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.

4. Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead).

a.What was the company’s bid price on the Koopers job using a plantwide predetermined overhead rate?

b.What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?

Using the company's plant wide approach. Compute the plant wide predetermined rate for the current year.

Predetermined overhead rate _____ % of direct labor cost

Using the company's plant wide approach. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.

Manufacturing overhead cost applied $__________

Suppose that instead of using a plant wide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Compute the predetermined overhead rate for each department for the current year.

Fabrication dept. _____% of direct labor cost

Machining dept. _____% of direct labor cost

Assembly dept. _____% of direct labor cost

Suppose that instead of using a plant wide predetermined overhead rate, the company had used departmental predetermined overhead rates based on direct labor cost. Determine the amount of manufacturing overhead cost that would have been applied to the Koopers job.

Manufacturing overhead cost applied _______

Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What was the company’s bid price on the Koopers job using a plant wide predetermined overhead rate?

Company ‘s bid price __________

Assume that it is customary in the industry to bid jobs at 150% of total manufacturing cost (direct materials, direct labor, and applied overhead). What would the bid price have been if departmental predetermined overhead rates had been used to apply overhead cost?

Manufacturing overhead cost applied _______

Question 4.

Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: “Wes, I’m not sure how to go about answering the questions that came up at the meeting with the president yesterday.”

"What's the problem?"

“The president wanted to know the break-even point for each of the company’s products, but I am having trouble figuring them out.”

“I’m sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00.”

Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below:

Velcro

Metal

Nylon

Annual sales volume

115,000

213,000

301,000

Unit selling price

$

2.40

$

1.40

$

1.60

Variable expense per unit

$

1.00

$

0.80

$

1.10

Total fixed expenses are $271,000 per year.

All three products are sold in highly competitive markets, so the company is unable to raise prices without losing an unacceptable numbers of customers.

The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories.

Required:

1. What is the company’s over-all break-even point in dollar sales?

2. Of the total fixed expenses of $271,000, $41,300 could be avoided if the Velcro product is dropped, $102,600 if the Metal product is dropped, and $94,000 if the Nylon product is dropped. The remaining fixed expenses of $33,100 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely.

a. What is the break-even point in unit sales for each product?

b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company?

What is the company’s over-all break-even point in dollar sales? (Round CM ratio to 4 decimal places and final answer to the nearest thousand dollars.) $______

What is the break-even point in unit sales for each product? (Do not round intermediate calculations.)

Velcro Metal Nylon

Break even point in unit sales

If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company?

Is it Net operating income or Net operating loss ___________

__________