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devry acct349 week 5 homework




Question;Chapter 18;Review Questions and Exercises;1. Units of production that do not meet the specifications required;by customers for good units and that are discarded or are sold at reduced;prices are called. Units of production that do not meet the specifications required;by customers for finished goods that are subsequently repaired and sold as good;finished goods are called;2.;3. _ 3. __ __ is residual material that results from manufacturing;a product, it has low sales value compared with the total sales value of the product.;4.;4.;is inherent in a particular production process that arises even under;efficient operating conditions.;5.;The cost of abnormal spoilage is debited to which account?;\;6.;Accounting for spoilage or rework in job-costing systems uses what three;classifications? __\;True-False;1. Normal spoilage is a period cost.;2. In computing equivalent units for process costing, it is more accurate to;include normal spoilage and exclude abnormal spoilage.;3. The appropriate base to use in computing normal spoilage is actual units started;in production.;4. When a company adheres to a goal of zero defects, all of its spoilage is;regarded as abnormal.;5. The cost of normal spoilage should never be allocated to units in ending;workin-process inventory.;6. Regardless of the point in the production process that inspection occurs, normal;spoilage is computed on the basis of the number of good units that pass the;inspection point during the current period.;7. Unlike spoilage and rework, no cost is assigned to scrap, and hence scrap is;not classified as normal or abnormal.;Multiple Choice;1. (CPA) The Forming Department is the first of a two-stage production process.;Spoilage is detected at the end of the Forming Department. Costs of spoiled units;are assigned to units completed and transferred to the second department in the;period spoilage is detected. The following information concerns Forming?s conversion;costs in May 2011;Units;Conv. Costs;Beginning work in process (50% complete);2,000;$10,000;Units started during May;8,000;75,500;Spoilage?normal;500;Units completed and transferred out;7,000;Ending work in process (80% complete);2,500;Using;the weighted-average method, how much of Forming?s conversion costs were;transferred to the second production department?;C;2. Using the information in question 1 and the FIFO method, how much of the Forming;Department?s conversion costs were transferred to the second production department?;(Round equivalent unit cost to four decimal places.);D;3. (CMA) During March of the current fiscal year, Mercer Company completed 50,000;units costing $600,000, exclusive of spoilage allocation. Of these completed;units, 25,000 were sold during the month. An additional 10,000 units, costing;$80,000, are 50% complete at March 31. The inspection point is at the end of;the production process. For the month, normal spoilage is $20,000 and abnormal;spoilage is $50,000. The portion of total spoilage costs that should be charged;against revenues in March is;\;4. If spoilage occurs that is normal and Control should be credited with;5. In a job-costing system, Work-in- Process Control should be debited with the;cost of rework that is;c.;6. (CPA) Simpson Company manufactures electric drills to the exacting;specifications of various customers. During April, Job 403 for the production;of 1,100 drills is completed at the following cost per unit;Direct materials;$10;Direct manufacturing labor;8;Manufacturing overhead allocated;12;Total manufacturing cost;$30;Final;inspection of Job 403 discloses 50 defective units and 100 units of normal spoilage;attributable to this specific job. The defective drills are reworked at a total;cost of $500 and the spoiled drills are sold to a jobber for $1,500. What is;the unit cost of the good units produced on Job 403?;b;7. (CPA) Under Heller Company?s job-costing system, the budgeted manufacturing;overhead cost rate includes the estimated costs of defective work (considered;normal in the manufacturing process). During March, Job No. 210 for 2,000 hand;saws is completed at the following cost per unit;Direct materials;$5;Direct manufacturing labor;4;Manufacturing overhead allocated(at 150% of direct;manufacturing labor cost);6;Total manufacturing cost;$15;Final;inspection of Job No. 210 discloses 100 defective saws were reworked at a cost;of $2 per unit for direct manufacturing labor, plus manufacturing overhead at;the budgeted cost rate. The defective units on Job No. 210 are considered normal.;What is the total rework cost and to which account should it be debited?;Rework;cost Account debited;A;8. (CPA adapted) If the value of scrap is not immaterial, the scrap is sold;soon after its production, and the scrap is common to all jobs in a;manufacturing process, the scrap is recorded as a;Review Exercises;1.;(CMA) JC Company uses a process-costing system. A unit of product passes;through three departments? Molding, Assembly, and Finishing?before it is completed.;The following activity took place in the Finishing Department during May;Units;Work in process, May 1;1,400;Transferred in from the Assembly Department;14,000;Spoilage;700;Completed and transferred out to finished goods inventory;11,200;Direct;materials are added at the beginning of the processing in the Finishing;Department without changing the number of units processed. Conversion costs are;added evenly throughout the process. The workin process inventory was 70%;complete as to conversion costs on May 1 and 40% complete as to conversion costs;on May 31. All spoilage is detected at the inspection point, which occurs at;the end of the production process, 560 of the units spoiled are considered;normal spoilage.;JC;Company uses the weighted-average method. The equivalent unit costs for May are;as follows;Equivalent;Unit Cost;Transferred-in costs;$5.00;Direct materials;1.00;Conversion costs;3.00;Total manufacturing cost;$9.00;a.;Compute the equivalent units of transferred-in costs, direct materials, and;cconversion costs.;Equivalent Units;b.;Compute the cost of units completed and transferred from the Finishing;Department to finished goods inventory during May.;c.;Compute the cost assigned to the Finishing Department?s work-in-process;inventory on May 31.;d.;Compute the cost of abnormal spoilage.;e.;Compute the total transferred-in costs of the Finishing Department during May;assuming the transferred in costs component of the work-in-process inventory of;the Finishing Department on May 1 amounted to $6,300.;2.;Boucher Company uses a job-costing system. During November, the following costs;are incurred on Job 109 to manufacture 200 motors;Original costs;Direct materials;$ 6,600;Direct manufacturing labor;8,000;Manufacturing overhead allocated (150% of direct manufacturing;labor);12,000;Total;$26,600;Direct costs of reworking 10 motors;Direct materials;$1,000;Direct manufacturing labor;1,600;Total;$2,600;a.;Prepare the journal entry to record the rework costs, assuming the rework is;attributable specifically to Job 109.;b.;Compute the cost per finished motor for Job 109, assuming the rework is;attributable specifically to this job.;c.;Prepare the journal entry to record the rework costs, assuming the rework is;common to all jobs.;d. Compute the cost per finished motor for;Job 109, assuming the rework is common to all jobs.;Chapter 20;Review Questions and Exercises;1.;Which six categories of costs pertaining to inventory are distinguished for;management purposes?;2. Which two of the cost categories in the preceding answer are considered in;the EOQ model?___ ___ and;3.;What do each of the letters in the EOQ model stand for?;D;= __ P = __ C =;4.;In purchasing materials or goods, ordering costs are equivalent to _ ___ costs;for a production run.;5.;A system of production that manufacturers each component in a production line;as soon as, and only when, needed by the next step in the production;line;is called;6.;Traditional normal and standard costing record the journal entries in the same;order as actual purchases and progress in production occurs, which is called _________.;7.;omits recording some of the journal entries relating to the stages from purchase;of direct materials to the sale of finished goods, it then uses normal or standard;costs to work backward to assign manufacturing costs to units produced and/or;sold.;8.;A stage in the cycle, from purchase of direct materials to sale of finished;goods, at which journal entries are recorded in the accounting system is called;a;True-False;1. Examples of carrying costs of inventory are obsolescence, opportunity cost;of investment tied up in inventory, and inspection.;2. The EOQ model does not include quantity discounts lost on inventory;purchases.;3. EOQ minimizes the annual relevant total carrying costs of inventory.;4. An example of a cost pertaining to inventory that usually is irrelevant to;the decision of how much to order is salaries of stockroom workers.;5. The reorder point decreases if the ordering costs per purchase order;increase.;6. JIT purchasing should be guided by the EOQ decision model.;7. Adopting JIT purchasing is likely to result in fewer suppliers for each item;and more paperwork.;8. JIT production operates as a push through system.;9. A key feature of back flush costing is that it tracks manufacturing costs;sequentially.;10. When a single Inventory Control account is used in back flush costing, this;account is restricted solely to direct materials, whether they are in;storerooms, in process, or in finished goods.;11. Although back flush costing may not strictly adhere to generally accepted;accounting principles, the accounting principle of materiality works in favor;of back flush costing when inventories are low.;Multiple Choice;1. (CPA) Barter Corporation has been buying Product A in lots of 1,200 units, a;four months? supply. The cost per unit is $100, the ordering cost is $200 per;purchase order, and the annual inventory carrying cost for one unit is $25.;Assume the units are required evenly throughout the year. The EOQ is;b.;240 units.;2. (CPA) Garmar, Inc., determines the following information for a given year;EOQ in units;5,000;Total annual ordering costs;$10,000;Ordering cost per Purchase order;$50;Cost of carrying one;unit for one year;$4;What;is Garmar?s estimated annual demand in units?;3. (CPA adapted) A manufacturer expects to produce 200,000 widgets during the fiscal;year ending June 30, 2011, to supply the demand that is uniform throughout the;year. The setup costs for each production run of widgets are $144. The cost of;carrying one widget in inventory is $0.20 per year. After a batch of widgets is;produced and placed in inventory, it is sold at a uniform rate and inventory;reaches zero when the next batch of widgets is completed. The quantity of;widgets (rounded to the nearest one hundred widgets) that would be produced in;each run in fiscal year 2011 to minimize total annual relevant setup and;carrying costs is;4. (CPA) For its EOQ model, a company has ordering cost per purchase order of $10;and annual cost of carrying one unit in stock of $2. If the ordering cost per purchase;order increases by 20%, and the annual cost of carrying one unit in stock;increases by 25%, while all other considerations remain constant, EOQ;A;5. (CMA) Canseco Enterprises uses 84,000 units of Part 256 in manufacturing;activities over a 300-day work year. The usual purchase-order lead time for the;part is six days, occasionally, however, the lead time has been as high as;eight days. The company now desires to adjust the size of its safety stock. The;size of the safety stock and the likely effect on stock-out costs and carrying;costs, respectively, are:.;6. (CPA adapted) Key Co. changed from a traditional production system with job costing;to a just-in-time production system with back flush costing. What are the expected;effects of these changes on Key?s inspection cost and recordkeeping detail of;costs tracked to jobs in process?;Inspection Detail of costs;Cost tracked to jobs;7. (CMA) Which one of the following statements best describes material;requirements planning (MRP)?;Review Exercises;1.;(CMA) Gerstein Company manufactures a line of deluxe office fixtures. The;annual demand for its miniature oak file is estimated to be 5,000 units. The;annual cost of carrying one unit in inventory is $10, and the setup cost to;initiate a production run is $1,000. There are no miniature oak files on hand;and Gerstein has scheduled four equal production runs of this file for the;coming year, the first of which is to be run immediately. Gerstein operates 250;business days per year. Assume sales occur uniformly throughout the year.;a.;If no safety stock is held, compute the relevant total carrying costs for the;miniature oak file for the coming year.;b.;If two equal production runs are scheduled for the coming year rather than;four, compute the amount of change in the sum of annual relevant total carrying;costs and setup costs.;c.;Compute the number of production runs that minimizes the sum of relevant total;carrying costs and setup costs for the coming year.;2.;Quinn Electronics manufactures television sets. Quinn implemented a JIT;purchasing policy at the beginning of 2011. One year later, Sandra Lansing is;evaluating the effect of this policy on financial performance. She obtains the;following information;?;Average inventory declined from $400,000 to $200,000. Pre-JIT;insurance costs of $40,000 per year declined by 40% (because of lower average;inventory).;?;Pre-JIT, 5,000 square feet of warehouse space was leased for;$10,000 per year. The lower average inventory allowed Quinn to sublet 40% of;the space at $2.50 per square foot.;?;The JIT purchasing policy leads to stockouts on 5,000 pieces of;direct material per year. Quinn?s policy is to handle stockouts with rush;orders at a cost of $4 per piece.;?;Quinn?s required rate of return on investment in inventory is;15%.;3.;Cumberland Inc. produces video cameras. For November, there were no beginning;inventories of direct materials and no beginning and ending work in process.;Cumberland uses a JIT production system and backflush costing. Standard costs;per unit for November are: direct materials $52, conversion costs $30.;The;following data are for November;Direct materials and components purchased;$21,200,000;Conversion costs incurred;$12,320,000;Number of finished units manufactured;400,000;Number of finished units sold;384,000;Assume;there are no variances for materials.;a.;Prepare summary journal entries for November (without disposing of underallocated;or overallocated conversion costs), assuming there are two trigger points: (i);purchase of direct materials and components and (ii) completion of finished;goods. The inventory accounts used are Inventory: Materials and In-Process;Control, and Finished Goods Control.;b.;Prepare summary journal entries for November, assuming there are two trigger;points: (i) purchase of direct materials and components and (ii) sale of;finished goods. The only inventory account, Inventory Control, is restricted;solely to direct materials and components (whether they are in storerooms, in;process, or in finished goods). Underallocated or overallocated conversion;costs are written off at the end of each month.;c.;Refer to part (b). Assume conversion costs are regarded as being material in;amount. How do your journal entries in part (b) change?;d.;Repeat part (a) with one difference. There is only one trigger point, the;completion of good finished units. As a result, there is only one inventory account;Finished Goods Control.


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