Rift Valley University- Lebu Lafto Campus

Department of Accounting & finance

Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Workout the following questions

Q1. Palmer Manufacturing produces weather vanes. For the year just ended, Palmer produced
10,000 weather vanes with the following total costs:
Direct materials $20,000
Direct labor 35,000
Overhead 10,000
Selling expenses 6,250
Administrative expenses 14,400

During the year, Palmer sold 9,800 units for $12 each. Beginning finished goods inventory
consisted of 630 units with a total cost of $4,095. There was no beginning or ending inventories of
work in process.
Required:
1. Calculate the unit costs for the following: direct materials, direct labor, overhead, prime cost, and
conversion cost.
2. Prepare schedules of cost of goods manufactured
3. Prepare schedules of cost of goods sold.
3. Prepare the schedule of income statement for Palmer Manufacturing.

Q2. Cardinal Company’s southeastern factory provided the following information for the last
calendar year:
Beginning inventory:
Direct materials $49,300
Work in process 55,400
Ending inventories:
Direct materials $20,000
Work in process 20,400

During the year, direct materials purchases amounted to $150,000, direct labor cost was $200,000,
and overhead cost was $324,700. There were 100,000 units produced.
Required:
1. Calculate the total cost of direct materials used in production.
2. Calculate the cost of goods manufactured.
3. Calculate the unit manufacturing cost.

Q3. For each of the following independent situations, calculate the missing values:
a. The Chico plant purchased $275,000 of direct materials during May. Beginning direct materials
inventory was $16,000, and direct materials used in production were $200,000.
What is ending direct materials inventory?

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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

b. Landsman Company produced 10,000 units at an average cost of $6 each. The beginning
inventory of finished goods was $3,510. (The average unit cost was $5.85.) Landsman sold 8,900
units.
How many units remain in ending finished goods inventory?

c. Beginning WIP was $50,000, and ending WIP was $18,750. If total manufacturing costs were
$93,000, what was the cost of goods manufactured?

d. If the conversion cost is $32 per unit, the prime cost is $19.50, and the manufacturing cost per
unit is $39.50, what is the direct materials cost per unit?

e. Total manufacturing costs for April were $156,900. Prime cost was $90,000, and beginning WIP
was $60,000. The cost of goods manufactured was $125,000.
Calculate the cost of overhead for April and the cost of ending WIP.

Q4. Cimino Company manufactures staplers. At the beginning of June, the following information
was supplied by its accountant:
Direct materials inventory $51,200
Work-in-process inventory 10,000
Finished goods inventory 10,075

During June, direct labor cost was $22,000, direct materials purchases were $70,000, and the total
overhead cost was $216,850. The inventories at the end of June were:
Direct materials inventory $18,600
Work-in-process inventory 6,050
Finished goods inventory 8,475

Required:

1. Prepare the schedule of cost of goods manufactured statement for June.

2. Prepare the schedule of cost of goods sold schedule for June.

Q5. Photo-Dive, Inc., manufactures disposable underwater cameras. During the last calendar year,
a total of 150,000 cameras were made, and 154,000 were sold for $8.00 each.
The actual unit cost per camera is as follows:
Direct materials $2.25
Direct labor 1.50
Variable overhead 0.65
Fixed overhead 0.70
Total unit cost $5.10

The selling expenses consisted of a commission of $0.25 per unit sold and advertising co-payments
totaling $36,000. Administrative expenses, all fixed equaled $83,000.
There were no beginning and ending work-in-process inventories. Beginning finished goods
inventory was $30,600 for 6,000 cameras.

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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Required:
1. Calculate the number of cameras and the value of ending finished goods inventory.
2. Prepare the schedule of cost of goods sold statement.
3. Prepare the schedule of income statement.

Q6. Arja Company, a manufacturing firm, has supplied the following information from its
accounting records for the last calendar year:
Direct labor cost $371,500
Purchases of direct materials 160,400
Freight-in on materials 1,000
Factory supplies used 37,800
Factory utilities 46,000
Commissions paid 80,000
Factory supervision and indirect labor 190,000
Advertising 23,900
Materials handling 26,750
Work-in-process inventory, January 1 201,000
Work-in-process inventory, December 31 98,000
Direct materials inventory, January 1 47,000
Direct materials inventory, December 31 17,000
Finished goods inventory, January 1 8,000
Finished goods inventory, December 31 62,700

Required:

1. Prepare the schedule of cost of goods manufactured statement.

2. Prepare the schedule of cost of goods sold statement.

Q7. Marcus Washington owns and operates three Compufix shops in the Chicago area. Compufix
repairs and upgrades computers on site. In May, purchases of materials equaled $9,350, the
beginning inventory of materials was $1,050, and the ending inventory of materials was $750.
Payments for direct labor during the month totaled $18,570. Overhead incurred was $15,000. The
Chicago shops also spent $5,000 on advertising during the month. Administrative costs (primarily
accounting and legal services) amounted to $3,000 for the month. Revenues for May were $60,400.
Required:
1. Determine the cost of materials used for repair and upgrade services during May
2. Determine the prime cost for May
3. Determine the conversion cost for May
4. Determine the total cost of services for May

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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Q8. Sheger Company provided the following information for last year:
Beginning inventory:
Direct materials $41,600
Work in process 26,000
Finished goods 75,000
Ending inventories:
Direct materials $ 31,600
Work in process 51,000
Finished goods 140,000
During the year, direct materials purchases amounted to $270,000, direct labor cost was $320,000,
and overhead cost was $490,000. During the year, 25,000 units were completed.
Required:
1. Calculate the total cost of direct materials used in production.
2. Calculate the cost of goods manufactured.
3. Calculate the unit manufacturing cost.

Q9. Jordan Company produces a chemical reagent used by medical laboratories. For 2011, Jordan
reported the following:
Work-in-process inventory, January 1 $ 13,250
Work-in-process inventory, December 31 13,250
Finished goods inventory, January 1 (24,000 units) 170,000
Finished goods inventory, December 31 (12,000 units) 85,000
Direct materials inventory, January 1 15,600
Direct materials inventory, December 31 14,000
Direct materials used 120,000
Direct labor 72,000
Plant depreciation 9,500
Salary, production supervisor 45,000
Indirect labor 36,000
Utilities, factory 5,700
Sales commissions 66,000
Salary, sales supervisor 40,000
Depreciation, factory equipment $25,000
Administrative expenses 52,000
Supplies (half used in the factory, half used in the sales office) 4,000
Jordan produced 100,000 units during 2011 and sold 97,000 units at $6 per unit.

Required:
1. Prepare the schedule of cost of goods manufactured.
2. Prepare the schedule of income statement.

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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Q10. Ballyhoo Rags makes evening dresses. The following information has been gathered from the
company records for 2010, the first year of company operations. Work in Process Inventory
at the end of 2001 was $25,500.
Direct material purchased on account $330,000
Direct material issued to production 294,000
Direct labor payroll accrued 215,000
Indirect labor payroll accrued 62,000
Factory insurance expired 2,500
Factory utilities paid 14,300
Depreciation on factory equipment 21,700
Factory rent paid 84,000
Sales on account 958,000
The company’s gross profit rate for the year was 35% of sales

Required:
a. Compute the cost of goods sold for 2010.
b.Compute the total cost of goods manufactured for 2010
c. Determine total selling and administrative expenses for the year if net income was $60,300

Q11. Mundell Company applies overhead at the rate of $4 per direct labor hour. The following
transactions occurred during April 2009:
1. Direct material issued to production, $160,000.
2. Direct labor cost paid, 35,000 hours at $16 per hour.
3. Indirect labor cost accrued, 7,500 hours at $9 per hour.
4. Depreciation on factory assets recorded, $37,200.
5. Supervisors’ salaries paid $15,000.
6. Indirect materials issued to production, $9,000.
7. Goods costing $840,000 were completed and transferred to finished goods.

Required:
a. Prepare journal entries for the above transactions using a single overhead account and
assuming the Raw Materials Inventory account contains only direct materials.
b. Compute the ending balance if Work in Process Inventory had a beginning balance of
$55,620.
c. Compute under applied or over applied overhead for the month April.

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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Q12. Vital Strength Inc. began business in October 2008. The firm makes an exercise machine for
home and gym use. Below are data taken from the firm’s accounting records that pertain to its
first year of operations.
Direct material purchased on account $213,000
Direct material issued to production 192,000
Direct labor payroll accrued 114,000
Indirect labor payroll paid 45,300
Factory insurance expired 2,700
Factory utilities paid 8,900
Factory depreciation recorded 18,700
Ending Work in Process Inventory (48 units) $32,000
Ending Finished Goods Inventory (30 units) $45,600
Sales on account ($1,060 per unit) $ 212,000

a. How many units did the company sell in its first year?
b. How many units were completed in the first year?
c. What was the cost of goods manufactured?
d. What was the per-unit cost of goods manufactured?
e. What was cost of goods sold in the first year?

Q13. At the beginning of August 2010, Brennan Corporation had the following account balances:
Raw Materials Inventory (both direct and indirect) ----------- $ 8,000
Work in Process Inventory -----------------------------------------13,000
Finished Goods Inventory -------------------------------------------5,000
During August, the following transactions took place.
1. Raw materials were purchased on account, $75,000.
2. Direct materials ($21,200) and indirect materials ($2,500) were issued to production.
3. Factory payroll consisted of $50,000 for direct labor employees and $7,000 for indirect labor
4. Office salaries totaled $21,100 for the month.
5. Utilities of $8,700 were accrued; 70 percent of the utilities cost is for the factory area.
6. Depreciation of $9,000 was recorded on plant assets; 80 percent of the depreciation is related
to factory machinery and equipment.
7. Rent of $12,000 was paid on the building. The factory occupies 60 percent of the building.
8. At the end of August, the Work in Process Inventory balance was $8,300.
9. At the end of August, the balance in Finished Goods Inventory was $8,900.
Brennan uses an actual cost system and debits actual overhead costs incurred to Work in
Process.

Required:
a. Determine the total amount of product cost (cost of goods manufactured) and period cost
incurred during August 2010.
b. Compute the cost of goods sold for August 2010.
c. What level of August sales would have generated net income of $27,700?

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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Q14. The following balances are from the account of Beth Manufacturing
January 1 December 1
Direct Material inventory Br. 24,500 Br. 27,000
Work-in -process inventory 32,300 29,000
Finished goods inventory 4,500 6,500
Direct material used during the year amount to Br. 47,700, and the cost of goods sold for
the year was Br.56, 000.
Required: Based on the above data, compute the value of:
a) Cost of direct material purchased during the year
b) Cost of goods manufactured during the year
c) Total manufacturing costs incurred during the year
Q15.Find the value of x, y, and z from the following cost data
Direct material inventory, January 1,2011 x
Direct material inventory, December 31,201 Br.3,600
Work in process inventory, January 1,2011 2,700
Work in process inventory, December 31,2011 3,800
Finished goods inventory, January 1,2011 1,900
Finished goods inventory, December 31,2011 300
Purchase of direct materials 16,100
Cost of goods manufactured during the year y
Total manufacturing costs 55,550
Cost of goods sold 56,050
Gross margin z
Direct labor 26,450
Direct material used 15,300
Manufacturing overhead 13,800
Sales revenue 103,300
N.B: Gross margin= Revenue- cost of goods sold on income statement.

Q16. The following accounts were selected from the accounts of ABC Company at Dec.31, 2007
before adjustment and closing.
Direct material available for use Br. 414,000
Work in process inventory January1,2010 80,300
Finished good inventory January1,2010 125,600
Sales 1,000,000
Direct material purchases 380,400
Direct labor 320,000
Factory Overhead 130,000
Purchase return and allowance 38,400
Selling expenses 133,000
Administrative expenses 100,000

Inventories as of Dec.31, 2007 were as follows:

Direct material --------------------- Br. 85,000
Work in process-------------------- 110,000
Finished good---------------------- 140,000
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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Required: Based on the above data, prepare schedule of:

a) Cost of direct material inventory on January 1, 2007.
b) Cost of goods manufactured.
c) Cost of goods sold.

Q17. A partial account balance of Tokicha manufacturers as of December 31, 2011 is as follows:

Direct material inventory, Jan. 1 Br 80,000

Work in process inventory, Jan. 1 50,000
Finished good inventory, Jan. 1 230,000
Direct material purchases 360,000
Direct labor 430,000
Indirect labor (factory) 110,800
Factory rent 168,000
Office rent 60,300
Depreciation – Machinery 85,000
Depreciation – Office Equipment 16,000
Insurance - Factory 50,000
Salespersons’ salaries 141,000
Repairs and Maintenance – Machinery 43,000
Miscellaneous Factory costs 160,000
Miscellaneous Office costs 80,000
The December 31 inventories:
Direct materials 56,600
Work in process 55,000
Finished good 196,000

Required: Prepare schedule of:

a) Cost of goods manufactured and
b) Cost of goods sold.

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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Q18. DDC manufacturing company has the following cost information for the year ended
December 2011.
Administrative salaries---------------------------------------- Birr 17,000
Depreciation on factory building---------------------------- 20,000
Cost of goods manufactured---------------------------------- 500,000
Direct material inventory, December 31--------------------- 22,000
Direct materials purchased during the year------------------ 120,000
Direct material used -------------------------------------------- 250,000
Direct labor ---------------------------------------------------- 30,000
Distribution costs ----------------------------------------------- 5,600
Finished goods inventory, January 1-------------------------- 28,000
Finished goods inventory, December 31 -------------------- 35,000
Insurance on plant machinery ---------------------------------- 4,800
Marketing costs -------------------------------------------------- 12,500
Other plant costs-------------------------------------------------- 11,000
Plant utilities ------------------------------------------------------ 130,200
Sales revenue -----------------------------------------------------1,000,000
Taxes on manufacturing properties --------------------------- 15,000
Indirect labor----------------------------------------------------- 60,000
Work-in-process inventory, January 1 ----------------------- 33,000
Work-in-process inventory, December 31 -------------------- 28,000
Required: Based on the above data:
a) Determine the beginning Direct material inventory
b) Prepare the schedule of cost of goods sold statement
c) Prepare the schedule of income statement

Q19. A review of accounts showed the following for Pacific Parts for the last year;
Administrative costs--------------------------------Br 1,200,000
Depreciation manufacturing---------------------------- 400,000
Direct labor-----------------------------------------------1,900,000
Direct material purchases-------------------------------1,250,000
Direct material inventory, January 1--------------------405,000
Direct material inventory, December 31--------------- 320,000
Finished goods inventory, January 1------------------- 640,000
Finished goods inventory, December 31---------------550,000
Heat, light, and power of plant------------------------- 160,000
Marketing costs--------------------------------------------900,000
Miscellaneous manufacturing costs--------------------- 44,000
Plant maintenance and repair---------------------------- 260,000
Sales revenue---------------------------------------------8,000,000
Supervisory and indirect labor---------------------------510,000
Supplies and indirect materials----------------------------56,000
Work-in process inventory, January 1------------------540,000
Work-in process inventory, December 31--------------560,000

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 Rift Valley University- Lebu Lafto Campus
Department of Accounting & finance
Cost & Management Accounting I
Assignment-I
===================================================================================================================================================================================================================

Required: Based on the above data:

a) Determine the beginning Direct material inventory
b) Prepare the schedule of cost of goods sold statement
c) Prepare the schedule of income statement

Q20. Foxwood Company is a metal –and wood cutting manufacturer, selling products to the home
construction market .consider the following data for 2011;
Sandpaper ------------------------------------------------------- $ 2,000
Materials –handling costs------------------------------------- 70,000
Lubricants and coolants --------------------------------------- 5,000
Miscellaneous indirect manufacturing labor --------------- 40,000
Direct manufacturing labor ----------------------------------- 300,000
Direct materials inventory, Jan .1 ---------------------------- 40,000
Direct materials inventory, Dec.31 --------------------------- 50,000
Finished goods inventory, Jan. 1 ------------------------------ 100,000
Finished goods inventory, Dec. 31---------------------------- 150,000
Working in process inventory, Jan.1 -------------------------- 10,000
Working in process inventory, Dec.31------------------------- 14,000
Plant –leasing costs----------------------------------------------- 54,000
Depreciation –plant equipment -------------------------------- 36,000
Property taxes on plant equipment ---------------------------- 4,000
Fire insurance on plant equipment ----------------------------- 3,000
Direct materials purchased ------------------------------------- 460,000
Revenues ------------------------------------------------------ 1,360,000
Marketing promotions ------------------------------------------ 60,000
Marketing salaries ------------------------------------------------ 100,000
Distribution costs -------------------------------------------------- 70,000
Customer –service costs----------------------------------------- 100,000

Required:
a. Prepare schedule of cost of goods manufactured
b. Prepare schedule of income statement.
c. Suppose that both the direct material costs and the plant- leasing costs are used for the
production of 900,000 units .What is the direct material unit cost and plant-leasing unit
cost?

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