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Larry M. Walther & Christopher J. Skousen Managerial and Cost Accounting Exercises I Download free ebooks at bookboon.com 2 Managerial and Cost Accounting Exercises I © 2011 Larry M. Walther, Christopher J. Skousen & Ventus Publishing ApS. All material in this publication is copyrighted, and the exclusive property of Larry M. Walther or his licensors (all rights reserved). ISBN 978-87-7681-795-4 Download free ebooks at bookboon.com 3 Managerial and Cost Accounting Exercises I Contents Contents Problem 1 6 Worksheet 1 6 Solution 1 7 Problem 2 8 Solution 2 8 Problem 3 9 Worksheet 3 10 Solution 3 11 Problem 4 12 Worksheet 4 13 Solution 4 14 Problem 5 15 Worksheet 5 16 Solution 5 17 Please click the advert The next step for top-performing graduates Masters in Management Designed for high-achieving graduates across all disciplines, London Business School’s Masters in Management provides specific and tangible foundations for a successful career in business. This 12-month, full-time programme is a business qualification with impact. In 2010, our MiM employment rate was 95% within 3 months of graduation*; the majority of graduates choosing to work in consulting or financial services. As well as a renowned qualification from a world-class business school, you also gain access to the School’s network of more than 34,000 global alumni – a community that offers support and opportunities throughout your career. For more information visit www.london.edu/mm, email mim@london.edu or give us a call on +44 (0)20 7000 7573. * Figures taken from London Business School’s Masters in Management 2010 employment report Download free ebooks at bookboon.com 4 Managerial and Cost Accounting Exercises I Contents Problem 6 19 Worksheet 6 20 Solution 6 22 Please click the advert Teach with the Best. Learn with the Best. Agilent offers a wide variety of affordable, industry-leading electronic test equipment as well as knowledge-rich, on-line resources —for professors and students. We have 100’s of comprehensive web-based teaching tools, lab experiments, application notes, brochures, DVDs/ CDs, posters, and more. See what Agilent can do for you. www.agilent.com/find/EDUstudents www.agilent.com/find/EDUeducators © Agilent Technologies, Inc. 2012 u.s. 1-800-829-4444 canada: 1-877-894-4414 Download free ebooks at bookboon.com 5 Managerial and Cost Accounting Exercises I Problem 1: Worksheet Problem 1 Armor World manufacturers armored cars. The armor provides low level balistics protection. Cars are made to customer specifications via orders submitted over an internet site. The cars are completed and shipped in about one day. As a result, Armor World does not maintain any work in process or finished goods inventory. The following costs were incurred in producing and selling mats during July: Steel used in the armoring $ 67,150 Armor grade glass for windows 7,000 Factory rent 4,800 Electricity to run the welding equipment 1,300 Labor cost of welders 17,050 Internet sales site 750 Administrative salaries 6,250 Depreciation of welding equipment 3,700 Salary of factory safety inspector 1,750 Office rent 6,750 Evaluate these costs, and determine the amount of direct material, direct labor, factory overhead, and selling/general/ administrative costs. Next, identify how much is considered to be a “prime cost” and how much is considered to be a “conversion cost.” Worksheet 1 Total Cost Steel used in the armoring $ Direct Material 67,150 $ Direct Labor - $ Factory Overhead - $ SG&A - $ - Armor grade glass for windows 7,000 - - - - Factory rent 4,800 - - - - Electricity to run the welding equipment 1,300 - - - - 17,050 - - - - 750 - - - - Administrative salaries 6,250 - - - - Depreciation of welding equipment 3,700 - - - - Salary of factory safety inspector 1,750 - - - - Office rent 6,750 - - - - Labor cost of welders Internet sales site $ 116,500 $ - $ - $ - $ - Download free ebooks at bookboon.com 6 Managerial and Cost Accounting Exercises I Problem 1: Solution Solution 1 Total Cost Steel used in the armoring $ Direct Material 67,150 $ Direct Labor Factory Overhead SG&A 67,150 Armor grade glass for windows 7,000 - Factory rent 4,800 - $ 4,800 Electricity to run the welding equipment 1,300 - 1,300 17,050 - 17,050 - 750 - - - Administrative salaries 6,250 - - - 6,250 Depreciation of welding equipment 3,700 - - 3,700 - Salary of factory safety inspector 1,750 - - 1,750 - Office rent 6,750 - - - 6,750 Labor cost of welders Internet sales site $ 116,500 $ 67,150 $ 7,000 $ 17,050 $ 18,550 $ $ 750 13,750 The prime costs are $84,200, consisting of direct labor and direct materials ($67,150 + $17,050). The conversion costs are $35,600, consisting of direct labor and factory overhead ($17,050 + $18,550). Download free ebooks at bookboon.com 7 Managerial and Cost Accounting Exercises I Problem 2 Problem 2 Deerbound Manufacturing transferred $3,000,000 of raw materials into production during the most recent year. Direct labor and factory overhead for the period totaled $2,000,000. Beginning work in process was $670,000 and ending work in process was $850,000. Finished goods inventory decreased by $50,000. If gross profit was $1,000,000, how much was sales for the period? Worksheet 2 Total manufacturing costs were $6,000,000 ($3,000,000 + $2,000,000). Of this total cost entering production, $5,820,000 was transferred to finished goods (the other $180,000 remained in work in process ($850,000 - $670,000)). Given that finished goods inventory decreased, the total cost of goods sold was $5,870,000 ($5,820,000 transferred into finished goods + $50,000 decrease in finished goods). Total sales equaled $7,470,000 ($5,870,000 cost of goods sold + $1,600,000 gross profit). Download free ebooks at bookboon.com 8 Managerial and Cost Accounting Exercises I Problem 3 Problem 3 Bubble Bobber provided the following list of cost data related to its manufacturing operations for the month of October 20X5. Beginning raw materials inventory $ 2,416,000 Raw materials purchased (net) 5,863,750 Ending raw materials inventory 2,045,500 Direct labor costs 805,750 Indirect materials 313,750 Indirect labor 222,250 Factory utilities and maintenance Factory depreciation Other factory related overhead 1,140,000 141,500 61,000 Beginning work in process 1,942,500 Ending work in process 1,792,500 a) Arrange the cost data into a statement of cost of goods manufactured. b) If Bubble Bobber’s cost of goods sold for the month was $10,000,000, how much was the increase or decrease in finished goods inventory for the month of October? Download free ebooks at bookboon.com 9 Managerial and Cost Accounting Exercises I Problem 3: Worksheet Worksheet 3 a) BUBBLE BOBBER CORPORATION SCHEDULE OF COST OF GOODS MANUFACTURED For the month ending October 31, 20X5 Direct materials: $ - $ $ Raw materials transferred to production Direct labor - Factory overhead $ - $ Total manufacturing costs - $ - Please click the advert b) You’re full of energy and ideas. And that’s just what we are looking for. © UBS 2010. All rights reserved. $ Cost of goods manufactured Looking for a career where your ideas could really make a difference? UBS’s Graduate Programme and internships are a chance for you to experience for yourself what it’s like to be part of a global team that rewards your input and believes in succeeding together. Wherever you are in your academic career, make your future a part of ours by visiting www.ubs.com/graduates. www.ubs.com/graduates Download free ebooks at bookboon.com 10