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Week Four Homework Assignment (Chapters 19 and 20).xlsB-19.05
Renaissance Gallery converts photographs to portraits via a tedious hand painting process. Costs are
tracked for each painting, with gallery overhead being applied at 125% of direct labor cost.
Renaissance Gallery began June with one job in process. This job related to the Price Wedding photo,
and beginning work in process included total costs of \$14,400 (direct labor, direct material, and applied
During June, four new jobs were begun. These consisted of the Ramirez family portrait, the Oberweiss
farm photo, the Ravenwood big fish picture, and the Zhang baby picture. The only job remaining in
process at the end of June was the Ravenwood big fish picture. To date, \$13,000 in direct labor and
\$3,500 of direct materials had been committed to the Ravenwood job.
Total direct labor incurred on all jobs during June was \$60,900. Total direct material incurred on all
jobs during June was \$11,700.
(a)
Compute the ending work in process inventory balance and the total cost assigned to finished
jobs.
(b)
Why is it necessary to track costs to individual jobs?
(c)
The overhead application rate is based on estimates. What happens if the amount of overhead
applied to individual jobs differs from the amount of overhead actually incurred?
Name:
B-19.06
Date:
Section:
Cool Sun produces awnings and screens. Prepare journal entries to reflect the following transactions.
After you complete the entries, determine the amount to include in raw materials, work in process, and
finished goods.
Aug. 4, 20X5
Purchased fabric and aluminum to be used in the manufacturing process. The purchase
price was \$4,000, on account.
Aug. 8, 20X5
Transferred 60% of the raw materials purchased on August 4 into production.
Aug. 8, 20X5
Incurred direct labor costs of \$3,000. Factory overhead is applied at 40% of the direct
labor cost.
Aug. 9, 20X5
Transferred completed awnings with total assigned costs of \$4,400 to finished goods.
Aug. 10, 20X5
Sold and delivered half of the finished goods (from August 9) to a customer for \$4,000
cash.
GENERAL JOURNAL
Date
Page 1
Accounts
8-4-X5
To record purchase of raw materials
8-8-X5
To transfer raw materials to production,
record direct labor costs on job, and apply
overhead at the predetermined rate
8-9-X5
To transfer completed units to finished
goods inventory
Debit
Credit
Name:
B-19.06
Date:
Section:
8-10-X5
To record sale of finished awning for
\$4,000
8-10-X5
To transfer finished goods to cost of goods
sold
Name:
B-19.07
Date:
Section:
Information for three different companies follows. Each company applies factory overhead at the rate of 40%
of direct labor cost. In each scenario, the following entry was made to record the actual overhead costs:
85,000
Salaries Payable
50,000
Utilities Payable
15,000
Supplies
4,000
Accumulated Depreciation
16,000
Prepare a compound journal entry for each company to transfer raw materials to production, record direct
labor costs on each job, and apply overhead at the predetermined rate. If the scenario involves underapplied
or overapplied overhead, prepare an additional journal entry to transfer the amount to Cost of Goods Sold.
Company A Raw materials transferred to production totaled \$100,000, and direct labor cost was \$212,500.
Company B Raw materials transferred to production totaled \$110,000, and direct labor cost was \$200,000.
Company C Raw materials transferred to production totaled \$90,000, and direct labor cost was \$225,000.
GENERAL JOURNAL
Date
Accounts
A
To record costs and apply overhead at the
predetermined rate (\$212,500 X 40% =
\$85,000)
B
To record costs and apply overhead at the
predetermined rate (\$200,000 X 40% =
\$80,000)
B
Debit
Credit
Name:
B-19.07
Date:
Section:
C
To record costs and apply overhead at the
predetermined rate (\$225,000 X 40% =
\$90,000)
C
Name:
Date:
B-20.02
Section:
Zeus Corporation produces cultured diamonds via a secretive process that grows the diamonds in a
vacuum chamber filled with a carbon gas cloud. The diamonds are produced in a single continuous
process, and Zeus uses the weighted-average process costing method of accounting for production.
The production process requires constant utilization of facilities and equipment, as well as direct
labor by skilled technicians. As a result, direct labor and factory overhead are both deemed to be
introduced uniformly throughout production.
At the beginning of June, 20X9, 4,000 diamonds were in process. During June, an additional 8,000
diamonds were started, and 7,000 diamonds were completed and transferred to finished goods.
As of the beginning of the month, work in process was 80% complete with respect to materials and
60% complete with respect to conversion costs.
As of the end of the month, work in process was 70% complete with respect to materials and 40%
complete with respect to conversion costs.
Prepare a “unit reconciliation” schedule that includes calculations showing the equivalent units of
materials, direct labor, and factory overhead for June.
Unit Reconciliation:
Quantity
Schedule
Beginning Work in Process
Started into Production
Total Units into Production
Equivalent Units Calculations:
Conversion
Direct
Materials
Direct
Labor
Factory
To Finished Goods
Ending Work in Process
Total Units Reconciled
Ending WIP Completion Status:
Materials =
%
Conversion = %
B-20.03
Zeus Corporation produces cultured diamonds via a secretive process that grows the diamonds in a
vacuum chamber filled with a carbon gas cloud. The diamonds are produced in a single continuous
process, and Zeus uses the weighted-average process costing method of accounting for production.
The production process requires constant utilization of facilities and equipment, as well as direct labor
by skilled technicians. As a result, direct labor and factory overhead are both deemed to be introduced
uniformly throughout production.
Zeus Corporation prepared the following “unit reconciliation” for the month of July:
Unit Reconciliation:
Quantity
Schedule
Beginning Work in Process
5,000
Started into Production
6,000
Total Units into Production
11,000
Equivalent Units Calculations:
Conversion
Direct
Materials
Direct
Labor
Factory
To Finished Goods
8,000
8,000
8,000
8,000
Ending Work in Process
3,000
1,800
1,500
1,500
11,000
9,800
9,500
9,500
Total Units Reconciled
Ending WIP Completion Status:
Materials = 60% and Conversion = 50%
The above beginning work in process inventory had an assigned cost of \$3,000,000, divided between
direct materials (30%), direct labor (20%), and factory overhead (50%).
Additional costs incurred during July were \$9,500,000, divided between direct materials (15%), direct
labor (25%), and factory overhead (60%).
Prepare a schedule showing the calculation of cost per equivalent unit.
Cost Per Equivalent Unit:
Conversion
B-20.03
Total
Cost
Beginning Work in Process
Cost incurred during period
Total cost
Equivalent units
Costs per equivalent unit
Direct
Materials
Direct
Labor
Factory
B-20.04
Zeus Corporation produces cultured diamonds via a secretive process that grows the diamonds in a
vacuum chamber filled with a carbon gas cloud. The diamonds are produced in a single continuous
process, and Zeus uses the weighted-average process costing method of accounting for production.
Below is the company’s calculation of cost per equivalent unit for October. During October, the company
completed and transferred 8,000 diamonds to finished goods. An additional 4,000 units were still in
process at the end of the month. The ending work in process was 60% complete with respect to direct
materials and 40% complete with respect to both elements of conversion cost.
Prepare a schedule showing the allocation of total cost between finished goods and ending work in
process.
Cost Per Equivalent Unit:
Conversion
Total
Cost
Beginning Work in Process
\$
\$
\$
13,200,000
Equivalent units
\$
÷
Costs per equivalent unit
Direct
Labor
1,170,000 \$
9,300,000
Cost incurred during period
Total cost
3,900,000
Direct
Materials
\$
Factory
780,000 \$
1,950,000
1,860,000
2,325,000
5,115,000
3,030,000 \$
3,105,000 \$
7,065,000
10,400
291.35 \$
÷
9,600
÷
323.44 \$
9,600
735.94
\$1,059.38
\$1,350.72
Cost Allocation:
Total
Cost
Transferred to Finished Goods
Ending Work in Process
Direct
Materials
Equivalent Units:
Conversion
Direct
Factory
Labor
B-20.04
Total Ending Work in Process
Total Cost Allocation
Sand Castle Manufacturing produces concrete yard art. Recently, 2,500 concrete seahorses were
produced in a production run. The run required 1,250 machine hours, and also required five “set-ups”
of mixing equipment. Final inspection required 50 hours of inspection activity. Overhead is estimated
at \$30 per machine hour, plus \$2,750 per “set-up,” and \$25 per inspection hour. Direct materials and
direct labor total \$75 per seahorse.
(a)
Apply activity-based costing and determine the amount assigned to a concrete seahorse.
(b)
For GAAP purposes, Sand Castle applies traditional costing methods, and allocates
overhead at \$50 per machine hour. How much cost would be assigned to the 2,500
seahorses? What is the per unit cost of a seahorse under the traditional approach? What
might explain the higher cost assignment, and how could this influence business decision
making?

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