HARAMAYA UNIVERSITY
COLLEGE OF CONTINUING AND DISTANCE EDUCATION
DEPARTMENT OF ACCOUNTING AND FINANCE
ASSIGNMENT OF THE COURSE COST AND MANAGEMENT ACCOUNTING I
Maximum mark 30%
1.
Cost of finished goods manufactured, income statement, manufacturing company.
Consider the following account balances (in thousands) for the Canseco Company.
Canseco Company
Beginning of 2011
End of 2011
Direct materials inventor
22000
26000
Work-in-process inventory
21000
20000
Finished goods inventory
18000
23000
Purchases of direct material
75000
Direct manufacturing labo
25000
Indirect manufacturing labor
15000
Plant insurance
9000
Depreciation—plant, building, and equipment
11000
Repairs and maintenance—plant
4000
Marketing, distribution, and customer-service costs
93000
General and administrative costs
29000
Required
1. Prepare a schedule for the cost of goods manufactured for 2011.
2. Revenues for 2011 were $300 million. Prepare the income statement for 2011.
2. Ron Howard recently took over as the controller of Johnson Brothers Manufacturing. Last
month, the previous controller left the company with little notice and left the accounting records
in disarray. Ron needs the ending inventory balances to report first-quarter numbers.
For the previous month (March 2017) Ron was able to piece together the following information:
Direct materials purchased
$120,000
Work-in-process inventory,3/1/2017
Direct materials inventory, 3/1/2017
Finished-goods inventory, 3/1/2017
Conversion costs
Total manufacturing costs added during the period
Cost of goods manufactured
Gross margin as a percentage of revenues
Revenues
Calculate the cost of:
I. Finished-goods inventory, 3/31/2017
II. Work-in-process inventory, 3/31/2017
III. Direct materials inventory, 3/31/2017
3.
$ 35,000
$ 12,500
$160,000
$330,000
$420,000
4 times direct materials used
20%
$518,750
The Stanton Processing Company had work in process at the beginning and end of
March 2017 in its Painting Department as follows:
Percentage of Completion
Direct Materials
Conversion Costs
March 1 (3,000 units)
40%
10%
March 31 (2,000 units)
80%
40%
The company completed 30,000 units during March. Manufacturing costs incurred during March
were direct materials costs of $ 176,320 and conversion costs of $ 312,625. Inventory at March 1
was carried at a cost of $ 16,155 (direct materials, $5,380 and conversion costs, $10,775).
Required
1. Assuming Stanton uses First in First Out; determine the equivalent units of work Done in
March, and calculate the cost of units completed and the cost of units in ending
Inventory.
2. The assembly division of Fenton Watches, Inc. uses the weighted-average method of process
costing. Consider the following data for the month of May 2017:
Physical Units
(Watches)
Beginning work in process (May 1)a
80
Direct
Materials
$493,360
Conversion
Costs
$ 91,040
Started in May 2017
500
Completed during May 2017
460
Ending work in process (May 31)b
120
Total costs added during May 2017
$3,220,000
$1,392,000
A. Degree of completion: direct materials, 90%; conversion costs, 40%.
B. Degree of completion: direct materials, 60%; conversion costs, 30%.
Required
1. Assuming Fenton watches Inc. Uses Weighted average method; determine the equivalent
units of work done in May, and calculate the cost of units completed and the cost of units
in ending Inventory.
3. British Petroleum (BP) Company buys crude oil and processes it into three different products.
Refining the oil till the split off point results in new products such as Gas, Benzyl and Tar. In
January, 2009 BP Co. purchased 120,000 barrels crude oil for $5,000,000; in addition to this,
conversion costs of $800,000 were incurred for joint processing of the products up to the split of
point at which one stable product can be produced. The company has produced 55,000, 35,000,
and 25,000 barrels of Gas, Benzyl and Tar respectively. The company can sell Gas, Benzyl and
Tar at the split-off point for $105, $85 and $90 per barrel respectively. Alternatively, Tar can be
further processed at a cost of $12 per barrel and then sold for $140 per barrel while, Gas can be
further processed at additional cost of $15 per barrel and then sold for $155 per barrel, benzyl
can be further processed at additional cost of $10 per barrel and then sold for $135 per barrel.
The output after further processing is estimated to be 44,000 barrel for Gas and 20,000 barrel for
Tar and 30,000 barrels for benzyl
Required: Allocate joint cost of production
A. Using estimated net realizable value (NRV) method
B. using physical measure method
C. Using sales value at split off point
4. The Cocoa Factory manufactures and distributes chocolate products. It purchases cocoa beans
And processes them into two intermediate products: chocolate-powder liquor base and milkchocolate liquor base. These two intermediate products become separately identifiable at a single
split-off point. Every 2,000 pounds of cocoa beans yields 50 gallons of chocolate-powder liquor
base and 50 gallons of milk-chocolate liquor base.
The chocolate-powder liquor base is further processed into chocolate powder. Every 50 gallons
of chocolate-powder liquor base yield 650 pounds of chocolate powder. The milk-chocolate
liquor base is further processed into milk chocolate. Every 50 gallons of milk-chocolate liquor
base yield 1,070 pounds of milk chocolate.
Production and sales data for August 2017 are as follows (assume no beginning inventory):
■ Cocoa beans processed, 28,000 pounds
■ Costs of processing cocoa beans to split-off point (including purchase of beans), $62,000
Production
Sales
Selling Price
Separable
Processing
Costs
Chocolate
9,100 pounds
6,500 pounds
$ 9 per pound
$50,100
14,980 pounds
13,500 pounds
$10 per pound
$60,115
powder
Milk chocolate
Cocoa Factory fully processes both of its intermediate products into chocolate powder or milk
chocolate. There is an active market for these intermediate products. In August 2017, Cocoa
Factory could have sold the chocolate-powder liquor base for $20 a gallon and the milkchocolate liquor base for $60 a gallon.
Required
1. Calculate how the joint costs of $62,000 would be allocated between chocolate powder and
milk chocolate under the following methods:
a. Sales value at split off
b. Physical measure (gallons)
c. NRV
d. Constant gross-margin percentage NRV