Managerial Accounting

| June 29, 2015
  1. Stewart Inc. uses a process cost system and the weighted-average cost flow assumption. Production begins in the Fabricating Department where materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. On March 1, the beginning work in process inventory consisted of 20,000 units which were 60% complete and had a cost of $175,000, $145,000 of which were material costs. During March, the following occurred:

Materials added                                                                                       $305,000

Conversion costs incurred                                                                        $120,000

Completed units transferred out in March                                                     65,000

Units in ending work in process March 31 (40% complete)                          25,000

Instructions: (15 points)

Answer the following questions and show the computations that support your answers.

(a)  What are the equivalent units of production for materials and conversion costs in the Fabricating Department for the month of March?

(b)  What are the costs assigned to the ending work in process inventory on March 31?

(c)  What are the costs assigned to units completed and transferred out during March?











  1. Davis Inc. uses a job order cost accounting system and keeps perpetual inventory records. The following transactions occurred in the first month of operations:
  2. Direct materials requisitioned during the month:

Job 101                 $20,000

Job 102                   16,000

Job 103                   24,000



  1. Direct labor incurred and charged to jobs during the month was:

Job 101                 $30,000

Job 102                   28,000

Job 103                   20,000



  1. Manufacturing overhead was applied to jobs worked on using a predetermined overhead rate based on 75% of direct labor costs.
  2. Actual manufacturing overhead costs incurred during the month amounted to $66,000.
  3. Job 101 consisting of 1,000 units and Job 103 consisting of 200 units were completed during the month.

Instructions: (28 points)

(a)  Prepare journal entries to record the above transactions.

(b)  How much manufacturing overhead was applied to Job 103 during the month?

(c)  Compute the unit cost of Jobs 101 and 103.

(d)  What is the balance in Work In Process Inventory at the end of the month?

(e)  Determine if manufacturing overhead was under- or over-applied during the month. How much?

  1. Campbell Inc. is a small manufacturer that uses machine-hours as its activity base for assigning overhead costs to jobs. The company estimated the following amounts for 2013 for the company and for Job 62:

 Company                  Job 62   

Direct materials                                       $60,000                   $4,500

Direct labor                                            $25,000                   $2,500

Manufacturing overhead costs                 $72,000

Machine hours                                          80,000                     1,350


During 2013, the actual machine-hours totaled 84,000, and actual overhead costs were $71,000.

Instructions: (18 points)

(a)   Compute the predetermined overhead rate.

(b)   Compute the total manufacturing costs for Job 62.

(c)   How much overhead is over or under applied for the year for the company? State the dollar amount and whether it is over- or under applied.

(d)   If Campbell Inc. sells Job 62 for $14,000, compute the gross profit.





  1. Write a paragraph explaining the difference between absorption and variable costing. (15 points)
  1. The comparative balance sheets for Ashley Company as of December 31 are presented below.


Comparative Balance Sheets
December 31
Assets 2013 2012
Cash $70,600 $45,220
Accounts receivable 43,599 61,607
Inventory 151,897 141,806
Prepaid expenses 15,290 21,335
Land 105,700 130,600
Equipment 228,359 155,043
Acc. depr. – equipment (45,192) (35,358)
Building 199,500 199,500
Acc. depr. – building (59,850) (39,900)
     Total $709,903 $679,853
Liabilities and Stockholders’ Equity
Accounts payable $47,460 $39,754
Bonds payable 261,050 300,300
Common stock, $1 par 197,650 158,400
Retained earnings 203,743 181,399
     Total $709,903 $679,853

Additional information:

  1. Operating expenses include depreciation expense of $41,747 and charges from prepaid expenses of $6,045.
  2. Land was sold for cash at book value.
  3. Cash dividends of $14,684 were paid.
  4. Net income for 2013 was $37,028.
  5. Equipment was purchased for cash. In addition, equipment costing $22,162 with a book value of $10,199 was sold for $6,272 cash.
  6. Bonds were converted at face value by issuing 39,250 shares of $1 par value common stock.

Instructions: (24 points) Prepare a statement of cash flows for the year ended December 31, 2013, using the indirect method.

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Accounting Partnerships/corporations
Accounting and Financial Management

Category: Accounting

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