Managerial Accounting 8ed Chapter3

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CHAPTER 3

PROBLEM 3-43 (35 MINUTES)
1. Predetermined overhead rate = budgeted overhead ÷ budgeted direct-labor cost = $2,730,000 ÷ $2,100,000 = 130% of direct labor cost
2. Additions (debits) total $7,802,500 [$2,800,000 + $2,175,000 + ($2,175,000 x 130%)].
3. The finished-goods inventory consisted of job no. 3154, which cost $175,750 [$78,000 + $42,500 + ($42,500 x 130%)].
4. Since there is no work in process at year-end, all amounts in the Work-in-Process account must be transferred to Finished-Goods Inventory. Thus:
Finished-Goods Inventory 7,880,900*
Work-in-Process Inventory 7,880,900

*Beginning balance in Work-in-Process Inventory + additions to the account: $78,400 + $7,802,500 = $7,880,900

5.
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2. Predetermined overhead rate = budgeted overhead ÷ traceable costs = $1,050,000 ÷ $3,750,000 = 28% of traceable costs
3. Target profit percentage = target profit ÷ total cost = $960,000 ÷ $4,800,000 = 20% of cost

4. The total cost of the Davis Manufacturing project is $96,000, and the billing is $115,200, as follows:

Professional staff salaries… ……… $61,500
Administrative support staff……… 3,900
Photocopying………………………… 750
Travel………………………………….. 6,750
Other operating costs………………. 2,100
Subtotal…………………………… $75,000
Overhead ($75,000 x 28%)…………. 21,000
Total cost…………………………. $96,000
Markup ($96,000 x 20%)……………. 19,200
Billing to Davis……………………… $115,200 5. Possible nontraceable costs include utilities, rent, depreciation, advertising, top management salaries, and insurance.

6. Professional staff members are compensated for attending training sessions and firm-wide planning meetings, paid vacations, and completion of general, non-client-related paperwork and reports. These activities benefit multiple clients, the consultant, and/or the overall firm, making traceability to specific clients difficult if not impossible.

PROBLEM 3-49 (45 MINUTES)
1. SUPERIOR METALS
SCHEDULE OF COST OF GOODS MANUFACTURED
FOR THE YEAR ENDED DECEMBER 31, 20X4

Direct material: Raw

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