Prior to 2017, Heberling Inc. excluded manufacturingoverhead costs from work in process and finished goodsinventory. These costs have been expensed as incurred. In2017, the company decided to change its accountingmethods for manufacturing inventories to full costing byincluding these costs as product costs. Assuming thatthese costs are material, how should this change bereflected in the financial statements for 2016 and 2017?

Prior to 2017, Heberling Inc. excluded manufacturingoverhead costs from work in process and finished goodsinventory. These costs have been expensed as incurred. In2017, the company decided to change its accountingmethods for manufacturing inventories to full costing byincluding these costs as product costs. Assuming thatthese costs are material, how should this change bereflected in the financial statements for 2016 and 2017?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter2: Accounting For Materials

Section: Chapter Questions

Problem 11E: Renfro, Inc. was franchised on January 1, 2016. At the end of its third year of operations, December...

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Prior to 2020, Heberling Inc. excluded manufacturing overhead costs from work in process and finished goods inventory. These costs have been expensed as incurred. In 2020, the company decided to change its accounting methods for manufacturing inventories to full costing by including these costs as product costs. Assuming that these costs are material, how should this change be reflected in the financial statements for 2019 and 2020?
The ABC Co. in 1997 and 1998 included certain factory administrative expenses in the general and administrative expense category. For the year ended December 31, 1999, ABC has decided that these expenses should be allocated to units produced as part of factory overhead. The amount involved Is material. The auditor should regard this change asA. A classification in change that does not require special treatment or commentB. A change in accounting principle that requires management justificationC. A change in an accounting estimate that requires footnote explanationD. A change from the absorption costing inventory method to the direct costing inventory method
At the end of 2018, Furry Balls Co. had the following account balances after factory overhead had been closed to manufacturing overhead control: Manufacturing overhead control, P20,000 Dr. Cost of goods sold, P384,000 Dr. Finished goods, P96,000 Dr. Work in process, P160,000 Dr. Raw Materials, P160,000 Dr. Case 1: any under- or over- applied overhead is considered material. What is the adjusted balance of cost of goods sold after disposing the under -or over-applied overhead?
At the end of 2018, Furry Balls Co. had the following account balances after factory overhead had been closed to manufacturing overhead control: Manufacturing overhead control, PP20,000 dr. Cost of goods sold, P384,000 dr. Finished goods, P96,000 dr. Work in process, P160,000 dr. Raw materials, P160,000 dr. Case 1: any under- or over-applied overhead is considered material. What is the adjusted balance of finished goods inventory after disposing of the under-or over-applied overhead?
How much fixed manufacturing overhead was included in the 2016 and the 2017 ending inventory under absorption costing?
At the end of 2018, Furry Balls Co. had the following account balances after factory overhead had been closed to manufacturing overhead control: Manufacturing overhead control, PP20,000 dr. Cost of goods sold, P384,000 dr. Finished goods, P96,000 dr. Work in process, P160,000 dr. Raw materials, P160,000 dr. Case 1: any under- or over- applied overhead is considered material. a. What is the adjusted balance of finished goods inventory after disposing the under-or over-applied overhead? b. What is the adjusted balance of work in process inventory after disposing the under-or over-applied overhead?
At the end of 2018, Furry Balls Co. Had the following account balances after factory overhead had been closed to manufacturing overhead control: Manufacturing overhead control, P20,000 cr. Cost of goods sold, P384,000 dr. Finished goods, P96,000 dr. Work in process, P160,000 dr. Raw materials, P160,000 dr. Case 1: Any under -or overapplied overhead is considered immaterial. What is the adjusted balance cost of goods sold after disposing of the under-or over-applied overhead?
Renfro, Inc. was franchised on January 1, 2016. At the end of its third year of operations, December 31, 2018, management requested a study to determine what effect different materials inventory costing methods would have had on its reported net income over the three-year period. The materials inventory account, using LIFO, FIFO, and weighted average, would have had the following ending balances: a. Assuming the same number of units in ending inventory at the end of each year, were material costs rising or falling from 2016 to 2018? b. Which costing method would show the highest net income for 2017? c. Which method would show the lowest net income for 2018? d. Which method would show the highest net income for the three years combined?
Lavender Manufacturing Company began business in the current year. The company uses the simplified method to allocate mixed services costs to production. The companys costs and expenses for the year were as follows. a. Determine Lavenders total production costs for the year. b. Assume that the hourly pay for direct labor is much lower than the hourly pay for employees in general administration and that the employee turnover is much higher for production employees than for general administration employees. How should these facts affect the companys decision to use the simplified mixed services method to allocate mixed services costs to production?
At the end of 2018, Furry Balls Co. had the following account balances after factory overhead had been closed to manufacturing overhead control: Manufacturing overhead control, P20,000 dr. Cost of goods sold, P384,000 dr. Finished goods, P96,000 dr. Work in process, P160,000 dr. Raw materials, P160,000 dr. Case 1: any under- or over-applied overhead is considered immaterial. What is the adjusted balance of work in process inventory after disposing of the under-or over-applied overhead?
The following account balances are from Woods Corporation accounting records for the yearended December 31, 2008.Required:1. Determine the amount of Direct materials used in production2. Determine the amount of factory overhead costs3. Determine the prime cost & conversion costs4. A schedule for factory/manufacturing overhead costs5. A schedule of the Cost of goods manufactured, clearly showing total manufacturing cost andtotal manufacturing cost to account for6. An Income Statement for Woods Corporation for the year ended December 31,20087. During the year Woods corporation produced 20,000 pieces of furniture. What was the unitproduct cost?8. How does the format of the income statement for a manufacturing concern differ from theincome statement of a merchandising business?Advertising expense $ 85,000Amortization expense – Patents 16,000Special Design Cost 10,000Bad Debts expense 28,000Depreciation expense – Office equipment 37,000Depreciation expense – Factory Building…
At the end of its current year, a company learned that its overhead was underapplied by $1,500 and that this amount is not considered material. Based on this information, the company should a. Credit the $1,500 to Finished Goods Inventory. b. Credit the $1,500 to Cost of Goods Sold. c. Debit the $1,500 to Cost of Goods Sold. d. Do nothing about the $1,500 because it is not material and it is likely that overhead will be overapplied by the same amount next year. e. Include the $1,500 on the income statement as “Other Expense.”