QUESTION 1 You have been employed as an entry-level management accountant for a little under a year. You suspect that your immediate supervisor is involved in a significant fraud involving diverting of company assets to personal use. Briefly discuss the steps you might take to resolve this dilemma and use a real world example (not hypothetical) to support your discussion.
Question 2 Lismore Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:
Work-in-process inventory (January 1) $ 140,400
Work-in-process inventory (March 31) 171,000
Finished goods inventory (January 1) 540,000
Finished goods inventory (March 31) 510,000
Direct materials used 378,000
Indirect materials used 84,000
Direct manufacturing labor 480,000
Indirect manufacturing labor 186,000
Property taxes on manufacturing plant building 28,800
Salespersons' company vehicle costs 12,000
Depreciation of manufacturing equipment 264,000
Depreciation of office equipment 123,600
Miscellaneous plant overhead 135,000
Plant utilities 92,400
General office expenses 305,400
Marketing distribution costs 30,000
Required:
a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare a cost of goods sold schedule for the quarter.
c. Indentify inventoriable and period costs.
d. Of what value is the schedule of cost of goods manufactured? How does it tie into the income statement? Discuss and use examples to support your discussion.
Question 3 The Dougherty Furniture Company manufactures tables. In March, the two production departments had budgeted allocation bases of 4,000 machine-hours in Department 100 and 8,000 direct manufacturing labor-hours in Department 200. The budgeted manufacturing overheads for the month were $57,500 and $62,500, respectively. For Job A, the actual costs incurred in the two departments were as follows:
Department 100 Department 200
Direct materials purchased on account $110,000 $177,500
Direct materials used 32,500 13,500
Direct manufacturing labor 52,500 53,500
Indirect manufacturing labor 11,000 9,000
Indirect materials used 7,500 4,750
Lease on equipment 16,250 3,750
Utilities 1,000 1,250
Job A incurred 800 machine-hours in Department 100 and 300 manufacturing labor-hours in Department 200. The company uses a budgeted overhead rate for applying overhead to production.
Required:
a. Determine the budgeted manufacturing overhead rate for each department.
b. Prepare the necessary journal entries to summarize the March transactions for Department 100.
c. What is the total cost of Job A?
d. What factors should be considered in selecting an allocation base to be used in computing the budgeted overhead rate? Discuss and use examples to support your discussion.
Question 4
a. Silver Spoon Incorporated is a manufacturer of kitchen utensils. It produces all of its products in one department. The information for the current month is as follows:
Beginning work in process 37,500 units
Units started 55,000 units
Units completed 75,000 units
Ending work in process 14,500 units
Spoilage 3,000 units
Beginning work-in-process direct materials $25,000
Beginning work-in-process conversion $ 10,000
Direct materials added during month $113,750
Direct manufacturing labor during month $40,020
Beginning work in process was 25% complete as to conversion. Direct materials are added at the beginning of the process. Factory overhead is applied at a rate equal to 37.5% of direct manufacturing labor. Ending work in process was 60% complete. All spoilage is normal and is detected at the end of the process.
Required:
Prepare a production cost worksheet if spoilage is recognized and the weighted-average method is used.
Why is cost accumulation easier under a process costing system than under a job order costing system? Discuss and use examples to support your discussion.